Rocky Fu’s Blog

A recent The McKinsey Quarterly article discusses how business leaders can embed “healthy” thinking in the organization to sustain corporate performance.

The article points out three sets of impediments blocking the way to nurture health in a corporate context.

• The “mindfulness” trap: the tendency to be pulled back into a short-term performance perspective by the press of daily business, much as moments of reflection at home come abruptly to a halt when the doorbell rings.
• The cognitive traps: a preoccupation with the near-term outputs of performance and what is needed to produce them, the mistaken belief that organizational health is soft and intuitive and therefore lacking the hard-nosed rigor and precision needed to drive performance, and the easy but wrongheaded assumption that near-term performance and long-term health embody a set of trade-offs (and that the first to some extent precludes the second).
• The self-knowledge trap: our tendency to say (and believe) one thing and do another.

So, what are the attributes of health?

• Resilience

Healthy companies are practiced at spotting and managing key risks (including low-probability but high-impact catastrophes), and they build mechanisms and have the resources—cash reserves or backup IT systems—to get through difficult periods.

• Execution

Companies that execute well share certain attributes: distinctive capabilities, the ability to make sound and timely decisions, strong forecasting skills, and employees who understand their roles and responsibilities.

• Alignment

Healthy companies, however scattered and disaggregated physically and organizationally, generally work toward a common cause.

• Renewal

Healthy companies invest in their future by expanding into well-chosen markets where existing assets and competencies provide real leverage, usually with the help of a winning formula that has been honed from experience and facilitates smooth integration across the entire value chain and the efficient extraction of synergies.

• Complementarity.

It often figures in organizational practices, such as hiring policies, training programs, and consistent and mutually reinforcing behavioral incentives.

What are the healthy actions that you can take? Work on one health attribute at a time? It doesn’t work this way.

There are invariably tensions among them—moving to improve one could weaken or compromise another.

The discipline of managing tensions among the different characteristics of health requires a willingness to transcend daily routines and conventional mind-sets and to view the performance system in its full complexity.

Monitor the way you allocate resources. Break down resources into two categories—those devoted to driving performance and health, respectively.

Balance the strategic portfolio. Companies can keep an eye on their health by regularly assessing all their business ideas and new initiatives—projects or programs to change or improve something in the business.

Integrate into core processes. Extending health-oriented strategic thinking into detailed planning and budgeting processes is the next step.

Have the metrics to match. executives should develop a number of health variables for each of the attributes vital to the health of the business.

Reinforce through performance.

Anatomy of a healthy corporation [via The McKinsey Quarterly]

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