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The hidden value of organizational health--and how to capture it

Organizational Health

According to a decade long research, the health of an organization is based on alignment with a robust strategy, deep-rooted culture, and a clarity of vision.

The health of an organization can also be defined as the capacity or ability to deliver superior financial and operating performance.

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The hidden value of organizational health--and how to capture it

The hidden value of organizational health--and how to capture it

https://www.mckinsey.com/business-functions/organization/our-insights/the-hidden-value-of-organizational-health-and-how-to-capture-it

mckinsey.com

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Key Ideas

Organizational Health

According to a decade long research, the health of an organization is based on alignment with a robust strategy, deep-rooted culture, and a clarity of vision.

The health of an organization can also be defined as the capacity or ability to deliver superior financial and operating performance.

Better Health = Better Performance

Extensive Data studies have found a link between the health of an organization and its performance.

Robust health is crucial to an organization's long term success.

The Four Organizational Recipes

Companies aligned with one of these four organizational recipes are more likely to be healthy and to deliver strong, sustained performance than those following random management styles:

  • Leader Driven
  • Market Focused
  • Execution Expertise
  • Talent and Knowledge-based

Leader Driven Organizations

Leader-driven organizations have the presence of great leaders, who are talented and are free to figure out ways to deliver results while being accountable for the same.

Leader-driven organizations have an open, trust-based culture, where creativity is valued.

Market-Focused Organizations

Market-focused organizations have a strong orientation towards competitors, business partners, and the community/marketplace.

They focus on where the innovation is, where the market trend is going, and like to stay ahead of the competition, making innovative products while ensuring the response is profitable.

Execution Edge

Organizations that follow the Execution Edge recipe focus on implementation, frontline execution, elimination of wastage of time and resources, and optimal utilization of data for efficiency.

They also use technology to foster better communication, last-mile delivery, and overall efficiency.

Talent and Knowledge Core

The talent and knowledge core recipe is generally found in professional service firms, in various sectors like sports, consultancies, and entertainment.

They have star performers, and high-quality talent (physical or knowledge-based) to differentiate themselves and be profitable with the branding.

SIMILAR ARTICLES & IDEAS:

“The biggest risk is not taking any risk. In a world that is changing really quickly, the only strategy that is gu..."

Mark Zuckerberg, CEO of Facebook
Skills Needed In Digital Leaders
  • Work together, complement each other, and function as a team.
  • Able to operate on and enable environments that are more dynamic, team-centric, and connected.
  • Lead and build teams and partner with the broader ecosystems, keep people connected and engaged, and drive a culture of innovation, learning, and continuous improvement.
  • Lead a workforce that includes contractors, the contingent workforce, and crowd talent.
  • Understand how different business functions, industries, and technologies come together to form solutions.
  • Comfortable and competent with risk-taking.
Demographics And Leadership Destiny

Millennials expect to be developed via opportunities, mentoring, and stretch assignments. However that is hard to come by in top-heavy companies. 

Most millennials think their roles provide little development while most companies report they have excellent or adequate programs for Millennials.

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The model of future work

By 2030, up to 30 to 40 percent of all workers in developed countries may need to move into new occupations or upgrade their skill sets. Skilled workers in short supply will become even scar...

Employers should lead the way

The pace and scale that technology disrupts is a social, political and business challenge.
Employers are best placed to make a positive societal impact, for example, by upgrading the abilities of their employees and equipping them with new skills. Employers will also reap the greatest benefit if they can successfully transform the workforce in this way.

Talent is the largest barrier

Talent is the largest barrier to the successful implementation of new strategies.

Many leading businesses realize that it is quicker and more financially prudent to look internally and develop the talent they already have. Yet only a third of global executives report that their organizations have launched any new reskilling programs.

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Leo Tolstoy

“Everyone thinks of changing the world, but no one thinks of changing himself.”

Leo Tolstoy
About change

Organizations don’t change. People change. Many companies move to change systems and structures and create new policies and processes but fail to address the underlying mind-sets and capabilities of the people who will execute it.

A new strategy will fall short of its potential if they fail to address the mental attitude because people on the ground tend to continue to behave as they did before.

Looking both ways

Companies that only look outward in the process of organizational change, and dismiss individual learning and adaptation make two common mistakes:

  • They focus solely on business outcomes and fail to appreciate that people will have to adapt to implement it.
  • They focus too much on developing skills. 

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Diversity & Inclusion
Diversity & Inclusion

There is a significant relationship between competitive profit gains and diversity.

Companies with gender, ethnic and racial diversity are at least 15 percent more likely to experience...

5 Lessons for Managing D&I
  • Recognize the Shift in Global Understanding of D&I.  Diverse thinkers come from a variety of different backgrounds.
  • Build an Inclusive Environment. All people are encouraged to draw upon their unique experiences, perspectives and backgrounds to advance business goals.
  • Use Multiple Practices and Measures.  Have solutions in place to monitor and retain a talented and diverse workforce.
  • Ensure Leaders Model Diversity and Inclusion. It sets the tone for the rest of the organization to follow suit.
  • Recognize the Connection Between Innovation and D&I. Diversity and inclusion increase innovation and reduce business risk.

Cognitive Diversity

The concept of cognitive diversity focuses on diversity of thinking and is composed of four dimensions:

  • Perspectives. People represent situations in different ways
  • Interpretations. Through diverse interpretations, teams can discover multiple resolutions.
  • Heuristics. People resolve issues in different ways.
  • Predictive models. Some analyze, and others look for a story. Both are useful for discovering workplace solutions.
Remote-first Mindset

Accept that you have to put in place remote work systems, even if more than half of your employees ultimately revert to office-based work.

  • If done right, a remote-first infrastructu...
Build a socially-connected culture

Intentionally design for the same interactions that would otherwise happen if people were in the office.

  • Culture is what naturally happens when a group of people gets together for any period.
  • A great culture happens with intentional design and influence. It's the reason you should make your company's mission, vision, values, operating principles, standards, and agreements visible. 
  • Culture is experienced through emotions, including how your employees feel about the company, you, other leaders, and peers. That feeling is developed through human interaction at the water cooler, kitchen, or hallway conversations.
Your leadership presence

Your people need to feel your presence as a leader as they will have fewer opportunities to see you face to face when they work remotely.

  • Regularly show up in a variety of forms that can include weekly video meetings, periodic company-wide emails, or presence in public channels.
  • Err on the side of more communication rather than less.

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Continuous improvement
Continuous improvement

Is an ongoing effort to improve all elements of an organization - processes, tools, products, services, etc. 

It rests on the belief that a steady stream of improvements, diligent...

3 Practices for Continuous improvement
  • Performance transparency: it starts with making goals public and cascading those goals  in a way that is tailored to individuals at all levels of the organization.
  • Knowledge sharing: critical to scaling best practices across (and up and down) organizations.
  • Employee involvement: frontline employees are closest to the work and typically have the richest insights on how their work can be done better. Capturing their perspectives is critical.
The Pressure Of Time

Most leaders have familiar approaches to managing time: setting goals, planning, delegating, tracking commitments, and creating to-do lists. While these approaches do help in self-organization, the...

Sustainable Productivity

Instead of increasing the number of productive hours, we can focus on getting the right things done in a timely way. We also need to restore and balance ourselves, our colleagues, family and environment, instead of a neurotic or pathological focus on deadlines.

Find out what's truly important to us and use the finite resource of time wisely.

Phantom Workload

Phantom workload looks like real work but results in massive unproductivity and even conflict in an organization. The pressure to meet unrealistic expectations causes a vicious cycle of further workload.

Leaders need to take a hard look at what is being avoided or not addressed. Facing difficult tasks that were 'swept under the carpet' earlier strengthens them further to make hard decisions and face difficult people and situations.

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Culture and strategy

In most organizations, culture and strategy tend to be discussed in separate conversations.

Executives know that a negative culture can hurt company performance, but they may not know h...

Starbucks company culture

Walk into a Starbucks anywhere in the world, and you will find a consistently comfortable and welcoming ambiance. You don't get that simply by telling your staff to be warm and friendly.

  • Starbucks has built a capability to foster a relationship-driven, employees-first approach, which encourages close relationships between staff.
  • The feel of Starbucks stores exists because the people behind the counter understand how their work fits into a common purpose. They know how to accomplish great things together.
  • Employees are called "partners." Even part-time staff in the U.S. receive stock options and health insurance.
  • During the health-crisis, Starbucks chose to invest in their staff training.
  • Starbucks understands the importance of having employees of diverse backgrounds to create a welcoming environment.
Focus on the positive of a company culture

When most companies try to improve their culture, they focus on the negative aspects and try to improve them. Although this may sound reasonable, the opposite approach is more successful.

  • Identify a few positive attributes within your culture that are connected directly to the identity and specific capabilities that are driving success in your business.
  • Find ways to increase and extend them throughout the organization to counterbalance some of the negative aspects of your culture.
  • Articulate the critical attributes of your business that people care about, and that can help move your strategy forward.
  • In time, great behaviors and attributes will replace the negative aspects of your culture.

This approach has far more power than a “culture initiative” because it lets people bring their own emotional energy to a business where they feel they have a stake.

How leaders cope with uncertainty

Uncertainty is always there. The degree of uncertainty can rise and fall.

Leaders, being human, also have difficulty coping with uncertainty. When they receive confusing information, they te...

Heuristics during periods of uncertainty

During periods of heightened uncertainty, leaders reflexively reduce investment, stop hiring, slash marketing, refrain from entering new markets, or stop making decisions.

Although understandable, acting in a pro-cyclical manner can be counterproductive. It can leave companies poorly positioned to benefit from the next stage of the cycle.

Attributes to succeed in uncertainty

Organizations should be inclined toward action. As a baseline, companies must strive to be fit for growth. This can be done by aligning costs with priorities and strategy, investing in varied capabilities, and using traditional and digital levers to execute.

They must regularly engage in scenario planning with an array of options. They must build the capacity to be agile. They must learn to become more resilient to withstand strong external forces and quickly recover from setbacks.

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Happiness

Happiness and satisfaction are subjective concepts – while for some of us monetary benefits can be equated with job satisfaction, some might strive for recognition of their hard-work and los...

Workplace Happiness defined

In a fundamental sense, workplace happiness comes when:

  • We enjoy doing the tasks assigned to us
  • We feel right about the people we are working with
  • We are happy with the financial benefits we get from the job
  • We have the scope of improving our existing skills
  • We feel respected and acknowledged at work
Importance Of Happiness At Work

Happy employees are compulsory for a growing business.

A study on organizational success revealed that employees who feel happy in the workplace are 65% more energetic than employees who don’t. They are two times more productive and are more likely to sustain their jobs over a long period of time.

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