What is Organizational Health?

Organizational Health

“Organizational Health is how many successful companies develop and maintain a sustainable competitive advantage - It is a value multiplier” - Andrea Sotgiu Managing Director Lavan

Let’s define a few, perhaps obvious things before we delve into organizational health, but important to distinguish the true value of business health.

Business Essence

A business doesn’t exist unless it develops value, a dependable distribution channel(s) to capture client demand, and a monetization process to sustainably support operations capable of reliably delivering on promises.

Value Creation

There are 3 main approaches or combinations a business can adopt to deliver value and succeed; 

Cost, producing similar quality products or services at lower costs to competitors, selling at the same price for higher market profit margins or lower price to undermine competitors.

Differentiation, creating uniquely desirable products and services and or a Niche offering a specialized service/product and charging a premium price. Positioning is focused on design, quality, new product/service innovation, development, and branding rather than outsourcing, efficiencies, cost reductions and process innovation.

Every company must develop enough value to have at least one advantage to successfully compete in the market. An edge can be achieved over competitors in two fundamental ways;

External Changes

Taking advantage of external changes such as political, economic, socio-cultural and technological factors that affect a company’s external environment - PEST

Internal Changes 

Internal changes drive value through an ability to perform activities that deliver a product or service differentiation, and or do so more cost effectively. Usually, superior differentiation and customer value will be the result of many interrelated activities and strategies used. The best combination of them should be used to pursue sustainable differentiation advantage. Producing goods at lower costs than the market price and or delivering superior products or services is the essence of any sustainable business.

Operational Excellence

Ultimately operational output is the result of execution which relies on leadership to develop product, process and people. How well people and business strategy align is the essence of Organizational Health. The technical side of the business, strategy and associated activities must work well with the adaptive, people side.  

The traditional support activities of M Porter’s value chain like Information Systems (technology) R&D, and Management are highly important drivers for differentiation advantage.

A clear appreciation of capabilities, how well you perform across the activities that combine to deliver desirable customer solution is essential. There are myriad tools and frameworks to determine how well you compete including; 5 forces, SWOT, PEST and variations that have inspired operating frameworks like OGSM - Objective, Goals, Strategy and Metrics. The primary activities of VCA; inbound logistics, operations, outbound logistics, marketing, sales, and service are at the heart of value creation. Lean processing and efficiencies enable cost reduction and competitive pricing. Value add components enable market penetration and or increased margins. Used well they reveal competitive advantages or disadvantages to help a strategist Identify the best sustainable differentiation

The Concept of Health in business

Many company leaders possess the ability to develop the technical side of a business. They develop and tweak strategy, evolve new business models and new capabilities. They are comfortable in the cerebral side of the business equation - defining aspirations, where to play how to win, capabilities, and performance systems - to try and stay ahead of their competition. They spend much of their time levering those drivers, and falling short in the other, more influential side of the equation, where adaptive challenges are met by creating a proven process to optimize talent.

Identifying and aligning people and business strategy is crucial to driving high-performing teams and a competitive advantage. Unfortunately, in the long-run when focus is only on the technical side any outperformance gained is incremental value at best, often short-lived. Engaged high potential talent makes the difference. Organizational health, integral to talent optimization cannot be accomplished by outsourcing, or delegating to an HR department. The HR department are integral to a cohesive leadership team who actively engaged in this pursuit. Those that don't eventually struggle as health is how their competition creates differentiated value and a sustainable advantage to win in the long run. 

Awareness delivers opportunity for an edge. If you learn faster and execute you develop an edge. Information leads to insight enabling better, faster decision-making, but also importantly, an opportunity and ability to recover from any mistakes. Errors from inaction are more expensive than those from action. Leaders know they have to take risks to move the dial. Bold leaders develop cohesive teams who lean into this discomfort, and enjoy personal and professional growth from their collective courage.

Organizational Health can only happen effectively through appreciation of the ideology and a commitment to disciplined implementation and practice management.

Organizational Health Behaviors – Habits

Business is perhaps the ultimate team sport, where leaders prioritize team effectiveness, working to ensure  individuals place team results ahead of all else to win.

Similarly to sports, businesses are often outplayed, and lose to a less talented, but more cohesive and organized teams. Organizational health is elusive, but it's immediately recognizable. We've all likely been on high-performing teams at some stage, where things feel effortless. As the musketeers famously chorused "All for one and one for all" captures the essence and sentiment of a team. Billy Bean – the Moneyball, a true David and Goliath story of deep pockets versus frugal resources captures the undeniable strengths and advantages of data collection, statistics, analytics and strategy - purposefully making the playoffs and driving matchups to win!

Business is no different. Data collection and analysis is paramount to drive awareness from evidence. A cohesive leadership develops high performing teams, incorporating people data for insight, to help achieve common goals that result from key behavioral principles; Trust, healthy conflict, commitment collective buy-in, peer accountability for results that matter. They instill ownership, achieving and failing together as a team. They clearly articulate their vision, and what they're trying to achieve. Their core values authentically carry behavior, and align to objectives actively representing the principles of the organization. Values are integral to all aspects of culture and operations, including programs, hiring, aligning talent and business strategies, training, and relations with the community. They support, seek to divest control and see their people shine through achievement. They balance accountability with compassion. They harness the passion of their people, energy, creativity and full capacity towards aligned goals, working to deliver on a company vision. Their resources row in the same direction and great things happen. 

Signs of organizational health are no politics, or confusion, great moral, productivity and low turnover. In healthy organizations’ management, operations, strategy, and culture work well together. People in healthy companies trust and learn from one another, identify issues and recover faster from mistakes. They are more effective at solving problems and make better decisions, faster. Healthy organizations get smarter and better at execution over time. They achieve results closer to their full performance potential and gain a clear advantage. They do not suffer from the inefficiencies plaguing companies with poor health such as - politics, lack of clarity, apathy, ego, employee disengagement, and limited accountability, where behavioral misalignment and inconsistency are their downfall.

Strategy doesn’t typically fail in formulation. It fails most often through implementation, the execution in the trenches, when people don’t have the necessary skills or attitude to perform. Accountabilities are not held, so fail. The where you are going is not effectively turned into the how to support and achieve the goals to deliver the results necessary to deliver the desired outcome(s).

Where to begin

It is helpful to start with the end in mind, and begin with the vision. A company’s vision shines a light on aspirations, strategy illuminates a path to achieve them - The whole team executes collectively, succeeds and fails collectively.

We have a complete set of simple concepts and practical tools that have helped hundreds of entrepreneurs get what they want from their businesses. Organizational diagnostics provide an evidence based view of your companies operational deficits enabling a roadmap for engineered improvement. Executing their path by mastering a simple way of operating, clients systematically and permanently improve performance.

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