Although employee health and well-being are undeniably crucial for your company’s success and are frequently discussed and measured, the overall health of your organization is just as important. Organizational health, though challenging to measure, profoundly impacts your organization’s ability to achieve sustainable success.
Explore the components of organizational health and learn how to identify the signs of an unhealthy organization. You can also check out our tips for improving your organization’s organizational health to improve your bottom line and boost employee satisfaction.
What is organizational health?
Organizational health refers to how well a company can align around organizational goals and adapt to change when needed. Healthy organizations can operate smoothly while working to meet strategic objectives, keeping employees engaged in a shared purpose, and responding effectively to internal and external shifts.
Maintaining organizational health is essential for a company’s and its employees’ well-being. The business landscape is very competitive right now, and companies that can’t meet objectives and adapt to change often have to downsize or even close down.
Organizational health also impacts the employee experience, as workers in healthy organizations are more engaged and satisfied with their work.
Key components of a healthy organization
Each attribute below is crucial to a business’s overall organizational health. It’s important to remember that all organizations, regardless of their current state, have the potential for improvement and the opportunity to become even healthier.
This realization can inspire hope and motivation for the journey towards a healthier organization.
Organizational alignment
To create a healthy organization, you must align everyone within the company with your mission and objectives. Frequent and purposeful communication can help. When everyone understands what needs to be done and the why behind your company’s decision, team members can come together to work towards a common goal.
Adaptability
Being able to adapt efficiently is a key skill for healthy organizations. The last few years have shown how imperative it is for companies to adapt to unexpected events or changes, whether adjusting to a fully dispersed work model or positioning your company to continue succeeding with rising inflation.
Healthy companies can adjust their business strategy or internal processes efficiently to maintain smooth operations and meet business goals.
Employee well-being
To create a healthy organization, you need to prioritize the health, happiness, and overall well-being of the employees within that organization. This means prioritizing things like employee mental health and work-life balance and creating a positive company culture so that employees get the rest they need and feel supported by their team.
Effective teamwork
Effective teamwork is a cornerstone of healthy organizations. When everyone works together effectively, it helps the organization achieve its goals and strengthens other key attributes like organizational alignment and adaptability.
This underscores the importance of collaboration in achieving and maintaining organizational health.
Accountability
In healthy organizations, employees at all levels should showcase accountability. This means taking ownership of their behaviors and work. Accountable people follow through on their commitments. They also take responsibility for their words and actions. Furthermore, if something goes wrong, they work to fix their mistakes instead of shifting blame.
Leaders improve organizational health by following through on their promises and commitments to their employees. Additionally, they take ownership of both their successes and their failures. Lower levels may mean meeting deadlines and turning in quality work.
All of these things help organizations function in a healthy and productive manner.
How to assess organizational health
Organizational health tends to focus on more qualitative measures, such as well-being and teamwork, which can be hard to quantify. However, there are still several ways to measure your organization’s health.
OHI index
McKinsey has developed an Organizational Health Index (OHI) designed specifically to measure organizational health. The OHI measures organizational health based on McKinsey’s proprietary formula, which considers organizational health outcomes, management practices, and the employee experience. Then, McKinsey compares your organization to its database of 2,600 other companies and 8M survey responses to predict your performance potential.
Workforce metrics
You can also use your workforce data and employee surveys to assess organizational health. Some metrics that can be an indicator of the organizational health of your business include:
eNPS: Your employee net promoter score (eNPS) measures how likely employees are to recommend you as an employer. A high eNPS score indicates positive employee satisfaction and well-being.
Turnover and retention rates: All organizations will have some turnover, but high turnover rates or recent rises in turnover are red flags that may indicate that your organization is unhealthy.
Employee engagement rates: You can measure engagement and satisfaction through recurring employee surveys.
Absenteeism rates: Increased rates of absenteeism often reflect a decline in employee well-being. High absenteeism rates indicate an issue with work-life balance or something going on in the work environment that makes people feel burned out or disengaged.
Organizational performance
Business performance is another measure of your organization’s health. Healthy organizations should be high-performing and capable of meeting financial and strategic goals.
Your company’s financial performance is one indicator of organizational health. Organizations that adapt well to change tend to come out ahead and maintain solid financial success. Of course, economic performance is only sometimes reflective of how healthy an organization is, as new start-ups or nonprofits will not be profitable.
How well an organization achieves its annual or quarterly goals is also a strong indicator of organizational health. Was everybody able to align with a goal and work together to achieve it? Was your company adaptable when you faced setbacks in achieving your goals?
Setting and tracking goals for the overall organization (along with individual and team goals) will provide important insight into your organizational health.
Signs of an unhealthy organization
Every organization will have its challenges, and the attributes of an unhealthy organization can vary widely, but these are the most common signs to look out for:
Poor communication: When the leadership team does not communicate effectively and frequently, the whole organization suffers. In healthy organizations, you’ll want to communicate clarity to ensure everyone understands and is on the same page.
High turnover rates: Elevated turnover rates show that there is a problem within the organization.
A lack of cohesion within leadership: Healthy companies have a cohesive leadership team that provides consistent, clear messaging and applies policies relatively uniformly.
Unproductive conflict: Healthy conflict can be great for teams and will ultimately lead to better decision-making and problem-solving. However, unhealthy organizations tend to have unproductive disputes, such as harassment, workplace drama, and professional disagreements, that are not handled respectfully.
A lack of accountability: Employees and leaders in unhealthy organizations often struggle to take accountability. They may be prone to making excuses or shifting blame onto others. This can hurt team relationships and often indicates that people feel uncomfortable or like they will be judged if they admit to making a mistake at work.
Tips for improving organizational health
Whether you’re noticing signs of an unhealthy organization within your company or simply want to strengthen your organizational health, here are some strategies to try.
Engage in transparent communication
Employees need to know what they’re supposed to align on to be properly aligned on objectives. Every team member should understand the company values, business goals, and priorities. They also need to know how to correctly showcase those values in their work and how their contributions support the organization’s objectives.
This allows them to all be focused and aligned on supporting the health and success of the organization.
Communicating openly and frequently with your employee population is essential for aligning them with your company’s goals and strategies. Good leadership communication also improves employee engagement, leading to more productive teamwork and better overall employee well-being.
Rethink how you approach change
Change management is tricky, even for seasoned leaders. It’s also where organizational health breaks down for a lot of companies. A change in the marketplace, an unexpected leader exit, or another shift can throw a wrench in your current company plans and create a lot of anxiety for employees.
Strong leadership requires strong change management skills, so work on actively planning for and training on how to work through change. Having flexible, dynamic processes that can accommodate unexpected shifts can help. Planning for leadership succession can also help you avoid the dysfunction often resulting from an abrupt leader’s departure.
Invest in strengthening your organizational culture
Many organizations, especially smaller businesses, are so busy that it can take a lot of work to carve out the time to focus on company culture in team building. However, investing time and resources into culture building is key for long-term success.
Look for opportunities to strengthen your culture and encourage team building, such as planning dedicated team-building events or employee gatherings. Creating employee resource groups, mentoring programs, and other in-office opportunities for team members to connect can also strengthen your workplace culture.
Seek out employee feedback
Employees will often have different perspectives on organizational health than managers or Human Resources staff. Make sure to involve them in your initiatives aimed at boosting organizational health. Actively seek their feedback and ideas on topics like employee well-being, leadership communication, team dynamics, and the overall culture.
Model accountability
Creating a culture of accountability starts at the top. Employees will follow suit when they see leaders taking accountability by keeping their word, owning up to their faults or mistakes, and working to find solutions when things go wrong. However, with leaders setting that example, taking accountability at work can be manageable.
Employees may feel self-conscious or worry about their job security and hesitate to take accountability for their work and actions. Some unhealthy organizations struggle with micromanagement. Consequently, employees may not feel a sense of ownership or personal responsibility for their work.
This lack of ownership can hinder accountability within the organization. Create a safe space for people to ask for help, own their work, and admit when they’ve messed up and work to correct it.
More Resources:
Gainsharing: The key to rewarding smarter, harder work
Leadership weaknesses: How self-awareness & feedback drive growth
Quiet hiring: Pros, cons, and best practices for success
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