The prosperity of any organization hinges on various factors, with one pivotal aspect being the overall health of the company or institution. But what exactly does ‘organizational health’ mean? In the following discussion, we will delve into the meaning of this term and explore two prominent metrics that companies can employ to assess it.
Organizational health is a comprehensive term that encompasses the overall state of an organization. It encompasses elements such as culture, employee satisfaction, leadership effectiveness, operational efficiency, and more. Due to its broad scope, the concept of organizational health may vary based on the industry and business model of a particular company.
It is essential to recognize that organizational health is not solely synonymous with profitability. A company might be raking in substantial revenue and experiencing growth, yet simultaneously suffer from high turnover rates and a toxic work culture. Conversely, another company reporting modest profits could be deemed healthy due to exceptionally low turnover rates, an outstanding work culture, and other factors contributing to high employee contentment.
Research from McKinsey indicates a strong correlation between organizational health and profitability. Companies that invest in the health of their organizations yield total returns to shareholders at a rate three times higher than unhealthy organizations. Moreover, the research demonstrates that companies that equally prioritize organizational performance and health double their likelihood of outperforming competitors.
Conducting regular checkups is imperative for evaluating organizational health and identifying areas that need improvement. Fortunately, there are numerous metrics available to help organizations gauge the performance of employees, leaders, and the organization as a whole, providing valuable insights into its operations.
One vital metric to consider is employee engagement. Disengaged employees can negatively impact productivity, whereas engaged employees tend to stay with the company longer and exhibit higher levels of productivity. Employee engagement is a complex measure and can be assessed through various evaluations, including feedback from one-on-one meetings, engagement surveys, and anonymous opinion surveys. Regularly gathering this feedback can help organizations strive for an engagement goal ranging from 80% to 100%.
Additionally, surveys can provide valuable insights, including the Employee Net Promoter Score (eNPS), a metric derived from survey analyses. Smaller in scale than a full employee engagement study, eNPS assesses how employees feel about recommending the organization or their job to others. Employees respond to simple questions such as, ‘Would you recommend your job to a friend?’ and provide ratings on a scale of 1 to 10. The average eNPS score is calculated by tallying the responses and dividing by the total number of employees, with a higher score indicating a better outcome.
For further insights into measuring organizational health, please refer to the following resource.
Author bio: Matt Mayberry is President of Matt Mayberry Enterprises, Inc. He is also the Wall Street Journal bestselling author of “Culture Is the Way,” an internationally acclaimed keynote speaker, and one of the world’s foremost thought leaders on leadership development and culture change. Global Gurus ranked Mayberry one of the world’s top 30 leadership thought leaders for 2023. His insights on business performance have been featured on Harvard Business Review, Inc. Magazine, Fortune, Business Insider, NBC, ABC, Men’s Journal, Chief Executive and many more major media outlets.