“The single greatest advantage any company can achieve is organizational health.”
That statement, from Patrick Lencioni’s “The Advantage: Why Organizational Health Trumps Everything Else in Business,” has never been more true than it is today. And yet, as Lencioni continues, “it is ignored by most leaders even though it is simple, free and available to anyone who wants it.”
So, what is organizational health and how can it help your business?
Consulting firm McKinsey & Company found that: “… the health of an organization is based on the ability to align around a clear vision, strategy, and culture; to execute with excellence; and to renew the organization’s focus over time by responding to market trends.”
At Navigate the Journey, we help digital agencies improve their organizational health. Here are small steps you can take to strengthen your own company’s well-being.
Realize the three biases that prevent organizational health
First and foremost, you need to understand the three common attitudes that get in the way of becoming a healthy organization.
- The Sophistication Bias: Though agencies generally pride themselves on being flat, nimble and agile, in reality they have become a lot more sophisticated than they realize.
- The Adrenaline Bias: Agencies have this bad. Too much time and energy is spent working “in” the business of client projects, with too little time spent working “on” the business by taking time to slow down, pull the team away and work on strategic issues that don’t appear particularly urgent but are critical to solve.
- The Quantification Bias: Outcomes such as utilization and effective billing rate are quantifiable. Though organizational health is subjective in terms of measurement, it is likely the single biggest driver of the quantifiable outcomes you desire for your company.
Your agency needs to be both “smart” and “healthy”
Lencioni helpfully makes the case for organizations to be both “smart” and “healthy.” Being “smart” means doing the classic fundamentals of business well – design, development, finances, marketing and yes, even strategy. Being “healthy” means having “minimal politics, minimal confusion, high morale, high productivity, and low turnover.” Your agency needs to be “smart” and “healthy” to do really well.
Being a technically ‘smart’ agency increasingly just means giving ‘permission to play’
The barriers of entry to becoming a digital studio are incredibly low. Agencies that are highly successful and agencies that are struggling have equal access to the technical “smarts” of the industry. The “smarts” of your digital agency are no longer the competitive differentiator; they are mostly just a pass to play in the digital space. Rather, your agency’s “health” will increasingly become the difference maker as industry smarts become more widely available to everyone.
Ensure you are multiplying the inherent abilities of your team
Healthier studios exploit the knowledge, experience, creative ideas and intellectual capital of their people. Unhealthy studios have allowed cultures to develop where their people are too beholden to the demands of clients, to the point where their people can feel like “programming monkeys” who are being told what to do, and not allowed to demonstrate their creativity and insight to produce an even better outcome for their clients and the agency.
Recognize the price of poor organizational health
Consider this statement from Lencioni: “The financial cost of having an unhealthy organization is undeniable: wasted resources and time, decreased productivity, increased employee turnover and customer attrition. The money an organization loses as a result of these problems, and the money it has to spend to recover from them, is staggering. And that’s only the beginning of the problem.”
As an owner, the symptoms of an unhealthy agency are obvious, from lower billing rates, decreased utilization and increased turnover. As with good physical healthcare, we need a doctor who will help diagnose what is causing our unhealthy symptoms, not just treat them. That way, we can become healthier — and stay healthier — in the long run.
Realize there is no silver bullet
Improving the organizational health of your studio requires a prioritized and sustained effort over the long run — there is no quick fix. Lencioni recommends that four disciplines are necessary for any organization to become and stay healthy, which we find to be true for digital agencies.
Discipline 1: Build A Cohesive Leadership Team
For agencies below about 20 employees, there may not be a need for a formal leadership team. In such cases, the owner needs to apply this principal to the team as a whole, meaning the entire agency team should be more cohesive. Right around the 20-person mark is when we recommend formalizing a leadership team for agencies.
For agencies with a leadership team, it is critical that each member is on the same page and unified; they should view the agency-wide leadership team as their first team, and the functional team they lead – such as design or development – as their secondary team. This unified leadership team needs to reinforce the clarity it has within itself throughout the agency.
Discipline 2: Create Clarity
Below are six questions we help agencies clarify during our StratOp Strategic Planning process:
Why do you exist?
- Do you have a compelling mission statement for why your agency exists?
How do you behave?
- Are the core values of your studio clarified so they can then be operationalized?
What do you do?
- Are you a full-service agency, a niche player in a certain segment of the market, or looking to transition away from relying on consulting to create alternate revenue sources such as developing your own product?
How will you succeed?
- What is your strategy? That is, what does the agency need to do to achieve your vision of the future?
What is most important, right now?
- What are the most critical issues facing the agency? Will the creation of cross-functional teams help solve these strategic initiatives?
Who must do what?
- Are employees’ responsibilities clarified by function? If so, individuals know exactly what is expected of them so they can contribute to the agency’s overall success.
Discipline 3: Over Communicate Clarity
As a founder or owner of the agency, the future and what needs to be done is relatively clear to you. But even if you occasionally communicate that message to your team, leaks happen. People don’t comprehend the complete clarity of what you say. Therefore, as a leader, you need to repeatedly communicate the most critical aspects of what you need from your team. And just when you are absolutely tired of communicating that clarity, that is when your team will understand and respond how you want.
Presume that it will take communicating a message at least seven times before your team really buys into what you are communicating.
Discipline 4: Reinforce Clarity
Most agency owners founded and built an organization that in many ways is an extension of themselves. An agency’s culture will resemble the founder or founders more at the beginning, but as the agency grows, the clarity of a smaller shop needs to be reinforced by operationalizing it without bureaucratizing it. As Aristotle said “We are what we repeatedly do. Excellence is not an act, but a habit.” Make excellence a habit by gaining and reinforcing clarity on the agency’s core values. The same is true when it comes to your people process, from recruiting, hiring, onboarding, development, feedback, coaching, evaluation and compensation. Clarify and reinforce core ideas and processes.
Organizational Health Truly is “The Advantage” for Digital Agencies
Having more of your team gain Drupal certification, moving to a bigger and hipper office space, refreshing your own website, and producing more accurate and timely metrics are all good things, and they are necessary to ensure your agency is successful. However, to survive and thrive over the long term, your agency needs a prioritized and sustained effort on organizational health.
Organizational health is increasingly becoming the invisible advantage that accelerates all other initiatives you pursue to succeed as a digital agency.
About The Author
Tom Barrett is a sought after strategic planning facilitator and coach to companies, teams and leaders. He is also the Co-Founder of Navigate The Journey, LLC a strategic planning and leadership development company that specializes in focusing and growing digital studios, consultancies, and agencies.
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