What is organizational health?

When people are healthy, they are better able to take on physical stress, recover from illness and push themselves to achieve goals. Alternatively, ill health can leave individuals vulnerable to stress and disease.

The same can be said for an organization. When a team or business is unhealthy, it can be undermined by environmental forces ranging from competition to economic downturns.

Enter organizational health, a concept that helps leaders build durable, sustainable and vigorous companies that can operate effectively in the long run. Given the vicissitudes of modern business, the health of an organization is deeply linked to that organization’s productivity, profitability and other factors.

Here, we’ll take a closer look at what organizational health entails and how to achieve it.

Organizational health arose from occupational health, which broadly focuses on building a workplace where employees feel valued. Organizational health, however, connects that concept more explicitly to the overall success of a business.

There are various definitions for organizational health. As Forbes states, “Organizational health refers to the ability of an organization to cope with change and continue to function with a high-performance workplace culture.”

That definition changes slightly in the International Journal of Environmental Research and Public Health, which states, “Organizational health describes an organization’s ability to operate effectively, grow sustainably and adapt smoothly to change.”

While the definitions have slight differences, change remains a constant. Industries experience change in the form of environmental, political, social and economic events. Organizational health is a helpful concept for building the necessary resiliency within an organization so it can withstand and even thrive in the face of inevitable change.

Companies and corporations that pursue organizational health are ultimately investing in the well-being of their workplace amid challenges. All organizations experience hardships, but the choices that leaders make when they prioritize organizational health can drastically improve the experience of employees, overall morale and the longevity of an organization.

Cultivating organizational health is crucial because it directly affects employee morale, engagement and satisfaction. A positive workplace culture fosters loyalty, productivity and innovation among team members, which can lead to higher retention rates and lower turnover costs. By investing in their organizational health, companies can establish a solid foundation for sustainable growth and long-term success.

Harnessing knowledge about organizational health equips companies with valuable insights to address, optimize and empower change in workplace culture. By using tools such as employee surveys and performance metrics, organizations can gauge the pulse of their workforce and identify areas for improvement. Whether it’s fostering open communication channels, promoting DEI initiatives or enhancing leadership development programs, an organization can tailor its strategies to bolster employee satisfaction and make the organization a place people genuinely want to work for. 

There’s no single metric for measuring organizational health, and its exact nature depends on the specific needs of an organization. Some factors, however, can affect organizational health and its twin goals of productivity and a positive company culture. Those factors include the following:

Leadership

From executives to managers, leaders in the workplace are well placed to see how individuals fit into the larger company goals and mission. Managers can serve as role models by bringing their energy, honesty and empathy to every task and project. This can then motivate employees to bring those same traits into their work, which ultimately contributes to a coherent company culture that motivates employees to succeed.

Accountability

When employees are unclear about how their success is measured, it can be difficult to work toward an organizational goal. Accountability in this context is all about transparency surrounding what leadership expects of employees and vice versa. When employees know the goals they are accountable for, they have a clearer idea how to contribute to the company’s mission.

When evaluating accountability, it’s important to assess how clearly goals are set and communicated within the organization. Without clear accountability, for example, it can be hard for an employee to know whether to take on more work or to step back. This can lead to an uneven distribution of work, resulting in bottlenecks and inefficiency.

Direction

Clear direction is crucial to organizational health. Employees may understand which goals they are accountable for, but if they don’t have clear direction on how to achieve those goals, productivity can suffer.

Good direction sets up employees to work independently toward their objectives. Direction comes down to being crystal clear with employees about processes and workflows. Instead of asking their superiors for input on every minor task, they can be empowered with the right skills and understanding to overcome obstacles independently.

Coordination

If direction describes how employees interact with their superiors, coordination describes how employees interact with each other. Poor coordination can result from ill-defined roles, uneven distribution of work or unclear processes.

When employees don’t (or cannot) communicate with each other clearly, for example, tasks can be missed or done twice-over. Crucial information can fall through the cracks. In all, a lack of coordination reduces the ability of an organization to work efficiently when challenges arise.

Much like direction, coordination hinges on clearly communicated priorities and objectives, as well as positive working relationships among employees. Clearly defining the responsibilities of each employee within a team can help that team work as one.

Motivation

When employees feel motivated, they’re more likely to dedicate energy and enthusiasm to their work. That extra energy may be just the thing to fulfill a quarterly sales quota or push a marketing campaign to new heights.

Talking to employees directly is key to understanding what motivates them, and understanding what motivates employees can help leaders make that work more meaningful to the staff. Opportunities for professional development, for example, can help employees grow in their jobs. In addition, when employees find a connection between their work and their personal values, they can more easily find a purpose that motivates them to succeed professionally.  

Values

Company values can provide a sense of direction and purpose for employees. It is not enough, however, to articulate these values. Strong leadership must also serve as an example of putting company values into action. When employees see their leadership align with company values, they feel more motivated to align their own work accordingly.

Does the organization implement policies that translate its values into material actions? Is there a sense of “organizational justice” where employees feel that everyone in the organization is held to the same high standard? These questions can help evaluate the place of values in the overall organizational health of a company.  

According to the consulting firm Table Group, a four-step model on how to improve organizational health is one place to start. The steps are:

1. Build a cohesive leadership team

With so much of organizational health coming from the top down, it’s no wonder that leadership team building is a priority. A team that’s aligned in values, coherent in processes and ready to lead can have a positive effect across the company.

2. Create clarity

After the leadership team is assembled, it’s crucial that all members have a clear understanding of their roles in the context of the larger company. Eliminating discrepancies is much easier with a smaller group of core leaders than it is across an organization. When the entire leadership team is on the same page, they can better communicate with employees.

3. Overcommunicate clarity

Leadership is responsible for leveraging protocols and work processes to convey company values, roles and responsibilities. Furthermore, leadership must repeat this information as many times as necessary to guide every employee to the same page.

4. Reinforce clarity

By integrating clarity into the processes that employees perform every day, leaders reinforce company goals and values. This can help create employees who are self-sufficient and who don’t need constant input to ensure their objectives align with the company’s.

Here are a few more ways to improve organizational health:

Strengths-based management

Strengths-based management evaluates the abilities of each employee and assigns tasks that play to (and develop) those strengths. This can help employees feel they’re making a unique contribution to company goals based on the strengths they already bring to the table.

Solicit employee feedback

All organizations can benefit from employee input. Asking for this feedback frequently and directly can make employees feel included in decision-making without being overwhelmed by intensive questionnaires and surveys.

Utilize industrial-organizational psychology

Industrial-organizational psychology applies concepts of psychology to the workplace to improve organizational health. Experts in this discipline may conduct surveys and interviews that give leadership a clearer view of each employee’s unique strengths, weaknesses and personality. This is such a vital field to organizations that there are bachelor’s degree programs available in industrial-organizational psychology.

Additionally, applying industrial-organizational psychology concepts can lead to protocols for evaluation and implementation that take employee personality into account.

Leading a company is no easy feat. Online business degrees from University of Phoenix help prepare students for the unique challenges they’ll face within the modern business landscape.

There are many benefits to prioritizing organizational health, from improved workplace culture to organizational efficiency. That’s why the best leaders often think about organizational health frequently.

While leading a company takes a great deal of work, plenty of resources are available to equip leaders with the right tools and skills.

Learn more about organizational health and business by exploring the Bachelor of Science in Business, Bachelor of Science in Management or Bachelor of Science in Industrial-Organizational Psychology​. If you already have a relevant bachelor’s degree and are looking to pursue your education further, consider a Master of Business Administration or Master of Science in Industrial-Organizational Psychology.