What is Organizational Health?

Organizational Health

“Organizational Health is how most 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. Obviously 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

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.

Business assessment to ensure intimate appreciation of the problem and solution space you are playing in, capabilities, how well you perform across the activities that combine to deliver desirable customer solution is essential - and there are a myriad of available tools from  Porter's value chain analysis or 5 forces, to SWOT, or PEST and variations that have inspired operating frameworks like OGSM. Used well they reveal competitive advantages or disadvantages to help a strategist Identify the best sustainable differentiation

Exponential technologies and accelerating digital transformation are, in part reasons why business disruption is rife. Fundamental to innovation companies like Uber, and Airbnb are uniquely solving problem spaces through new business models. Apps enabled the scalable recruitment of an outsourced workforce. Utilizing their personal assets; owner drivers’ vehicles, and owners' homes that replaced the need for capital outlay - on cars and hotels - preventing the need for burgeoning, unwieldy balance sheets of competitors. With less onerous, faster more effective and efficient opportunities to scale, with broader world-wide distribution channels and new prospect customers, both companies have altered and disrupted transport and hospitality business landscapes through value not previously seen in those markets. Arguably they have created new categories.

Besides support activities, the primary activities of M Porter’s value chain; inbound logistics, operations, outbound logistics, marketing, sales, and service are at the heart of value creation - that exceeds the cost of production -for profit. Lean processing and efficiencies enable cost reduction and competitive pricing. Value add components enable market penetration and or increased margins.

Shaped by market research, strategy, business models, operating frameworks like OGSM, (our own system ROSE℠) and performance systems in general - when executed well lead to operational excellence driving dependable future output. All these interrelated activities, drivers and disciplines require talent at the helm and in the trenches to execute

Operational output is the result of execution, the quality of which is relative to the abilities of leadership to develop and nurture the best, most conducive environment for the right people in the right seats and capacity to perform. Aligning talent strategy to business strategy is the essence of Organizational Health and when it is the highest priority, permeating the whole company, the company is best positioned to outperform. As the leadership goes, so goes the business.

The Concept of Health in business

Many company owners and or leaders possess the ability to develop, drive and tweak strategy, evolve new business models, iterative and additive capabilities . They are comfortable 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 to achieve outperformance. Unfortunately, in the long-run they can gain incremental value, often short-lived without a sustainable advantage. Falling short in the other, more influential side of the equation, creating a proven process to optimize talent - aligning people and business strategy, so organizational health becomes is illusive and often a bridge too far.

A business fall short largely because owners and leaders often lack the experience and knowledge to develop organizational health authentically. It cannot be accomplished by outsourcing, or delegating to an HR department. HR is integral to a cohesive leadership team all of whom are at the heart and soul of company health just like the parents of a functional family. Companies not actively engaged in this discipline eventually struggle as health is how their competition creates differentiated value and a sustainable advantage to win in the long run. 

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 a team sport, where cohesive leadership prioritizes team effectiveness, working to ensure  individuals place team results ahead of all else to win. A group of talented individuals will most often lose to less talented team. Cohesive leadership helps teams achieve common goals resulting from key behavioral principles; Trust, healthy debate, commitment with collective buy-in to company objectives, peer accountability for results that matter - owning, achieving and failing together. Leadership teams who develop organizational health are able to operate above the rim.

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 thousands 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 the path by mastering a simple way of operating, clients systematically and permanently improve. ROSE℠ operating model along with Talent Optimization harnesses leadership cohesion to drive engagement and organizational health- A simple framework, one ecosystem with endless possibilities for peak performance.

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