“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 entrepreneurial businesses 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 entrepreneurial businesses generally pride themselves on being flat, nimble and agile, in reality they have become a lot more sophisticated than they realize.
- The Adrenaline Bias: Many entrepreneurial businesses 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: More traditional business metrics such as billing rates or inventory turns are easily quantified. 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 business 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 business needs to be “smart” and “healthy” to do really well.
Being a technically ‘smart’ business increasingly just means giving ‘permission to play’
The barriers of entry to many industries are incredibly low. Companies that are highly successful and companies that are struggling within in a given industry have equal access to the technical “smarts” of the industry. The “smarts” of your company are no longer the competitive differentiator; they are mostly just an entry pass to play in your industry. Rather, your company’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 businesses exploit the knowledge, experience, creative ideas and intellectual capital of their people. Unhealthy companies often allow cultures to develop where their people are too beholden to the demands of clients and not allowed to demonstrate their creativity and insight to produce an even better outcome for their clients and their company.
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 company are obvious, from lower revenue, dissapointing profit levels, 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 business 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 entrepreneurial businesses.
Discipline 1: Build A Cohesive Leadership Team
For companies below about 15 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 team should be more cohesive. Right around the 15-person mark is when we recommend formalizing a leadership team for entrepreneurial businesses.
For companies with a leadership team, it is critical that each member is on the same page and unified; they should view the company-wide leadership team as their first team, and the functional team they lead as their secondary team. This unified leadership team needs to reinforce the clarity it has within itself throughout the company.
Discipline 2: Create Clarity
Below are six questions we help entrepreneurial businesses clarify during our engagements:
Why do you exist?
- Do you have a compelling mission statement for why your business 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 provider in your industry, a niche player in a certain segment of the market, or looking to transition away from relying on a legacy product or service to create alternate revenue sources?
How will you succeed?
- What is your strategy? That is, what does the business need to do to achieve your vision of the future?
What is most important, right now?
- What are the most critical issues facing the business? 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 comapny’s overall success.
Discipline 3: Over Communicate Clarity
As a founder or owner of the business, 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 business owners founded and built an organization that in many ways is an extension of themselves. An entrepreneurial businesses culture will resemble the founder or founders more at the beginning, but as the company grows, the clarity of a smaller organization 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 company’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 Entrepreneurial Businesses
Having more of your team gain certain certifications, 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 business is successful. However, to survive and thrive over the long term, your company 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 an entrepreneurial businesses.
About The Author
Tom Barrett helps entrepreneurial leaders focus & grow their business by implementing the Entrepreneurial Operating System (EOS), facilitating StratOp strategic planning workshops and coaching teams to operationalize their plans. He is the co-founder of Navigate the Journey, a consulting firm that helps entrepreneurial leaders break through the barriers that are holding them back at the company, team and individual leader levels. For more information and to schedule a call visit NavigateTheJourney.com