Why Organizational Health is Critical to Business Success

By Cindy Barber

​Have you ever looked at two companies who do the same (or very similar) things and wonder why one is successful and one isn’t?  They both have solid products or services, great marketing, and there is a need for what they are selling but one company seems to always perform better.  More than likely there is an organizational health issue involved.  Basically, the company is sick.  Like a person, an organization is healthy when it is free to function at its highest potential and is sustainable.  The sicker they are, the less productive and profitable.  Here are some key attributes of a healthy organization:

• A cohesive leadership team with shared vision, mission and values that are clear and are communicated throughout the organization both verbally and in the behavior of leadership 
• It has teams whose members trust each other and outside departments to do what is in the best interest of the company rather than for personal gain
• It has an accountability structure to reinforce expectations
• Has a culture that rewards those who stretch themselves to grow and take risks
• It fosters healthy conflict
• It constantly plans for the future by identifying high-potential performers and invests in their development to create a bench for succession and growth
• It provides an environment where people are engaged and motivated to give their very best
• People don’t want to leave and all their friends want to work there

 
According to Patrick Lencioni in his book The Advantage, “Addressing organizational health provides a competitive advantage to companies because ultimately health becomes the multiplier of intelligence. The healthier an organization is, the more of its intelligence it is able to tap into and actually use. Most organizations only exploit a fraction of the knowledge, experience and intellectual capital available to them. The healthy ones tap into all of it.  Addressing health helps companies to make smarter decisions, faster, without politics and confusion.”[1]
 
When a person or a family is unhealthy, things get in the way of them operating as successfully as they could.  In companies, we say they have an organizational drag – something(s) that pull in a counteractive direction to where the company is trying to move. It is common for the following to create an organizational drag:

• Leaders that are either underdeveloped or unteachable
• Lack of trust or misalignment of values within leadership team
• Lack of communication
• Unclear expectations
• Politics
• Lack of accountability
• Inconsistent treatment of employees
• Values that don’t actively serve as guiding principles of behavior throughout the organization
• Lack of succession planning
• Toxic culture
• Groups that work in silos rather than fully functioning teams
• Poor hiring practices

Aaron Demit, Bill Shaniger and Matthew Smith wrote in their article “The Hidden value of Organizational Health and How to Capture it” [2] that they found the linkage between health and performance at both the corporate and subunit level to be much stronger than had been thought previously.  After examining data collected over eight years, they found that healthy companies’ returns to shareholders (RTS) were three times that of unhealthy companies.  They state that they are more convinced than ever that sustained organizational health is one of the most powerful assets a company can build.  

It can be challenging to help executives understand that the cost of ignoring organizational health can be devastating.  Many of the measures of the health of an organization such as trust, engagement, accountability, and culture are “soft skills”, mistakenly treated too often as unimportant skills.  If soft skills are synonymous with people skills and people are driving your organization it is imperative that those skills be highly developed.   Regardless of the market space, an organization will never be better than its people.  And, unlike the economy, marketplace, competitor behavior, etc., it is the one critical area of business companies have control over. 

Those that understand and make organizational health an integral part of their overall business strategy are able to maximize the potential of their company.  It is encouraging to see more and more leaders moving in that direction.  It is the vision of The Dash Group that one day organizational health will be given the priority that marketing, sales, R&D and other business objectives receive.  It is the one investment you can count on to yield a high rate of return both now and for years to come.

[1] Lencioni, The Advantage, 3/13/12, Wiley
[2] McKenzie Quarterly, April 2014