Why the system works
WE TURN INSIGHT INTO PERFORMANCE
A rigorous analysis and cutting-edge thinking from McKinsey & Company’s Organization Practice make the OHI system the best in class approach to drive health and performance in your organization.
The Power of the Framework: Linking Performance and Health
Based on more than a decade of empirical research, the OHI framework uses new components to measure and manage an organization’s health and capacity to sustain success.
In 2001 the McKinsey Organization Practice set out to define the core components of an organization’s health—not just traditional aspects such as culture and climate but also the hard metrics. This massive research effort included a review of more than 800 articles and books; interviews with CEOs; and case studies of McKinsey client work. The result was a robust nine-box-framework that reveals an organization’s health and its capacity to perform. Using the framework with clients over the past decade, we have statistically proven the relationship between organizational health and performance. In any organization, health is the foundational metric that drives all others, whether tracking safety in hospitals, order fulfillment in consumer goods or employee engagement.
The OHI measures three things; An organization’s overall health score, its effectiveness in 9 outcome areas, and its frequency of use of each of the 37 management practices.
The OHI score is the best leading indicator of operational and financial performance. The score not only provides a tangible metric with which to track health performance but also benchmarks the organization relative to our global database, and more specifically peers in your industry or region.
The 9 OHI outcomes incorporate a balance of "hard" elements such as accountability and coordination/control and "soft" elements such as employee motivation and culture. Using a five-point agreement scale we gauge employees’ perceptions of their organization’s effectiveness.
The 37 management practices are the activities and behaviors needed to run an effective organization. Using a five-point frequency scale we measure how often leaders and managers demonstrate any of these actions.
The Power of Analytics: An Insight Engine
Our substantial and growing database provides us with a rich dataset with which to provide continuous new and exciting insights to our clients on what drives health. Our Data and Research team works collaboratively with our Health Coaches and other McKinsey experts in identifying industry and regional trends, and pinpointing the best areas to focus in to give your organization a competitive advantage.
The Organizational Health Index is powered by a robust survey instrument built by McKinsey & Company that has been used with our clients for more than a decade. Over that time we have amassed millions of participants and worked with hundreds of companies, creating a database of information we can benchmark against and gain insight from.
Industry and Functional Insights
Our database gives us the ability to go beyond just reflect an organization back on itself. We can provide powerful industry-wide insights. For example, we can understand which behaviors have become more valuable in health-care organizations since health-care reform, or how private equity firms are changing their organizational models to adapt to market demands post-2008. We can show which practices are standard for healthy organizations in an industry, and which ones are weak across the board. These insights can help our clients spot opportunities in the market and improve employee engagement.
If organizational health drives performance, what does a healthy organization look like? To answer this question we dug into our database to understand what companies with top quartile health were doing to be successful and we found four different Recipes for success. Each recipe reflects an underlying approach to management and the use of resources — including core beliefs about value creation and the drivers of success. Our research shows that companies strongly aligned to a recipe have a five times greater chance of achieving top quartile health. By helping organizations identify and align to the recipe that’s right for them, the OHI system gives each organization a clear indication of where to concentrate improvement efforts. We work with leaders to identify Priority Practices, to ensure improvement efforts are focused and impactful
Research proves you do not have to be great at all 37 management practices, but you should emphasize the management practices that are aligned to your recipe. Leveraging predictive analytics to assess your performance in each area relative to the information in our database, as well as your preferences as an organization, we identify the behaviors and practices that will have the greatest impact on health for you. What’s more, we also identify practices that could jeopardize your organization’s health. By prioritizing areas to build or de-emphasize, companies can concentrate on being great at the management practices that really count for them.
The Power of the System: Measure, Focus, Act
The OHI system isn’t just an assessment, it’s a holistic journey with clearly defined actions at each step. The comprehensive process measures and manages health over time, just as you would measure any other key performance metric.
The core of the OHI system is the assessment, which is either completed in full or in an abbreviated “pulse” version to support health tracking and measurement depending on where an organization is in the journey. The assessment gathers both quantitative and qualitative information to inform a deep understanding how your organization is being run and how effective your employees perceive your organization to be.
Achieving sustained improvement in health and performance requires leaders to agree on an underlying philosophy for how to allocate resources and run the business. Following the assessment we conduct a series of expertly designed workshops and discussions to reflect on the organization’s health, set goals and identify areas for improvement.
To move from data to action we work closely with leaders to answer the question “What does it mean for your organization to be great in this area?”. We then define a “North Star” and prioritize actions and deliverables to get there. We provide concrete, tactical actions for each management practice, built on evidence developed from almost 100 years of experience. These actions are grouped around business systems improvements, needed skills and competencies, and the day-to-day behaviors that can improve health for a specific management practice.