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  1. 1. Organizational Health Index: The Missing Management Metric Using organizational health to build and sustain financial performance
  2. 2. What makes the OHI unique? The OHI goes beyond a typical employee survey. It prescribes interventions to improve those elements of health directly linked to financial performance. For the first time, managers are saying they know where to focus organizational efforts to impact the bottom line.“McKinsey provides Three factors contribute to OHI’s distinctiveness:a unique combination Proven link between health and performanceof operational and • McKinsey has identified the nine elements of organizational health that impactorganizational expertise.” financial performanceChief Executive Officer,Energy Corporation • The healthiest companies are more than twice as likely to earn above their industry’s median profit margin Competitive insights • The OHI benchmarks a company’s results against a continuously growing, proprietary database of more than 600 companies in industries across all geographies. • Results are benchmarked against industry top performers as will as companies within an organization’s archetype Archetypes • McKinsey has identified four patterns of organizational behavior or “archetypes”, that help describe most companies’ organizational health profile; market focus, execution edge, talent/knowledge core, and leadership driven. • The archetypes are critical to defining a company’s “winning recipe” of management practices
  3. 3. About the OHI The Organizational Health Index measures and tracks the organizational elements that drive financial performance. It provides a simple but powerful roadmap for leaders and managers to improve organizational health.“McKinsey’s behavioral Linking organizational health and performancework is the most profound Our research has proven that the healthiest companies are more than twiceI’ve been involved in – the as likely to have EBITDA margins above their industry medianimpact is extraordinary”Chief Executive Officer, Nine elements of organizational health Proven link to financial performanceGlobal Telecom Company Probability of earning earning above-median Probability of above-median EBITDA margin margin EBITDA Percent Percent 68 68 48 48 2.2x 2.2x 31 31 Weak Weak Good Good Great Great Levels of health health Levels of Improving performance The OHI: • Employs an employee survey to provide hard measures for the soft issues that impact financial performance • Benchmarks a company’s results against industry performance and high performing organizations • Helps set aspirations and identifies which management practices to emphasize for improved performance using organizational archetypes • Helps prioritize needed interventions to drive lasting change • Tracks progress and catches potential issues early through regular survey deployment Connecting with experts The OHI process draws upon: • A group of highly trained analysts, with experience across many companies in different industries and geographies, who often yield from a company’s OHI, unexpected and important practical insights for that company • McKinsey’s deep organizational expertise and broad experience serving the world’s leading global institutions – critical for helping a company define its unique path forward
  4. 4. What the OHI deliversThe Organizational Health Index provides detailed findings for how your company is performing on the nine elements of health related to financial performance.McKinsey’s basic beliefs about organizational health Health matters Focus on the right practices Financial performance is driven by organizational health. Although companies must achieve a minimum threshold level We have identified nine elements and 34 underlying for all management practices, they need distinctiveness in only management practices directly related to performance. six to seven practices. Know your organization’s archetype Drive execution McKinsey has identified four patterns of organizational behavior Management must design and execute against a set of priorities or “archetypes”. Management needs to understand their that strengthen the critical organizational health practices and archetype to know which practices to emphasize. drive bottom line performance.The OHI’s value propositionThe OHI… 1 2 3 4 Provides hard measures Assesses organizational Identifies an Tracks progress and for the soft issues strengths and organization’s catches potential issues that impact financial weaknesses archetype to illuminate early performance the optimal path forward
  5. 5. Working with the OHI teamFrom designing the approach to tracking progress, the Organizational Health Index relies on McKinsey’s close collaboration with you and your management team Comprehensive OHI assessment survey • An online employee survey of an organization’s entire population or specific segments (paper-based survey available for employees without computer access) • In-depth interviews and focus groups to gain a deeper understanding of the key issues • Additional survey modules, if needed, to assess specific areas ; for example, social networks, top management effectiveness, change readiness Rigorous analysis and benchmarking • OHI analyses are provided for the enterprise, business units, functional groups, management layers and other subgroups as needed • Results are benchmarked against a proprietary database of more than 600 companies Identification of organizational archetype • Each archetype has a specific mix, or “winning recipe”, of management practices that delivers optimal performance • An archetype’s “winning recipe” guides in designing an organization’s optimal improvement plan Development of change programs along “themes for action” • Themes for action are developed based on the company’s optimal improvement plan • Change interventions and initiatives can be short- or long-term and revolve around McKinsey’s influence model Tracking progress • Regular survey deployment tracks progress and identifies potential issues early • Tracker survey results include McKinsey-facilitated discussion with management regarding progress made and additional interventions needed
  6. 6. For more information on the OHI,visit http://ohi.bymckinsey.comor email