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Company Performance vs Company Health

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Can focusing solely on performance be counter productive to a company?

Performance is what is delivered to stakeholders in financial and operational terms. What about the "Health" of a company - where does it come into play? Should a company focus on both at once and why?

Business Analysis
Organizational Effectiveness
Operational Excellence
Data Analysis
Scott Cook
1 month ago

6 answers

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Focusing only on performance can work for a while but is not sustainable over the long term. I recognize four stages of organisational fitness: fit to survive, fit to perform, fit to thrive and future-fit. At a given moment, an organisation may be focused only on one of these aspects. Over the long term, successful organisations balance all aspects.

Natalia Blagoeva
1 month ago
Natalia Blagoeva- CMC©, CPLP©, CTT© I really like your "4 Fs" model. It's simple and coprehensive. - Vic 1 month ago
Happy to hear that. Thank you :) - Natalia 1 month ago
Natalia Blagoeva- CMC©, CPLP©, CTT© - Thanks for the great response. Balance is critical. Companies should start managing their organizational health as rigorously as they do their P&L. This might start with the development of a health team dedicated to embedding the right behaviors in the organization that focus on the four stages of organizational fitness you have outlined. - Scott 1 month ago
Thanks, Scott! I agree with you. Many companies function out of the perception that they do not have time for this. Yet, they have enormous energy spills because of not addressing issues related to their organisational health. Good health equals more energy for what's truly important. - Natalia 1 month ago
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I think that "health" includes a focus on the employees--not just the bottom line. Employee satisfaction, training, pay and benefits contribute to their productivity and intention to stay. This ultimately helps the company health and productvity

Ellen Raim
1 month ago
I have found and continue to seek the answer on Employee satisfaction, training, pay and benefits. There is not a 1:1 conversion between Employee satisfaction, training, pay and benefits and performance. There has to be a buy in by the employees into the mission, vission, and strategy so that they invest time and effort into realizing the performance potential for themselves and the firm - Adrian 1 month ago
Ellen Raim - Employee satisfaction is important. Companies that focus on empowering their employee’s to improve knowledge sharing across the business units and that encourage and reward innovation and entrepreneurship see improvement and alignment across the mission, vision, and strategy for the organization. - Scott 1 month ago
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both at once. The company exists to realize results, otherwise your not in business your in social services.. My view on Company Performance vs Company Health is that both have to co-exist. if it requires a change in leadership or people, that is what it takes. As long as the moral campus, mission, vision, and strategy are aligned, then performance will result.

Adrian Woolcock
1 month ago
Adrian Woolcock - What companies are realizing is that both have to exist as you noted. This does often require a change in leadership. Leaders should start integrating organizational health into QBRs with data to show how both performance and health are trending against targets. - Scott 1 month ago
how do we define organizational heath? - Adrian 1 month ago
Scott and Adrian, The best benchmark that I focus upon is Toyota. Many books have been written about what makes Toyota high performing and healthy. If I was to push one such book, it would be Toyota Kata by Mike Rother. Its a quick read, and it points out that Toyota's continual success is not because of their toolset, but their mindset. They harness the brain power all employees. - John 1 month ago
John DuBois - Thanks for the recommendation. I will take a detailed look at the book. - Scott 1 month ago
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Performance is good for shareholders, but health needs to be at same time the focus of any company. Health starts with long term strategy, customer satisfaction, new product development, increase of market shares, employees empowerment and long term sustainable revenues for future development. without health, performance will be just a short term result and can degrade very quickly.

Didier Verriest
1 month ago
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Scott,
VC companies get burned by this question all the time. When using EBITDA as a performance metric to set a value for a company, VC firms forget how easy it is to "game" the metric of EBITDA. A company can go for years without buying a single spare part for the equipment, make no additional investment in infrastructure and make the performance of the company appear great. When you pull back the curtain and take a better look at the infrastructure, age of the equipment, spare part availability and most importantly the morale of the workers, you may find a very sick company.

We have been hired by many VC firms, after the acquisition, to come in and clean up the mess of what appeared to be a very strong performing company. Those same VC firms now hire us to assess the company health as well as performance prior to acquisition now.

John P DuBois
President optimize, Inc.

John DuBois
1 month ago
John DuBois - I too have experienced the same things you have noted. I have been on both sides of the acquisition process. It's good to see that VC firms are understanding the importance of also measuring the health of an organization prior to making acquisition decisions. - Scott 1 month ago
Scott, Some have, many others are late to identifying this strategy of risk avoidance. In either case, my firm gets lots of business from companies who pulled the trigger before knowing the true health as well as those who hire us to do the due dilligence prior to pulling the trigger. - John 1 month ago
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Scott Cook Great question! I believe that company health > company performance. Company performance is a derivative of company health.

McKinsey & Company have an Organizational Health Index (OHI) which measures organizational health based on proprietary organizational effectiveness outcomes and management practices.

  • An organization's OHI is benchmarked to 1700+ organizations
  • Companies with top quartile OHI deliver on average 3x greater Total Return to Shareholders, over time [company performance]
  • Nine organizational health outcomes are measures across the organizational ecosystem, both hard and soft skills
    • Leadership
    • Accountability, coordination and control, capabilities, motivation
    • Direction, innovation and learning, work environment, external organization
    • https://mck.co/2UYkbUf
Vic Clesceri
1 month ago
Vic Clesceri - Thanks for responding. McKinsey & Company has a great article titled "The hidden value of organizational health—and how to capture it. It is worth a read.. https://mck.co/2mcY75d. - Scott 1 month ago

Have some input?