Organizational health is a broad umbrella term that means different things to businesses depending on their business model (e.g., profit vs. non-profit) and industry. It can refer to culture, employee happiness, functionality, effectiveness, operations, and more. A company could be very profitable but still, have a toxic culture and high turnover rate. Conversely, a company could report low profits and have an incredible culture and extremely low turnover rates.
Given the gray area around organizational health and the need for more consensus about what it means within an organization, business leaders often fail to set targets and track metrics to measure and improve it. But this is a mistake. Research has shown that when companies pay equal attention to organizational performance and health, they double the probability of outperforming their competitors. In addition, Mckinsey found that between 2003 and 2011, healthy companies generated returns to shareholders that were three times higher than unhealthy companies.
Gone are the days when the predominant challenges businesses face are internal (e.g., lack of technology, supply chain issues, etc.). Research from Bain and Company found that 94% of the development challenges businesses face today are internal, which means that organizational health should be a top priority for business leaders and HR teams.
12 organizational health metrics to measure
Back in the day, organizations would have to rely on intuition to determine how healthy they were. Typically, if operations were running smoothly, they were said to be healthy. But today, we are fortunate to have data and metrics to find patterns and trends and make evidence-based judgments and decisions.
In the list below, you’ll find a range of HR metrics to gauge organizational health with an explanation of what they are, why they’re important, and how to measure them.