Organizational health is crucial to long-term performance, yet it is a moving target. For more than 20 years, McKinsey’s Organizational Health Index (OHI) has examined the practices and outcomes that lead to better health (exhibit). Through extensive research that yielded our latest OHI insights, we identified emerging and evolving trends in technology, worker motivation, talent strategies, and leadership styles, among other critical health factors. Test your knowledge below.
Authoritative leadership
For decades, the standard view was that there was a time and a place for authoritative leadership—using authority, pressure, and influence to get things done. Reflecting that viewpoint, the authoritative leadership practice has been part of our OHI survey from the beginning. When we were updating the survey, we hypothesized that it would stay as one of the leadership practices.
Employee experience
The OHI measures both outcomes (how well an organization aligns, executes, and renews itself to deliver sustained high performance) and practices (how leaders “run the place” every day to achieve those outcomes). We predicted that measuring individual employee experience, while leading to valuable insights, should not be included as a core aspect of the diagnostic. We believed it wouldn’t provide additional predictive value for organizational health beyond what is already captured by management practices.
Purpose
In the past, employee involvement has been about engaging people in the “what” and the “how” of interpreting, evolving, and executing an organization’s strategy. We predicted that purpose, reflecting the “why” that inspires people, should be added as a new practice driving whether organizations effectively set a clear direction, leading to four direction practices, not three: purpose, shared vision, strategic clarity, and employee involvement.
Decision-making excellence
Effective decision making is crucial to organizational health. If you’ve ever been at a company where decisions are made randomly, based on inaccurate input, or put off for far too long—or all of the above—you know this well. In updating the OHI survey, we predicted that decision-making effectiveness and efficiency would be a new practice driving the outcome of coordination and control, or whether the organization effectively measures and manages business performance.
Tech and digital capabilities
Many organizations invest in technology to improve the employee experience, believing that happier employees are more loyal employees. We predicted that technology and digital capabilities would be added as a new practice driving the capabilities outcome, focused on the role of technology in making work easier for employees.
Environmental sustainability
Employees want to know that their organizations are doing their part to make the world a better place by acting responsibly and in ways that benefit society and promote the welfare of individuals and communities. We predicted that sustainability (including a focus on net-zero goals) would be added as a new practice driving external orientation, or whether the organization effectively engages with external stakeholders.
Inclusion
The value of a diverse and equitable workforce is captured only if an organization is inclusive. We expected to add two practices related to inclusion. One focuses on creating an inclusive work environment that values the unique perspectives of all employees and where everyone feels they belong. We predicted that this practice would drive an effective work environment. We also expected to add a practice on inclusive leadership that focuses on how leaders foster this environment, include a diverse set of employees in decisions, and speak up when they see inappropriate behavior. We expected that this practice would drive the leadership outcome.
Talent deployment
All companies want to ensure that they have the best talent. However, attracting the best external talent and retaining great people once they’re hired is a tall order. We predicted that the talent acquisition practice, which is focused on hiring the best external talent, should be expanded to a broader practice that includes strategically and dynamically shifting talent within the organization.
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