Organizational Health: The Definition and Its Relation to Business Performance

Simply trying to drive profits won’t cut it. To build a successful company, it takes a long-term strategy and the right people to execute it. In other words, organizational health. A good organizational health ensures that adaptability, creativity, and innovation get incorporated into the core values of the workplace.

What is Organizational Health? 

Organizational health goes beyond the bottom-line. As McKinsey & Company summarizes it, the health of an organization is based on the ability to:

  • Align around a clear vision, strategy, and culture
  • Execute with excellence and efficiency
  • Renew the organization’s focus over time by responding to market trends and remaining relevant through innovation

Healthy companies drastically outperform their competitors. In fact, shareholder returns for healthy companies are approximately three times those of unhealthy ones. Those that are working on their company health can see tangible performance improvements in as little as 6 to 12 months. 

A Focused Approach for Organizational Health 

The health of your organization has a profound impact on your employees, their work and their capacity to achieve both individual and common goals. It gives you a competitive edge and as we’ve seen, there’s a significant reason to. After all, would you rather grow healthily and stay ahead of the pack now—or try to catch up later?

While there’s no secret formula to maintaining and building organization health, there are some factors that positively affect it. 

Organizational Alignment. Ensuring everyone has a shared vision of the company’s goals, values, and strategy results in many benefits including but not limited to improved employee relationships, employee loyalty, and a unified workforce.

Clear Communication. Maintaining clear, transparent communication is key to creating comprehensive and well-received policies and processes that can help organizations facilitate growth, adapt to changes and be flexible.

Employee Wellbeing & Development. According to a 2021 industry trends report on employee wellness by HubSpot, companies that meet the wants and needs of their employees differentiate themselves through a culture of well-being, and drive overall business success.

Organizational Fairness. Treating your employees fairly and having transparent processes to do so impacts their attitude on the workplace and the work that they do. Key factors include gender equality, inclusion, fair wages, and career development.

Companies can build health into their workplace by making sure it’s implemented and driven by all employees. Developing the company’s values and sharing them in a way that encourages employees to live and build on them can help you make leaps in organizational success. It may be hard to incorporate in the beginning, but once you do, you’ll notice the payoffs fast.