In their new book, Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage (Wiley, 2011), Scott Keller and Colin Price make the case that organizational health is vital for sustaining high performance. They posit that “Organizational health – the ability of your organization to align, execute, and renew itself faster than your competitors can – is just as important as focusing on the traditional drivers of business performance.”
They’ve done the research that demonstrates that healthy companies outperform unhealthy ones and that focus on performance and health increases the success of change efforts across multiple industries. I welcome their research and their results. They are demonstrating quantitatively what we’ve known qualitatively for a long while.
Focusing on driving business results is important; but it’s not enough. Smart leadership focuses on facilitating engagement as well as driving performance. This happens when leadership creates the conditions that make an organization healthy: clarity (which results in alignment), atmosphere (which enables smart and swift execution), and talent (which results in the aptitude and attitude for resiliency, adaptability).
Organizational health is always important. It is especially critical in times of organizational transformation. Keller and Price report in their research that 70% of change efforts failed due to poor organizational health, the symptoms of which include negative employee attitudes and unproductive management behavior. Those companies that focused on performance and health were “twice as successful as those focusing on health alone and nearly three times as successful as those focusing on performance alone.” (“What successful transformations share” McKinsey Global Survey, March 2010).
When we apply the CAT Scan model to assess change efforts we find that failure is due to the narrow focus of so many change efforts. Leadership tends to focus on changing structure and systems in the hopes that people will magically engage the change and perform at a high level in spite of a lack of clarity (no alignment), an insufficient atmosphere (no guidance on what/how to execute), and disengaged talent (“negative employee attitudes and unproductive management behavior”/lack of aptitude). Successful change requires us to address the needs of people, teams, and the organizational culture in addition to structural and systems and processes.
If our organizations are going to deliver value and maintain competitive advantage, leadership needs to get better at this balancing act of focusing on both driving performance and facilitating engagement (ensuring organizational health). When we accept our responsibility to create clarity, shape a positive atmosphere, and develop talent, we drive performance. We remove barriers to high engagement. Leadership that accepts this and works on getting better and better at it can only have a positive impact in both the short and long term.