"If you could get all the people in an organization rowing in the same [right] direction, you could dominate any industry, in any market, against any competition, at any time" (Patrick Lencioni).
It sounds so simple, but the above (slightly amended) quote is rightly identified as a means of sustainable competitive advantage. Why? Because it is so powerful - and so rare!
What it is
Organisational health (OH) is more than just culture or employee engagement: It’s the organisation’s proficiency at aligning around a common vision, executing against that vision effectively, and renewing itself through engagement, innovation and creative thinking. In short, OH is how the ship is run.
I have never spoken to any manager or executive who has disagreed that better OH would improve their business's bottom line.
Benefits
In case you think it's just me, check out this McKinsey study of more than 1500 companies across 100 countries over 10 years: A focus on organizational health can help businesses live longer, perform better | McKinsey
Some of the study highlights:
Organisational health (OH) remains the best predictor of value creation and a sustainable source of competitive advantage...
OH is not just nice to have; it’s required for sustained performance and organizational success...
OH can put companies on a fast track to performance and a commitment to sustained health can keep them there.
In one evaluation of 1,500 companies in 100 countries, ...companies that had improved their organizational health realized 18% increases in their EBIDTA after one year.
From 2020 to 2021, during the COVID-19 pandemic, healthy organizations were 59% less likely than unhealthy organizations to show signs of financial distress
Top-quartile companies have 6 times fewer safety incidents than those in the bottom quartile.
Companies whose health-improvement efforts took them from the second quartile of the OH Index to the top quartile recorded the biggest financial performance boost: a clear sign that health is an important factor in going from 'good' to 'great.'
Earnings and total returns to shareholders increased disproportionately—by 18% and 10% respectively (against an average 7% and 9 % respectively for companies in the S&P 500)
How to get it
OH is not rocket science, but it does require discipline, hard work and commitment to the process. There are 5 key steps:
Effective leadership
Cohesive, engaged teams
Clarity of purpose (mission, vision, values and strategic objectives)
Proficient communication systems
Intentionality (recruiting, promoting, etc. in line with the above steps)
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