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The typical approach to improving productivity focuses on assessing variance in quality, time, rate, service, or cost, around which management systems develop incrementally or revolutionary.
Organizational Health Index, on the contrary, focuses on improving performance through improved alignment of organizational systems. For example, by improving competence of key components such as mindset, work design, technical expertise, or relationships; or through improving the interface between work processes, or the interaction between work practices.
Simply put, the capability of an organization to achieve its strategic goals and their alignment defines an organization’s health. The Organizational Health Index (OHI) leverages logical consistency to manage the organizational health. OHI entails quantifiable evaluations, diagnostics and recipes for success that allow the leaders to calculate and accomplish the organizational health goals, required to sustain long-term performance.
Organizational health refers to the need to address soft (leadership, direction or culture) and hard factors (accountability, reporting lines, or controls) affecting performance. The organizational health index is an ongoing continuous improvement system applicable across an organization. The OHI measures not only the current health level, but also determines the next steps for an organization. There are numerous advantages to the organizations implementing it, including:
- Benchmarking organizational health against the rivals.
- Aligning the organizational systems, units, and people by communicating shared goals and priorities; and highlighting and plugging the disconnects.
- Improving organizational performance by pinpointing variances and opportunities to improve health and drive business success.
The OHI Diagnostic Framework provides a road map for leaders and managers to improve organizational health. It measures the organization against the 9 most critical health outcomes; these outcomes comprise both hard and soft organizational elements. Careful measurement of these 9 elements has a proven link with improved financial performance and earning above-average EBITDA margins:
- Direction
- Accountability
- Coordination and control
- External orientation
- Leadership
- Innovation and Learning
- Capabilities
- Motivation
- Work Environment
Direction
- Shared Vision
- Strategic Clarity
- Employee Involvement
Accountability
- Role clarity
- Performance contracts
- Consequence Management
- Personal Ownership
Coordination and Control
- People Performance Review
- Operational Management
- Financial Management
- Professional Standards
- Risk Management
External Orientation
- Customer Focus
- Competitor Insights
- Business Partnerships
- Government and Community Relations
Leadership
- Authoritative Leadership
- Consultative Leadership
- Supportive Leadership
- Challenging Leadership
Innovation and Learning
- Top-down Innovation
- Bottom-up Innovation
- Knowledge Sharing
- Capturing External Ideas
Capabilities
- Talent Acquisition
- Talent Development
- Process based Capabilities
- Outsourced Expertise
Motivation
- Meaningful Values
- Inspirational Leaders
- Career Opportunities
- Financial Incentives
- Rewards and Recognition
Work Environment
- Open and Trusting
- Internally Competitive
- Operationally Disciplined
- Creative and Entrepreneurial
Years of research have shown the healthiest companies to align with 1 of the 4 recipes for organizational health. These recipes constitute concrete management practices and activities for the organization to implement. Leaders need to acknowledge and align to the recipe that is appropriate for them. They can use these success recipes to plan and implement a change program that results in sustainable outcomes. The 4 recipes for organizational health are:
- Leadership
- Market Maker
- Continuous Improvement
- Talent
Interested in learning more about the other recipes for Organizational Health and the OHI Diagnostic Framework? You can download an editable PowerPoint on Organizational Health Index here on the Flevy documents marketplace.
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