Optimizing Productivity by Leveraging the Organizational Health Index (OHI)

The typical approach to improving productivity focuses on assessing variance in quality, time, rate, service, or cost, around which management systems develop incrementally or revolutionary.

Organizational Health Index, on the contrary, focuses on improving performance through improved alignment of organizational systems. For example, by improving competence of key components such as mindset, work design, technical expertise, or relationships; or through improving the interface between work processes, or the interaction between work practices.

Simply put, the capability of an organization to achieve its strategic goals and their alignment defines an organization’s health. The Organizational Health Index (OHI) leverages logical consistency to manage the organizational health. OHI entails quantifiable evaluations, diagnostics and recipes for success that allow the leaders to calculate and accomplish the organizational health goals, required to sustain long-term performance.

Organizational health refers to the need to address soft (leadership, direction or culture) and hard factors (accountability, reporting lines, or controls) affecting performance. The organizational health index is an ongoing continuous improvement system applicable across an organization. The OHI measures not only the current health level, but also determines the next steps for an organization. There are numerous advantages to the organizations implementing it, including:

  • Benchmarking organizational health against the rivals.
  • Aligning the organizational systems, units, and people by communicating shared goals and priorities; and highlighting and plugging the disconnects.
  • Improving organizational performance by pinpointing variances and opportunities to improve health and drive business success.

The OHI Diagnostic Framework provides a road map for leaders and managers to improve organizational health. It measures the organization against the 9 most critical health outcomes; these outcomes comprise both hard and soft organizational elements. Careful measurement of these 9 elements has a proven link with improved financial performance and earning above-average EBITDA margins:

  1. Direction
  2. Accountability
  3. Coordination and control
  4. External orientation
  5. Leadership
  6. Innovation and Learning
  7. Capabilities
  8. Motivation
  9. Work Environment
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There are 37 management practices under these 9 health outcomes, developed to help companies identify the behaviors most critical to their health journey:

Direction

  • Shared Vision
  • Strategic Clarity
  • Employee Involvement

Accountability

  • Role clarity
  • Performance contracts
  • Consequence Management
  • Personal Ownership

Coordination and Control

  • People Performance Review
  • Operational Management
  • Financial Management
  • Professional Standards
  • Risk Management

External Orientation

  • Customer Focus
  • Competitor Insights
  • Business Partnerships
  • Government and Community Relations

Leadership

  • Authoritative Leadership
  • Consultative Leadership
  • Supportive Leadership
  • Challenging Leadership

Innovation and Learning

  • Top-down Innovation
  • Bottom-up Innovation
  • Knowledge Sharing
  • Capturing External Ideas

Capabilities

  • Talent Acquisition
  • Talent Development
  • Process based Capabilities
  • Outsourced Expertise

Motivation

  • Meaningful Values
  • Inspirational Leaders
  • Career Opportunities
  • Financial Incentives
  • Rewards and Recognition

Work Environment

  • Open and Trusting
  • Internally Competitive
  • Operationally Disciplined
  • Creative and Entrepreneurial

Years of research have shown the healthiest companies to align with 1 of the 4 recipes for organizational health. These recipes constitute concrete management practices and activities for the organization to implement.  Leaders need to acknowledge and align to the recipe that is appropriate for them. They can use these success recipes to plan and implement a change program that results in sustainable outcomes. The 4 recipes for organizational health are:

  1. Leadership
  2. Market Maker
  3. Continuous Improvement
  4. Talent

Interested in learning more about the other recipes for Organizational Health and the OHI Diagnostic Framework? You can download an editable PowerPoint on Organizational Health Index here on the Flevy documents marketplace.

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