Does Organizational Health Really Affect the Bottom Line?

In June 2011, McKinsey featured an article in their quarterly newsletter entitled “Organizational health: The ultimate competitive advantage.” In it, they state that

“focusing on organizational health—the ability of your organization to align, execute, and renew itself faster than your competitors can—is just as important as focusing on the traditional drivers of business performance. Organizational health is about adapting to the present and shaping the future faster and better than the competition. Healthy organizations don’t merely learn to adjust themselves to their current context or to challenges that lie just ahead; they create a capacity to learn and keep changing over time. This, we believe, is where ultimate competitive advantage lies.”

We couldn’t agree more – in fact, organizational health and corporate culture are the most important drivers of results in our experience. They are clear predictors of financial health – if an organization is experiencing growth in a toxic culture, usually they have a protected status or a monopoly in the market. We consider it an important affirmation that McKinsey – a leader in transforming organizational strategies – chose to back their premise of “organizational health drives performance” with considerable research and credible experimentation inside companies.

What creates organizational health?

What McKinsey terms “recipes” for success we have long called “corporate culture.”  The drivers of organizational health are much the same as for individual health:

1) What does health mean?

Every person has a different definition of health. For some, it’s the ability to do competitive sports. For others, it’s having enough energy to get through the day. Sometimes it’s just as simple as “I want to feel good.”

For an organization, it’s important to begin by defining “What does a healthy workplace mean?”  “What are you trying to accomplish by building greater organizational health?”

We recommend: Ask your core executive team “What kind of people and healthy lifestyle / environment do we need, in order to win in our marketplace?”

2) Input determines output.

To achieve personal health, there are basic habits you must adopt into your daily life: Eating vegetables, avoiding sugar, and getting enough exercise. Then, there are the “extras” you can add-on if you want: Interval training for general cardiovascular health. Eating a vegan diet for philosophical and health reasons.  Cross-training to compete  in a triathlon.

There are universal basics for a healthy organization as well: A regular diet of honest, open conversations, beginning at the top. Ensuring  managers trust and empower people – the opposite of micro-managing.  Creating a little “healthy internal competition” helps too – we all run better next to someone who’s running at their best level.   The extras for organizations depend on the industry and core strengths: Technology companies often focus on health by hiring younger employees and building cultures that are “cool” with lots of freedom and concierge perks. Pharmaceutical companies (who are heavily regulated) focus on health through opportunities for growth, learning, and the chance to be part of cutting edge research.

We recommend: Cultivate regular times for open communication from all members of each key team in the organization. Leaders need to openly share their vision, reminding all of the desired outcome, while displaying trust in the strengths of each team member.

3) How does one stay motivated to pursue health?

This can be described as the “New Year’s Resolution Phenomenon.” Everyone has the experience of starting with good intentions, pursuing their goal with gung-ho enthusiasm, and a short-lived few weeks later, reverting to what’s easy and comfortable (often by convincing ourselves “I’m healthy enough”).  This is the same reason organizational change efforts don’t work – they don’t sustain attention on it. What helps? Nothing is more motivating to health than a combination of role models and leaders and a community of like-minded people you’re doing it with. The pursuit of health is hard: You have to have role models you admire, who are doing it themselves, and a way to keep the bigger picture of what you really want within sight. I hired a personal trainer whom I work with weekly and I have a clear goal that I remind myself of daily.

In organizations, most leaders move onto the next thing too soon. (One of our clients referred to this as the “shiny penny syndrome” – the CEO keeps being attracted to the next shiny penny, and it’s creating a lot of chaos in the organization.  The will-power of the leader determines the organization’s attention on the goal. You can create systems and processes, you can measure employee engagement all day long, but in the end, people are “copycats.” They’ll do what they see leaders do.

We recommend:  Be sure those who are in positions of power and influence are living examples of the change you want to see. And, like throwing out the junk food in your cupboards, eliminate every person in a position of power and influence who is distracting from healthy organizational behavior.  Otherwise your efforts won’t be credible.

4) Does a healthy mind = a healthy body?

The ability to identify and shift the “limiting beliefs and attitudes” one holds about health is the first step in shifting it.  For example, if one holds the belief  “I treat myself by eating unhealthy food, and healthy eating doesn’t feel like a treat” (a pretty common one in our culture), that will feel like a constant war inside, where you can discipline yourself for some time, until stress or habits trigger you to revert to old behaviors.

In an organization, mindset does determine health. It’s essential for organizational health, to identify which deeper needs really drive people’s true motivations – the need to be good at something, to have some level of autonomy, to feel connected to a bigger purpose and to one another, to win.  The need to try things and not be criticized for failure. (For example, Google had a gigantic flaming failure a few years back. The external world was hyping the massive failure of Google .. but internally was a different story. They gave the people who led the effort a “Founder’s Award,” big bonuses, significant public recognition, and a pat on the back for a great effort.) When the organization sets up rewards and processes that don’t tap lofty human motivation, they end up trying to “discipline” people through authority and money. This works for awhile, until people’s inherent need to feel independent, successful, to learn and grow. trumps the organization’s attempts to control them. Inevitably in this type of environment, the best ones leave.

We recommend: Surface healthy mindsets early and often, define what you want clearly, and nip pesky bad habits in the bud – such as the tendency to blame and ridicule failure.

5) What sustains health long-term?

Being a healthy person is a daily commitment to healthy habits – every person I’ve interviewed who chooses healthy over “yummy” says that it’s because it just feels better to be healthy.

The same is true for a healthy organization. It’s no accident … and winning is addictive.  If you do it long enough, it just becomes “The way things are.”

We recommend: Leaders are still the #1 predictor of organizational health. So, surround yourself with people who are living examples of healthy life. (i.e., Cultivate leaders who practice health, care about it, and remove those who don’t). True leaders are those who constantly “go first” in living the change they want to see. There’s no shortcut, and no substitute.

Regardless of your company’s size, everyone can benefit from the pursuit of better health. Here’s to an “apple a day” in your world.

Lisa Jackson and Gerry Schmidt are corporate culture experts with a proven method to teach leaders how to evolve their corporate cultures to perform better, innovate faster, and show they truly care about people in an unprecedented era of rapid change and transformation.

Visit them on the web at www.CorporateCulturePros.com or follow them on Twitter at http://twitter.com/corporatecultur

 

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