Maintaining Success: The Vitality of Organizational Health for Long-Term Performance
The market has seen many companies face independent factors, like economic uncertainty, technical advances, and competitors' bold moves, which they must do to remain standing up. Depending on those factors, their fortunes rose and fell based on their ability and how they kept peace with the market's predictions. Some didn't resist the volatility, which caused them to wave a bankruptcy flag. But some continue to survive despite the whole changeability.
In this article, we will deconstruct and identify the following steps to survive and build up sustainable sources of competitive advantages. Before diving in, there should be a question like why some companies (we mentioned above, especially successful ones) succeed year after year while others don't, both operationally and financially.
Everyone has different answers, like the veterans, if we have to define organizational health, which is much more than profit and loss. Organizational health combines diverse entities beyond financial predictions, KPIs, and metrics. Organizational health encompasses various interconnected aspects of an organization's internal dynamics, such as culture, structures, and processes, that contribute to its ability to operate efficiently, adapt to change, and achieve its objectives.
Unhealthy Acquires Destroy Values
To clarify using an example, companies with high OHI scores in the top half gain, on average, 5% more total returns to shareholders (TRS) compared to their industry peers after two years. In contrast, unhealthy companies experience a decline of -17% in excess TRS during the same period.
According to McKinsey's research results, the companies that had improved their organizational health realized 18 percent increases in their EBITDA after one year of evaluating 1,500 companies in 100 countries, also highlighting three trends, in particular, stand out: how leaders are leading; the links between technology, data, and innovation; and the value of talent mobility.
Reimagining leadership, the transition from controllers to growth coach. The COVID-19 pandemic in 2020 caused significant business disruptions, making it clear that strong leadership and empowerment are crucial. Amazon quickly prioritized essential supplies, protecting customers, and gave its employees benefits like unlimited paid time off. TJ Maxx and Southwest Airlines empowered their frontline workers to make speedy decisions, resulting in faster processes and better customer experiences. Studies show that companies led by decisive leaders who empower their employees are healthier and make better decisions. Executives are shifting from controllers to coaches, encouraging a culture of quick adaptation and bold experimentation.
The data is the fuel of innovation. OHI data suggests that data-driven insights enhance innovation success rates. Supplementing major innovations with frequent, small ideas improves everyday processes. Keep the text short, use everyday language, and consider the target audience.
The dynamic deployment of talent. Companies that encourage and even allow internal role changes can sharpen employees' skills, maximize their diversity, and provide different ways for growth.
The Way of Staying Healthy, Conclusion
I'm not an HR person, but every team member should know how to establish a successful baseline for the company they are already working for. It is the key to the success of a sustained organization came from. Also, there are other critical things for leaders, such as every company has to provide the resources employees need.
McKinsey's research also identifies four foundational behaviors, termed "power practices," which significantly impact organizational performance:
Strategic clarity: Healthy organizations translate vision and strategy into actionable objectives that are clearly communicated and understood at all levels.
Role clarity: Healthy organizations streamline decision-making processes, reduce bureaucracy, and facilitate efficient workflows, especially in new or ambiguous situations.
Personal ownership: Healthy organizations raise a culture where managers take personal ownership of their work and instill the same sense of responsibility in their teams.
Competitive insights: Healthy organizations have a clear understanding of their position in the competitive landscape and leverage this knowledge to set priorities, make decisions, and allocate resources effectively.
