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Why is a healthy organization important


The term “organizational health is an interesting phrase used to describe the culture of a company. Health is a characteristic primarily used to refer to a person’s state of being. That is also a state that company leaders seek for their businesses.

In Scott Keller & Colin Price’s 2011 book, Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage, Keller & Price define organizational health as, “the ability of an organization to align, execute, and renew itself faster than the competition to sustain exceptional performance over time”. These are not novel management ideas. Their research shows that a large part of a company’s long-term financial success is driven by its health.

9 elements of a Healthy organization

In “Beyond Performance,” the authors classify nine elements that create organizational health. These elements are:

  • Direction
  • Accountability
  • Coordination and Control
  • External Orientation
  • Leadership
  • Innovation
  • Capability
  • Motivation
  • Environment and values


The first element identified is “direction,” which they describe as a “clear sense of where the organization is heading and how it will get there that is meaningful to all employees.” They then refer to three practices that underpin this element, which are, shared vision, strategic clarity, and employee involvement. This same process is followed for the other elements of organizational health. 


Leadership is critical for the development of a healthy organization 

Literature indicates that supportive leadership is vital for the advancement of a healthy organization. Leaders, not surprisingly, play a crucial role in the development of a healthy organization. Leaders can inspire meaningful links with their employees, which is very important for bringing about desired job and work-related attitudes. When leadership is perceived to be healthy and effective for balancing both people and productivity concerns, this creates an engaging place to work for employees and greater returns for the organization.


Creating and maintaining healthy environments 

Healthy organizations realize that it takes a collective effort to compete in their market sector and generate continuous profits. Understanding and identifying the qualities of healthy organizations can help you uncover problems and take remedial steps to manage a successful business.

Balancing people and performance goals

In today’s fast-evolving business environment, leaders must continuously look for competitive advantage. This can be done by balancing people and performance goals. The healthy organization theory recommends that along with profits, employee’s well-being should also be an important goal for organizations.

Characteristics of a healthy organization

Traditionally, when organizations show positive financial performance, they are deemed healthy. Yet, several researchers have argued about the inadequacy of the organization’s financial measurement system in assessing organizational health.  

It may not feel like the appropriate stance to take, but a concentration on financial performance for your organization is not the best way to measure organizational health. While in theory, companies that improve their financial performance might be able to get their employees to align, execute, and improve resilience more successfully, the reverse usually occurs, according to McKinsey. 

When it comes to identifying or assessing organizational health, qualitative measurements such as employee experience, motivation of employees, and engagement levels are a far more accurate gauge than financial results. 

Feedback from employees is one the best ways to assess organizational health, as many will have different ideas on how the company can approach change. It is important to include all employees in the feedback phase, as a leader’s view may differ from employees with less authority. Indeed, McKinsey & Co. discovered that there is often incongruity between the leader’s perspective and their employees’ view of a company’s organizational health. For example, leaders often rate the company’s performance much higher than employees. Gathering feedback from employees across the whole organization is essential to getting a precise understanding of your company’s health. 

Dr John Behr, Executive Coach says: 

If your team is under-performing, you need to remember that they are part of that team, and they’ll need real feedback from team members to understand the full context of the current situation. Then they need to give that feedback serious consideration.

It starts with leaders slowing down and being willing to consider other perspectives. This requires an openness on their part to create an environment where team members feel safe enough to be forthcoming.”