December 10, 2012 | last updated December 10, 2012 8:05 am
Advice squad

Organizational health goes beyond the bottom line

Nobody who manages in today's business world needs me to remind them that success and survival are not guaranteed.

Competition is up, uncertainty and change are more pronounced, and technology advancements make it a challenge to keep up when others are investing in systems that can give them too great of an advantage unless we have our own upgrade strategies.

These conditions suggest that it is more important than ever that leaders focus on creating and maintaining healthy organizations that can respond to and thrive in their environments.

This is not as simple as it sounds. In my work as a consultant, I often find that managers don't think much about "organizational health" as a concept; and if they do, they tend to equate it solely with financial solvency. If a profit is being made in and we have resources in reserve, we must be healthy — that's the definition of organizational health. Well, actually, it's not. It's simply one among several key factors that must be in balance in order for the system to survive over time in a competitive environment.

I help leaders think more broadly by considering a wider set of health factors based on general systems theory, defining what any organism needs to do well in order to survive. They are the following:

A strong sense of identity

Members have a clear sense of the organization's mission, values, style and culture; and they are committed to achieving its goals. People outside the system have a clear image of what it does and what it stands for.

Effective reality testing

Members are able to get timely and accurate information about what is happening, both inside the organization and in the outside world. There are good processes for seeking, spotting and interpreting patterns and sharing them. This openness helps in making choices based on real data versus on assumptions or wishful thinking.

Task accomplishment

The system fulfills its mission in satisfying the expectations of customers and clients. It therefore receives sufficient new resources (money, new people, information, etc.) to maintain itself.


The parts of the system (individuals, groups, levels, etc.) work in sync rather than against each other. They manage their relations so the energy expended in collaboration, coordination, dealing with conflicts and the like gets used productively rather than blocking accomplishment or permanently splintering the system.

Effective problem solving and adaptability

As conditions change, either internally or in the marketplace, the system is able to make both short- and long-term process changes that solve new problems or help it seize opportunities created by the changes.

Of course, these factors don't operate as totally independent criteria. For example, poor reality testing makes it difficult to perceive change patterns and adapt in timely ways. Or a weak sense of identity might be increasing the degree or frequency of energy-draining disputes between departments. Inadequate adaptability (such as hanging on to old patterns because "that's what made us great") can be a big contributor to an organization's failure to keep in favor with customers or clients, and revenues dwindle as a result.

The point is that a healthy system generally needs to have a good balance among all these factors, just like we need in our personal health. We get checked for problems in functioning of heart, lungs, liver, stomach and the like because all need to be working well — we don't pick one organ as our favorite and forget about the rest. In too many cases, I have seen managers lock on to one criterion (usually profit or reduced costs) and ignore signs of decreasing commitment or increasing staff warfare until it's too late and the best people have left the system for more productive waters.

It is very helpful when experiencing a problem to be able to diagnose it like a medical problem, by understanding that it's an unbalanced internal process. An example would be making a string of poor decisions and realizing that faulty information was used to analyze the situations. Thinking of this as a reality-testing problem can lead to asking what information is missing or coming in too slowly. It can also spur consideration of whether we're stuck in non-adaptive patterns, thereby focusing more attention on processes that overvalue old ways and delay needed changes. Whatever the problem, keep in mind that one or more of these factors might be out of balance.


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