Want your business to perform better? Do these 4 things.
by Carla Arellano, VP Global Client Services for Org Solutions
Every office has a feeling — a vibe that you pick up, sometimes right away at reception. Or maybe it takes a little bit longer in a meeting or in the cafeteria or snack room, if they have one.
While ping pong tables, napping pods or espresso machines can add to the flavor of a workplace and give it a halo of a happy and healthy culture, the true measure of an organization’s health runs much deeper. Are ideas welcomed and encouraged? Are mistakes frowned upon or viewed as learning opportunities? Is it a culture in which constructive communication flows top-down and bottom-up? You can know relatively quickly if it’s the kind of place where you would want to work.
Now put yourself in the shoes of the managers running the shop. Let’s say they know they need to foster a culture in which employees’ input are part of regular, active dialogue and not just anonymous notes dropped into the proverbial suggestion box. How can they change the working environment from what they have to what they know they need to become?
There is a solution. It’s measuring the key indicators of an organization’s health and acting on them promptly and cohesively.
McKinsey’s expanding base of data on the topic has recently unearthed a surprising finding: there are four “power practices” that have outsized effects on the health of the workplace. Just as important: the absence of those factors blows a larger-than-expected hole in organizational health.
But before we dive into each one, let’s explain “organizational health.” McKinsey defines it as the ability to sustain performance over the long-term by creating an environment where employees:
1) Understand where the organization is going and how it plans to get there
2) Have the tools, capabilities and motivation to put those plans into action
3) Are encouraged to innovate and adapt to change so the organization can stay up to speed with everything that’s going on
Practices that pay dividends
We know that organizational health matters. McKinsey’s decade-long research underscores that companies that are organizationally healthy have total returns to shareholders nearly twice those of companies in the middle of the pack. The research, across thousands of organizations and nearly every industry worldwide, points to 37 practices that show how management teams spend their time. In other words, the practices talk about the actual work of running organizations — not about personal work styles or preferences.
But, we’ve now found that four of the 37 practices have a multiplier effect on organizational health — and therefore on performance. We call them “power practices” because they have the strongest correlation with top-quartile organizational health as measured by McKinsey’s Organizational Health Index (OHI) score. Clearly, all managers should make sure these take place within their organizations and role model them for their teams. While the strength of each of these varies by an organization’s situation, strategy and goals, they are worth focusing on. If any of these practices are ‘broken’ or essentially not happening in the organization, then managers should figure out how to re-wire the organization to build them in. For those companies that are already doing these, there is significant upside in getting these into the top quartile.
In short, if nothing else, you should be doing these four things:
Personal Ownership: In organizations where “personal ownership” gets top-quartile OHI scores, managers frequently create a sense of belonging among employees and encourage them to have personal stakes in their jobs. That doesn’t mean that managers are urging their workers to use more of their free time to “belong” to the organization. Instead, it means they go out of their way to make employees feel like part of a team that is achieving important goals together.
They find ways to make it attractive and interesting for their workers to strive for success in their jobs. Then, when the job requires an out-of-the-ordinary push, employees step up because they want to, not because they’re told to. Managers who do good jobs of role-modeling personal ownership typically identify and celebrate employees who exhibit personal ownership — those who go above and beyond to help a colleague, or achieve something unique, whether or not it is a part of their job.
Strategic Clarity: Leadership requires strategy and clarity. Articulating a clear direction and strategy for winning and translating it into specific goals and targets is important to making sure that your entire organization knows where you heading. The strategy needs to closely tie to the organizational vision. The vision is used as a guidepost to formulate a strategy and prioritize initiatives. Employees need to understand how they fit into the overall strategy. Managers need to have plans with clear timelines, milestones and owners to carry them out.
It’s really important that employees understand the vision and how they are supposed to get there. Senior leaders need to communicate and articulate the strategy and create open forums for employees to give feedback. Creating formal appraisal systems where employees are assessed against meeting specific goals can help ensure that targets are reached.
Competitive Insights: What is my competitor doing? This isn’t just important in sports and elections — as business leaders know, it’s critical to their business. A strong and dedicated competitive insights team is able to acquire and use information about the competition to inform their own business decisions.
When it works effectively, the team gathers intelligence from multiple sources and brings the best information possible. Insights are distributed across multiple channels. It’s important to develop and communicate the value of out-strategizing competitors. Communicating successes with examples of when the organization succeeded because of its competitive insights, is important to showing the value of the team.
Information shouldn’t live in a vacuum. Companies need to set up a system that enables information sharing between the competitive insights group and other employees to capture additional information. Training is also critical. Senior management needs to learn how to best use competitive insights and the team needs to stay current on the latest methods, tools, and most relevant market and competitor analyses for specific decisions.
Encouraging employees to share their input on competitive insights during strategic meetings is also valuable and tracking the metrics for assessing the impact is extremely important.
Role Clarity: When roles and responsibilities are crystal clear, employees know where they fit into the company, what their responsibilities are, and what they’re expected to deliver. Role clarity doesn’t “just happen” — it is designed by senior managers so that every individual job comes with clear accountability for results and responsibilities. Across the workforce, there is a shared understanding that performance is a function of unambiguous roles and clearly delineated responsibilities. More broadly, there is a culture of performance that is rooted in role clarity. In organizations where role clarity is prized, you rarely hear workers arguing over whose job it is to do something.
So how should manager’s role-model role clarity? For a start, they should openly discuss responsibilities and accountabilities for specific roles to ensure that those doing the jobs are very clear about what they have to do. Longer term, managers must redouble their efforts to foster a culture of role clarity, helping employees get used to defining clear roles and responsibilities in their jobs and interactions with colleagues.
It will also help to highlight examples of people who have complex accountabilities and to talk through the expectations for their more nuanced roles. Managers can and should do this both formally — for instance, in town-hall meetings — and informally, in team meetings and sessions with top leaders.
Organizational health isn’t just about ensuring that our people are happy, it’s about driving performance. The first step is for managers to understand and accept that performance and organizational health are inextricably linked. The next step is putting the Power Practices into play.
