Why Organizational Health is the Key to Competitive Advantage in Business


What’s bogging down your business? Henning Streubel, Senior Partner at Boston Consulting Group discusses why organizational complicatedness is the biggest barrier to high performance and how Smart Simplicity is key to improving organizational health. Henning leads BCG’s US West Coast practice and is a global thought leader for stakeholder management, Smart Simplicity, and organizational health.

How would you define organizational health?

Organizational Health is an organization’s ability to function effectively, to cope with change appropriately, and to grow from within which results in high performance.

Performance is driven by behavior, and behavior is influenced by context . At the Boston Consulting Group, we define an organization’s health by how well it performs along eight context dimensions (leadership, decision making, strategy and transformation agenda, etc.), which can be measured by our complicatedness survey. The survey identifies the symptoms of complicatedness impacting an organization’s health and lays the foundation for deeper diagnosis.

Addressing an organization’s complicatedness or “pain points” results in active engagement, improved productivity, and better performance.

What is “Smart Simplicity” and how does it correlate to organizational health?

Companies in every industry are struggling to boost growth and profitability in an increasingly complex and competitive business environment (e.g. more sales channels, increasing amount of regulations, new technologies, increasing customer expectations etc.). It turns out that companies facing complex business environments tend to become even more complicated as managers tend to overreact to decrease uncertainty and add layers, KPI’s processes, etc. to deal with the increasing external complexity.

Complexity is a fact of business life, but complicatedness doesn’t have to be. ‘Smart Simplicity’ is the antidote to complicatedness . The approach goes beyond traditional ‘efficiency’ solutions by evaluating the drivers of behavior—the context within which employees work—and then shaping this context to achieve desired behaviors. We recognize that performance is a result of what people do (i.e. their behaviors) and that behaviors can be influenced by smart adjustments to the company environment (the context in which work is carried out).

Removing complicatedness simultaneously increases performance and satisfaction at work: because you remove the obstacles that hinder both, you improve organizational health.

Do you believe information and innovation aren’t competitive advantages anymore?

Innovation is a strong driver of competitive advantage. Complicatedness – counterproductive proliferation of cumbersome structures, processes, and systems – however, hinders productivity and innovation. Information is great, but it’s most valuable when companies deriving meaning, knowledge, and insights from data and take action. Complicatedness makes it increasingly difficult for companies to make sense of the data.

We have seen examples where companies could significantly improve their speed of innovation (i.e. lead time of new product development process) by simplifying their organization. Innovation is not an individual achievement, it is a collective effort. Information and innovation are strong competitive advantages, but we also need change management to make sure employees leverage the insights from big data and analytics and are enabled to really change their ways of working. We have seen that this happens more effectively in simplified organizations.

What are key indicators of a “healthy” organization?

We have analyzed over 1000 companies, across more than 50 countries, to measure the health and “complicatedness” of organizations. Our analysis found seven key indicators of a healthy organization, including: penetration of purpose across the organization, agile organization structure, speedy and effective decision making, cooperation across units to deliver results, high engagement and morale of your people, active development and management of current and future talents, and retention of key talents.

Do you agree that organizational health is closely related to organizational culture?

Organizational health and organizational culture are closely linked. However, there are some key distinctions.

A high-performance organizational culture is a combination of employee engagement (employees willing to go the extra mile), a set of behaviors unique to the organization’s strategy, and an organizational environment to support both employees and strategy.

Organizational health does touch on employee culture as well as the organizational levers to support employees. However, it won’t tell you whether or not your organization is fit for its purpose – whether your behaviors are specifically aligned with your strategy.

Take an athlete – you can assess blood pressure, muscle tone, pulse, etc. These would tell you the athlete’s “health” (employee engagement). But they would not tell you whether or not that athlete is fit for a given purpose – e.g. distance runner vs. gymnast. Does that athlete exhibit a specific set of behaviors consistent with its strategy? That’s a high-performance organizational culture: a set of behaviors that are not only healthy in general but also unique for a given strategy.

You might have a healthy organization, but with the ‘wrong’ culture you still may be getting behaviors that aren’t in service of your strategy .

What do you feel are the biggest pitfalls that companies should look to avoid when executing their workforce strategy?

Workforce strategy has to be linked to your future business strategy .

Our workforce and the way we work are rapidly changing. We must adapt our approach to keep up with the drivers of change – on the demand side: shifts in technology and digital productivity, shifts in ways of generating business value, and on the supply side: shifts in resource distribution, and shifts in workforce value and culture. When companies address these drivers of change, they often do so by creating complicatedness, without focusing on identifying the root causes that behind the issues with a behavioral lens.

One of the biggest pitfalls we frequently observe is that companies are not considering behavior aspects, i.e. they change the context of employees without having a deep enough understanding how this context change will impact the employees’ behavior. They just consider workforce strategy, not holistic organizational levers to drive target behaviors. As a result, change initiatives often don’t deliver the intended results.

What are your pro-tips for organizations looking to embrace the idea “Smart Simplicity”?

Smart Simplicity focuses on the source of complicatedness: what are people doing in the organization and why are they doing it. Too often, we see a focus on the drivers of issues and a rush to conclusions, ignoring the big picture and creating further complicatedness in the organization, and not being able to sustain changes. The goal should be to focus on the root cause driving complicatedness. To do so, identify the root causes behind the issues with a behavioral lens, i.e. what do people do and why. Focus on solutions that meaningfully impact the context in ways that lead to desired behaviors, and avoid the pitfall of jumping to conclusions on what the solution should be.

Recognize that people’s behavior is driven by circumstance and context more than you think, and so focus less on intrinsics (personality, working style) and more on exogenous drivers of behavior. And finally, move past blame and focus on what happens – see if you can paint a picture of the current truth that all parties can agree on.

With technology coming into the picture, how can organizations start using workforce data to measure and monitor organizational health?

With new technology, we are able to identify the symptoms of an unhealthy organization.

Calendar and email metadata allows us to begin to quantify ways of working and work culture with unbiased data, rather than the traditional surveys and interviews which are prone to subjectivity. At its core, it allows us to see real observable behavior and use it to draw conclusions and support hypotheses. This is extremely exciting for organizations for a whole host of reasons, including the ability to measure certain organizational key performance indicators (time in meetings, interaction across divisions, number of people in meetings and their engagement, etc.) and track it over time.

Source: https://www.hrtechnologist.com/interviews/performance-management-hcm/why-organizational-health-is-the-key-to-competitive-advantage-in-business/

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