The not-so-hidden key to organizational success.
Org health beats innovation, scale & funding for NGOs & social enterprises
The 2009 biographical sports drama Invictus is a riveting true story about the South African Springboks’ improbable Rugby World Cup chase during post-apartheid unrest. The film showcases the brilliance of Nelson Mandela (Morgan Freeman) as he orchestrates the power of good leadership, the right team, and proper structure – the three bases of organizational health – as he uses the sport to bridge racial and economic divides.
In real life, there’s no doubt Mandela’s leadership itself moved mountains. But like most bold endeavors, Mandela knew he couldn’t go it alone. So he partnered with Springboks’ captain François Pienaar (Matt Damon) who began to assemble the right player mix around him. With good leaders and the right players in place, the squad set in motion the final pieces of performance via shared vision, teamwork, a rigid set of priorities, game-by-game reconfiguration and communication, and meticulous analysis.
These same principles are paramount for NGOs and social enterprises.
I just returned from Kenya after deep immersion with a new high-potential client, where I saw a good example firsthand: a compelling CEO, an engaged and capable team, and a company starting to put the right structure into place. It dawned on me: org health alone is far more important than innovation, scale, and funding – three hot topics that garner far more attention in the social sector. NGOs and social enterprises should be managing org health just like they manage their books. And leadership teams should spend as much time and energy on health as they do vision casting, growth, fundraising, or capacity building.
There’s an equivalent with the human body. Can you imagine setting a personal goal to win the Olympic triathlon? Traditional capacity building would have you creating a radically new schedule for the next couple of years (planning), learning a lot about three new sports (knowledge), hiring a coach (governance), working out twice a day (training), and buying exercise equipment (tools). But what if you’re so mentally and physically out of shape you can barely get out of bed in the morning? What if you’re just the wrong person to tackle such a courageous goal? I’m a triathlete myself. I know from experience that when aiming for audacious physical feats, some of the "softer" stuff like nutrition, sleep, spirituality, mental fitness, and a support system of loved ones are far more important than building the capacity of your muscles or spending money on the latest bike.
We’ll talk more about all of this below. And spoiler alert: Mandela led South Africa to win the 1995 Rugby World Cup, and Matt Damon gets the girl.
Organizational health, defined
Our definition of org health? It’s both a philosophical approach and deliberate set of actions through which a business sets a solid foundation for everything else to grow. In other words, it’s the dogged focus on a company’s human resources, identity, desired future state, priorities, rhythms, and results. Just like the Springboks focused on their leadership, players, and framework for success.
Note that org health doesn’t entail developing the next big idea (innovation), serving your constituents (products or programs), driving revenue through sales or donors (funding), or even finding and telling your story to the world (marketing). We’re talking about the internal, operations-level stuff that’s often difficult to put in a neat little box.
But org health is worth it. And entirely possible for any NGO or social enterprise, big or small, currently thriving or even in the midst of tough times.
Before getting into the Mighty Ally model for org health, it’s prudent to highlight what others say about the subject. Because we’re certainly not beating this drum alone. From management consultants to best-selling authors, there’s no shortage of wisdom out there on the topic and steadfast belief in its importance.
McKinsey & Company – a pioneer in the field of performance management across sectors – believes org health is the ability to align around a clear vision, strategy, and culture; to execute with excellence; and to renew the organization’s focus over time by responding to market trends.
In a 2017 analysis of 1,500 companies in 100 countries in both the private and social space, McKinsey found that 80 percent of organizations that took concrete actions on health saw an improvement, with a majority of these companies moving up an entire quartile against others in their database.
Patrick Lencioni is an American author who has written extensively about org health in bestsellers like The Five Dysfunctions of a Team and The Advantage: Why Organizational Health Trumps Everything Else in Business. He believes performance stems from making a company function effectively by building a cohesive leadership team, establishing clarity within a staff, and putting in place just enough structure to reinforce that clarity going forward.
And finally, in the book Traction (which we reference a lot around here), Gino Wickman asserts that the most successful business leaders are the ones who execute well and know how to bring focus, accountability, and discipline to their organization.
Org health in the social sector
In both a qualitative and quantitative analysis of NGOs and social enterprises between $1MM to $5MM in operating budget, Mighty Ally found a pattern in org health (or lack thereof). When analyzing organizations across the three dimensions of leadership, people, and structure... four classes of companies clearly emerge. Those that are high risk, those that are high potential, those that are low potential, and those that are healthy.
In short, our experience shows that just one out of 10 NGOs and social enterprises is truly healthy. That’s not good enough considering the world’s significant social problems require us all to be our best. The good news is that six out of 10 changemakers are stable, capable, and have high potential if they simply focus their attention on the health and performance of the organization.
But despite the power of org health and its popularity in the private sector, the term doesn’t often find its way into the lexicon – much less the priorities – for most NGOs and social enterprises. And isn’t it wild to think that many foundations and impact investors don’t yet look at/for health when making grantee decisions? It’s like making a used car purchase based on looks, online reviews, gas mileage, potential to drive fast, and the salesman’s word without ever looking under the hood or hooking up the engine to a diagnostics system.
We’re currently working with an international impact investor to incorporate some critical org health assessment criteria into their due diligence checklist. But in general, we’re not seeing funders even think about this core concept that could truly make or break their investment. Org health is free, effective, and available to all, so why all the attention on innovation, scale, and funding?
Without org health, innovation dies on the vine. Even good products and programs have no ability to scale. Great plans will never see the light of day. And changemakers end up in a perpetual funding chase, often wasting the money they do receive from foundations, donors, and customers.
By contrast, healthy NGOs and social enterprises capitalize on innovation through diligent execution. They have the structure in place to take their products and services into new markets. And they attract more funding from diverse sources, allowing leaders to turn around and focus greater energy on innovation and those constituents they serve.
We had an early changemaker client with a really compelling business idea involving both ag and tech (innovation: check). The business had grown from just dozens to hundreds of customers in a short time frame, and their global market potential was practically unlimited (scale: check). They had raised a few hundred thousand dollars from some of the most prestigious investors in the world (funding: check). And the founders were smart as a whip and worked tirelessly to make the model work (leadership, the foundation of the org health equation: check).
But it wasn’t enough.
We found quickly in our engagement that they lacked two of the three critical components: the right people in the right seats, and org health structure. Without those two important pieces of the puzzle, they had consistent staff issues which led to product and service problems, which led to a disconnect from customers. And they lacked a framework to establish a clear core ideology and vision for the company. As great as the founders were personally at being open to change and quickly implementing the right priorities, rhythms, and data in a last-ditch effort we recommended, it was too little too late.
How many great ideas with great potential, great funding, and even great leaders wilter every day in the social sector? The NGO and social enterprise graveyard is sadly littered with examples of organizations who "had it all"... except for health.
Where does your organization fall in this spectrum? And what do you do if you’re not yet the picture of health? Read on...
The Mighty Ally org health model
To develop a model of org health for the social sector, we’ve taken inspiration from renowned thought leaders, like those mentioned above. For example, Lencioni starts with leadership and believes management is paramount. Jim Collins – in Good to Great – thinks nothing is more important than getting the right people in the right seats. And Verne Harnish – in Mastering the Rockefeller Habits – focuses on priorities, rhythms, and data.
While insightful all around, no model was comprehensive enough or perfectly applicable to the unique challenges faced in the social sector. So we pieced together learnings from having served hundreds of clients across industries and business sizes. And for underserved, high-potential NGOs and social enterprises in particular, here’s what we think it takes to build a healthy organization:
Roughly ⅓ good leadership, ⅓ the right people, and ⅓ strong structure.
Let’s examine more.
There’s no doubt a company’s health starts with its leaders. Not just because they come first, typically. But because good or bad management can make or break an organization faster and further than any other component.
Good leadership starts by being healthy within the leadership team – i.e. across the C-suite or executive level – which requires compatibility, diversity of talents, trust, conflict, commitment, and accountability. Then it implies being good managers for those on staff – just because a co-founder or director team gets along with each other doesn’t mean they’re good captains for those they’re leading. In other words, being a good manager entails not just showing what you’ve done for the company, but mostly what you’ve done for your employees and what you stand for as a person.
In our experience, good or bad leadership alone will outweigh any other org health measures you put into place (like a proper structure, detailed below). This is why you rarely see a successful social venture driving meaningful impact without a strong leader (or more) at the top. Just look at the annual Skoll Awards to see not only forcible social enterprises, but always an effective leader steering the ship. That’s exactly why venture capitalists say they’d rather invest in an A-team with a B-idea than a B-team with an A-idea. Without the right management in place, a company simply cannot be healthy. Period.
In order to build a company beyond the founders’ small-scale ability, even good leaders need a team to drive real impact. And the truth is: bad leaders simply cannot attract and retain the right people. Sure, you might see an A-level player scattered throughout an organization with bad leadership, but those cases are the exception and those right people don’t last long (thus, high turnover). For that reason, leadership and people are directly correlated: bad leadership always ends up with the wrong people, but good leadership has the ability to recruit and retain the right people.
The first and foremost rule around team building is getting the right people in the right seats, and this accounts for roughly another third of organizational health. This often-used phrase in corporate culture simply means:
- Finding those who align with your core values (right people). Keep in mind it’s entirely possible to have the right person who doesn’t have a fitting seat on the bus. In those cases, you either have to make the heart-wrenching decision to let a good person go, or if you have the funding, you can bide your time until a right role for them emerges.
- Ensuring those right people are filling the roles they do well AND that are most critical to achieving your vision (right seats). It’s not uncommon to have someone in the right seat who may be damn good at their job, but who is simply the wrong person for your organization based on your unique core values. So never talk yourself into hanging onto a top performer just because they’re talented – they have to fit your core ideology too (more on that below).
With those right people in the right seats, it's wise for leaders to take a lesson from intrinsic motivation experts. Thought leaders in the field of self-determination theory – like Daniel Pink in the best-selling book Drive – have proven that both autonomy and mastery are critical to human motivation (purpose is too, but we include that in the next section, core ideology). Because ultimately, allowing teams to freely hone their craft leads to both performance and culture.
It's important to point out that the people equation of org health also includes your board of advisors and directors. They too should be hired, fired, and managed by looking at alignment with both core values and their individual skill sets. One tool we love for this kind of objective look at your team is the EOS People Analyzer.
Beyond leadership and people which make up two-thirds of the org health equation, there’s a great deal of structure that accounts for the final 1/3 lunge towards peak performance. The first element of that structure is core ideology, which is simply determining and documenting why you do what you do, how you do it, and what you do. In other words, this is your reason for being, core values, and mission. We like to say core ideology is the enduring character of an organization or the glue that holds a company together as it grows.
And it’s not good enough to have this information in your head, loosely defined, or on paper but outdated in a dusty strategic plan from a wilderness retreat a few years back. In Built to Last, the data shows companies that enjoy enduring success – with performance 15 times greater than the general market since 1926 – have core values and a core purpose that remain fixed, while their business strategies and practices endlessly adapt to a changing world.
Look at most long-standing international NGOs like BRAC or Partners in Health – while they have evolved tremendously since inception in terms of programs and services, their core reasons and values have remained unchanged. So there’s no understating how valuable it is to nail this first piece of org health structure. If leadership and people are the foundation for org health as a whole, core ideology is the foundation for org health structure. Without a clear understanding of the why, how, and what... nothing else to follow can take root.
Most social sector organizations are familiar with a vision statement. But there’s a lot more that goes into proper vision casting beyond the single, aspirational sentence. Your vision is not just important because it gives your people and funders a grand dream for where the organization is heading (which is indeed critical for establishing a healthy business), but it also matters for two additional reasons.
First, a vision should be broken down into more bite-sized views in order for people to grasp what the future will actually look like (this is extremely valuable for those doers and followers who might not dream as big as a founder or board). And second, a good vision will lead to shorter-term strategic planning (i.e. priorities, which we discuss next) so that both you and your team can actually determine what needs to happen to make said vision a reality.
A great vision should feel larger than life and scare you a bit, but also feel possibly attainable. This proper vision (you’ll know it when you nail it) will drive organizational health by getting your team excited about the meaning of their day-to-day work. A vision statement should be broken down into a 10-year target: a big hairy audacious goal that’s measurable and tangible. Then we recommend breaking the 10-year target down into a 3-year picture: what the organization will look/be like three years from now. This final step is where the vision finally feels real, and gives everyone from donors to the board and staff a real view of what the future holds. That shared view and collective energy are incredibly powerful as you move toward more logistical aspects of org health.
The next step in establishing an org health structure is to take that 3-year picture (i.e. short-term vision) and start to get shit done. They say momentum and progress are the greatest human motivators; even more so than success. So part and parcel of a healthy organization is the ability to set and accomplish goals. This is done by establishing and completing yearly, quarterly, weekly, and daily priorities.
There are a number of ways to determine what’s important now. An annual planning process should inform yearly SMART goals. Each quarter, both leadership and staff should establish priorities for those next three months (often called "rocks") that ladder up to annual goals. All teams should be meeting every week to review the data (see more below) and determine what TO DOs need to happen that week in order to stay on track for quarterly rocks. And finally, every individual should be setting a daily top three list that is shared with others every morning to promote momentum and enforce accountability.
As robotic as this all may sound, think about the clarity these priorities bring to a company and its people, plus the reassurance in knowing everyone is working on the correct things to reach the shared vision.
Establishing the right priorities is important, but it’s still not enough to be aligned with what to do. A healthy organization still must set a pattern for how it will get the work done. We’re not talking about the "how" of core values at a broader organizational level. Rhythms are all about the methods in which the organization holds meetings, facilitates internal communications, resolves issues, and establishes process.
This area can border on micromanagement if not done well and if not systematized across a company. So it’s important not to let individual leaders try and dictate individual rhythms for their departments or staff, unless dealing with a large organization spread across a number of countries.
Meetings should be held on the same day at the same time with the same agenda. This consistency builds trust and health. On internal communications, there’s no playbook – every org is different and every leadership team will have to find their own way of managing communications both up and down the ladder. But it’s important especially for those working in developing countries where much of the staff might not be from the same culture, since communication drives clarity and camaraderie. Too, resolving issues can’t be prescribed, but it’s critical because one of the unhealthiest and most frustrating traits an organization can have is the inability to make decisions. There are frameworks such as The 5 Whys and IDS that aid in good decision making vs. endless debate. And finally, every organization should implement processes where feasible and applicable. This is a topic in and of itself and there’s a ton of reading out there. We like The E-Myth: Why Most Businesses Don't Work and What to Do About It, which preaches that the franchise approach ensures you build a business based on systems.
The final piece of the org health puzzle forces organizations that have everything else above figured out to prove it on paper via key performance indicators (KPIs). Data doesn’t lie, despite some bad leaders (ahem, like certain world leaders) tending to dispute hard facts. So in order to truly become a healthy outfit, it’s imperative that objective figures are held in the highest regard.
There are a few old adages that speak to the importance of data. We like to say that you can’t manage what you can’t measure, what gets measured gets done, and what doesn’t get done identifies bigger problems elsewhere in the organization. As in, rigorous measurement often shines a light on underperforming staff, and getting rid of that dead weight circles back around to the second important pillar of org health (people).
To establish a healthy data-driven operation, we use a weekly scorecard as the must-have tool. Sure, dashboards can be sexy for funders, but dashboards are typically made up of lagging indicators (i.e. important success metrics that have already happened and are too late to affect). Scorecards, on the other hand, are made up mostly of leading indicators and allow leaders to see which activity metrics are on/off track, so they can better predict and course correct for downstream results. Everybody in the organization should have a measurable assigned to their performance – there’s a belief that if you ask someone how their day or week went, they should be able to answer you numerically. And all these metrics should be tied directly back to your theory of change and/or logic model. Because this whole thing is about impact in the first place. And if you’re not measuring the data that drive real impact, you’re measuring the wrong things.
That’s org health in a pyramid nutshell. You’ll notice that culture isn’t specifically a building block of org health. That’s because it’s not something you can create or do. Despite culture being a hot topic the last 20 years, you can’t manufacture it with a ping pong table, free snacks, and a fancy office with designer decor. Culture is a natural byproduct of the first three elements on the pyramid: good leadership, the right people being in the right seats, and a clear core ideology.
When the right people work for good leaders, feel in their bones why they’re coming to work every day, then know how to act and exactly what the company does to make the world a better place... that’s when culture emerges naturally.
You’ll also notice the top three elements of priorities, rhythms, and data look smaller relative to other important org health components. These final pieces might not seem worth the extra investment, but when viewed collectively they’re what push an organization from a B-grade to an A+. So don’t stop before the nitty-gritty elements at the top that sometimes feel too in the weeds for your attention.
Org health resources
With the concept of organizational health firmly in place, here are some additional tools and resources for those looking to dig in further. While org health is a service that firms like ours provide, there’s a great deal any company can accomplish on its own too. Start here.
- Organizational Capacity Assessment Tool. Built specifically for the social sector by the world’s preeminent management consultant McKinsey & Company, the OCAT is an extremely intensive (two hours!) online survey that allows the board, leadership, and staff of a nonprofit to measure how well their organization performs against best practices.
- Organizational Health Checkup. If you want a quicker assessment and intro to org health before taking a full-fledged OCAT assessment, this is just like it sounds. Take an online checkup from the EOS folks who wrote Traction to see where your company falls on a scale of 1-100. But here’s the tough love: don’t let a short quiz be your only investment of time. If you just want a fun score like some Buzzfeed poll and then return to business as usual, you’re likely part of the problem.
- DISC Profile. When it comes to developing a healthy leadership team, I talked earlier about how both compatibility and diversity of skill sets are important. A good way to find out how you and your fellow leaders "fit" together is via a DISC profile. DISC is a behavior assessment tool that provides a common language people can use to better understand themselves and adapt their behaviors with others. This free one is courtesy of none other than Tony Robbins.
- The Advantage: Why Organizational Health Trumps Everything Else In Business (Patrick Lencioni)
- The Five Dysfunctions of a Team (Patrick Lencioni)
- Traction: Get a Grip on Your Business (Gino Wickman)
- Mastering the Rockefeller Habits (Verne Harnish)
- Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage (Scott Keller & Colin Price)
A parting note...
Don’t be daunted. Org health might seem like a complicated subject on the surface, but when you figure it out once, it not only grows in importance but also sticks with you forever.
To use one final sports analogy, I liken org health to when I learned how to swim for long-distance Ironman triathlons. Swimming 2.4 miles in the Pacific ocean with 2,000 people kicking your face is scary for most of us at first. Getting to that race day was part art, part science, and part hard work that took a whole lot of time. But now that I’ve truly learned to swim the right way – flat, long, and on your side, in case you're curious – I could never go back to the doggy paddling I used to rely on. And I regret wasting all those years doing it the wrong way, knowing now there was literally a path of least resistance available.
Start small. Take the next logical step. Whether that’s ordering a book, taking an online assessment, or giving us a call. I guarantee from personal experience running companies and guiding hundreds of clients over the years: there’s a better, healthier way to build and operate your business, achieve your vision, and create meaningful impact for those you serve.