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Published: November 17, 2005

 
 

A Global Checkup: Diagnosing the Health of Today’s Organizations

  • 70 percent agree that “information flows freely across organizational boundaries.”
  • 61 percent agree that “field/line employees usually have the information they need to understand the bottom-line impact of their day-to-day choices.”
  • 60 percent agree that “everyone has a good idea of decisions/actions for which he or she is responsible.”

Healthy Companies Reap Better Results
Not surprisingly, organizational health and financial success are correlated. In fact, healthy organizations are nearly twice as likely as their unhealthy peers to report better-than-industry-average profitability. (Profitability is reported using a survey question that asks respondents to indicate whether their companies are “more profitable” than their industry’s average, “less profitable,” “about the same,” or “unknown/inapplicable.”) Although 48 percent of respondents who generated healthy profiles report better-than-average profitability, only 27 percent of those who describe their organizations as unhealthy do so. (See Exhibit 4.)


Exhibit 4: Healthy Organizations Report Greater Profitability



* Percentages do not total 100 percent due to rounding.

Source: Org DNA ProfilerSM data collected from www.orgdna.com, based on 12,465 responses; Booz Allen analysis

A closer look at the results question-by-question reveals that the traits most highly correlated with superior profitability are an ability to quickly translate strategic and operational decisions into action and the capacity to deal well with discontinuous change in the competitive environment. (See Exhibit 5.)


Exhibit 5: Execution and Adaptability Correlate with Superior Profitability 



Source:
Org DNA ProfilerSM
data collected from www.orgdna.com, blank answers excluded; Booz Allen analysis

All Industries Suffer Significant Organizational Dysfunction
Looking across the entire data set, no industry emerges as particularly healthy. Even in the “healthiest” industry (real estate), less than half of survey responses result in a healthy profile. And it gets much worse: In the least “healthy” industry (utilities), less than one-quarter of responses indicate a healthy organization.

The unhealthiest industries are remarkably consistent across revenue segments, so organization size alone does not drive this result. (See Exhibit 6.) For example, compared with other industries, utilities and health care fall in the bottom “health” quartile in all four revenue segments. Capital goods and energy companies are among the bottom six industries in three out of four revenue segments. We believe that these unhealthy organizations survive because they compete in regulated and/or capital-intensive industries where high barriers to entry likely protect them from failure. In contrast, more “healthy” industries — professional services, commercial services, hotel and leisure, real estate — tend to be more openly competitive.


Exhibit 6: Sector-Level Differences in Organizational Health 



Source:
Org DNA ProfilerSM
data collected from www.orgdna.com, based on 23,089 completed observations; Booz Allen analysis

Unhealthy Organizations Lack Clear Decision Rights
Despite their obvious importance in determining how an organization will perform, decision rights (i.e., who decides what) are poorly defined in a surprising number of companies. Only 43 percent of overall respondents believe that people in their organization have a clear idea of the decisions they are responsible for. Among “unhealthy” profiles, that number drops to 23 percent. Fewer than one in four people know where their job ends and another person’s begins. In contrast, nearly 80 percent of “healthy” respondents agree that everyone in their organization has a clear idea of the decisions/actions for which he or she is responsible. (See Exhibit 7.)


Exhibit 7: Decision Rights Are Unclear in Unhealthy Organizations 



Source:
Org DNA ProfilerSM
data collected from www.orgdna.com, blank answers excluded; Booz Allen analysis

Still more evidence that decision rights are unclear in unhealthy organizations is that three out of four responses from “unhealthy” companies agree that decisions, once made, are often second-guessed, compared with 37 percent of respondents from “healthy” companies. Second-guessing is a common symptom of ill-defined or poorly articulated decision rights.

 
 
 
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