I came upon some interesting research conducted several years ago by McKinsey & Company. They developed a metric that measures the effectiveness of an organization’s performance across several critical areas. “The Organizational Health Index (OHI) assesses an organization’s ability to align around a common vision, execute with excellence, and renew itself over time.” It posits that healthy organizations across all sectors are better at achieving and sustaining high-quality outcomes.
OHI and Performance
More recent research has shown that healthy organizations – regardless of industry – deliver three times the total shareholder returns of unhealthy organizations. The research also showed that organizations that improved their OHI achieved 18 percent increases in EBITDA after one year of making a conscience effort to improve their organizational health.
The Relationship Between OHI and the Baldrige Excellence Framework
When the Baldrige Program re-imagined itself in 2023, the focus on Award Recipients became those organizations that could serve as role models for resilience and long-term success as demonstrated by their results over time. The more I read about the OHI, the more I was struck with the synergy between it and the Baldrige Excellence Framework. Three key categories of the OHI assessment include: direction (aspirations, strategy, and vision), execution (accountability, coordination and control, and capabilities), and culture (culture and climate, leadership, and external orientation).
More Recent Findings from the State of Organizations Research
In 2023, McKinsey & Company’s researchers identified three new trends that both impact OHI and are impacted by it. The first is disruptive business change that was accelerated by the COVID pandemic but continues even now. This environment requires both decisive leadership and empowerment of front-line staff. The second is the dependence on data for everyday innovation. Their findings showed that successful companies rely on small innovations rather than one “big bang” and that frontline employees who are closest to the customers are often the contributors of these little innovations. “The research also reiterates that all forms of innovation are more likely to succeed when decisions are grounding in data and facts.” The third trend that emerged was the finding that the dynamic deployment of talent leads to a greater competitive advantage. According to the research, “employees that experience more mobility at work are 27 percent less likely to report feeling burnt out, 47 percent less likely to report intentions to leave… and 2.3 times more likely to recommend their companies to others.”
The BaldrigeCoach Experience
We haven’t done the statistically validated research like McKinsey, but we’ve worked with dozens of exceptional organizations (25 Baldrige Award recipients, 24 Gold AHCA/NCAL Quality Award recipients, and numerous other state and regional Baldrige-based Award recipients). Several common characteristics have been observed across this distinguished group. 1) The senior leaders are relentless in their pursuit of excellence and disdain the concept of “good enough.” 2) They understand the importance of a purposeful culture and use multiple techniques to reinforce the mission, vision, and values of the organization – including serving as personal role models. 3) They are lifelong learners, often voracious readers of a variety of subjects, perspectives, and new ideas. They foster that same intellectual curiosity in others.
Now Ask Yourself
Do these characterize your behaviors? Are there any that could use some attention to improve not only your own leadership but your organization’s health?
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