If we’re allowed only one takeaway from 2020, it’s that the world can change in the blink of an eye – from the way we conduct business to the way we shop, eat and live. Companies that have been able to overcome and thrive in the economic aftermath generally have a few things in common: Strong vision, inspired leadership and a solid infrastructure that helps them adapt to change. These are all signs of strong organizational health.
In addition to your company’s annual organizational health assessment, it could be beneficial to also take note of kindred factors that can help a healthy organization become even healthier – factors such as embracing innovation and fostering a culture of diversity and inclusion (D&I).
First things first. According to McKinsey & Company – 
creators of the Organizational Health Index (OHI) – organizational health is an “organization’s ability to align around a common vision, execute against that vision effectively, and renew itself through innovation and creative thinking.” In other words: See it, do it and renew it – with automatic precision.
Instilling good organizational health in your business is almost like installing a high-performance engine in your car that runs smoothly no matter who is driving, no matter what the road conditions are. The healthier your company is, the less likely inside and outside influences are to cause stalls or breakdowns on the road to success.
Overall reporting from McKinsey’s OHI case studies indicate that almost every company that improves its organizational health performs better – no matter the sector or region. And because companies are scored before, during and after the implementation of healthy strategies, the OHI serves as a reliable, data-driven comparative tool that highlights just how beneficial it can be to improve your organizational health. Data from OHI reporting shows that healthy companies deliver three times the returns to shareholders as less healthy companies, plus:
For small- and medium-sized businesses looking to boost their organizational health, McKinsey’s OHI data highlights some great places to start:
Of course, this organizational health checklist may have worked in an unusually strong economy over the past decade plus, but what makes for good organizational health in times of crises? According to McKinsey, the same business health ideas – just selectively applied.
For example, companies that found success immediately following the COVID-19 crisis all shared the following managerial themes:
McKinsey also points out that some organizational practices may be counterproductive during a crisis. For example, holding your directional course without accounting for external orientation can spell disaster.
Sometimes long-term visions need to adapt and change in order for a business to overcome adversity, as one sporting goods company found when faced with a changing sports landscape. But instead of treading water and hoping for a “return to normal” they shifted their focus to workout apps, and trainers and were able to effect an 80% quarterly increase in users and a 30% boost in digital sales.
What’s notable, then, is that all of these examples of robust business health share a willingness to innovate – and with good reason. According to one study, 90% of executives believe the COVID-19 crisis will fundamentally change the way they do business over the next 5 years, with 75% agreeing this ultimately boils down to significant new opportunities for growth. Yet when only 21% say that they have the resources, expertise and commitment to successfully pursue that new growth, it really hammers home just how much opportunity is out there that’s not yet fully seized.
In fact, with the exception of the pharmaceutical and medical product industries, this gap in opportune belief versus the ability to grasp it has led to a deprioritizing of innovation across almost every sector. According to executives polled in the McKinsey study, sidelining innovation “allows them to concentrate on four things: Shoring up their core business, pursuing known opportunity spaces, conserving cash and minimizing risk, and waiting until ‘there is more clarity.’”
But this might not be a tenable strategy, as what has caused businesses to thrive in the past may no longer be feasible. Consumers’ disposable income has changed, previous advertising channels may no longer reach less-mobile audiences who are working and schooling from home, new opportunities may be scarce for businesses that are late to innovate – in short, doing what you’ve always done might not be enough. Instead, McKinsey points to four innovation forward priorities that may provide businesses with a competitive advantage – all of which are in lockstep with improving your organizational health:
See it, do it and renew it – with automatic precision. If you need proof of concept, history points to previous post-crises time periods where businesses that focused on innovation fared far better during recovery – and beyond. For example, the 2002 SARS stay-at-home lockdown in China led directly to the rise of e-Commerce as king of sales – in particular, Jack Ma’s Alibaba empire.
Or in America, technology mixed with disruption after the 2008 recession to birth new business models that are now giants of industry – Uber being a prime example. And it wasn’t just start-ups in 2008: Even long-standing companies had a choice to reinvent themselves and thrive (Disney and Microsoft) or try to remain the same and dive (Toys “R” Us and Blockbuster).
If the near-term future follows suit, companies that look at ways to innovate their businesses today could form the next wave of industry icons tomorrow. Consider adding it to your organizational health checklist.
Just like innovation, a strong case can also be made about including D&I considerations into an organization’s health assessment. Unfortunately, just at a time when D&I initiatives were finally starting to make a dent in the racial and gender hiring and wage gap, the events surrounding 2020 put D&I gains at risk.
In truth, it shouldn’t have. Consider that reports show narrowing the gender gap by 2025 would increase the GDP by $12 trillion, yet 160 million women may now need to change their jobs by 2030 due to automation. And even though there’s $2 billion in potential revenue if services for black Americans are expanded through financial inclusion efforts, 39% percent of all jobs held by black Americans now face the threat of reduced hours or pay, furloughs or layoffs. In short, the very real benefits of D&I are not lining up with the often grim realities of diverse workers.
In a sign of the times, a McKinsey study found that 27% of D&I leaders report their organizations have put all or most D&I initiatives on hold during the pandemic. To say nothing of the obvious employee impact this has, these actions could also impact how consumers view a business and lead to losses of sales, business-to-business opportunities and brand perception.
Instead of halting D&I progress, companies today might do well to view D&I in the same manner as innovation – an opportunity for growth that can deliver a competitive edge. McKinsey experts highlight a number of these types of D&I hiring opportunities that savvy business owners can seize upon:
The bottom line is that when it comes time to do your yearly organizational health assessment, your company might consider reanalyzing your innovation and D&I initiatives to focus on more than just the norm – especially during a time that’s anything but normal.
At Seacoast Bank, we’re here to help with everything from organizational to financial health. If you have questions about the financial side of your business or want to know more about solutions we offer for business banking, use the form below to contact your local banker today.
Topics: Building Your Team
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