McKinsey’s Organisational Health Index: key insights for modern leadership

I am truly encouraged by the profound changes McKinsey’s latest Organisational Health Index (OHI) report reflects in its framework. This has prompted me to reflect on how leaders can choose to evolve to meet today’s dynamic challenges.

Here are my thoughts on the key practices leaders need to embrace in today's changing landscape, based on McKinsey’s nine-part framework that assesses organisational health, with six substantial changes emerging.

1. Empowering and decisive leadership

In the leadership domain, adopting empowering and directive leadership styles and relinquishing any hint of authoritative leadership is the sign of the modern leader.

What does this mean for leaders? Empowering leaders know that those closest to their work product are best placed to make decisions, leading to greater autonomy for these individuals. Decisive leadership is about making decisions quickly and following through. In the fast-paced and often disrupted organisational worlds, there is no room for hesitancy or flip-flopping. Employee satisfaction and productivity are bolstered by decisive leadership, driving the performance of individuals, teams, and the organisation.

Expanding on this, empowering leadership also involves fostering a culture of trust and collaboration. By delegating decision-making power to those at the front lines, leaders can cultivate an environment where employees feel valued and capable. This not only enhances morale but also drives innovation as team members are more likely to take initiative and propose creative solutions.

2. Purpose

Another takeaway from the OHI report is the importance of organisational purpose. Employees are engaged more by the ‘why’ over the ‘what’ than ever before. Organisations need to clearly articulate their ‘why’ and live it daily. It is the glue that binds individuals to a common organisational purpose and brings meaning to daily pursuits. To explore how to articulate your why, refer to Simon Sinek’s work.

Purpose-driven organisations see numerous benefits, including increased employee engagement, higher retention rates, and stronger brand loyalty. When employees understand and connect with the organisation's mission, they are more motivated to contribute to its success. Leaders should regularly communicate and reinforce the organisational purpose, ensuring it is reflected in every aspect of the business, from strategic decisions to daily operations.

3. Data-driven decision making

Leaders can no longer rely solely on inner knowledge or lived experience to make the right decisions. As we mature, our brains become better at convergence than divergence—tapping into stored knowledge and experience. This is no longer effective. Data-driven decision making is now key; our brains simply cannot keep up with the pace of change and volume of information to rely on those internal judgements.

Data-driven decision making enables leaders to make more accurate and objective decisions. By leveraging analytics and insights, leaders can identify trends, predict outcomes, and make informed choices that drive organisational success. This approach also fosters a culture of accountability and continuous improvement, as decisions are based on measurable data rather than intuition or guesswork.

4. Thriving employees

‘Employee experience’ is a frequently used and often misunderstood term. Measuring employee engagement or satisfaction is complex and can suffer from confirmation bias. McKinsey’s reporting shows that when employees rate their own sense of satisfaction and measure their own productivity around criteria important to them, the data becomes healthy and impactful. The individual employee thrives in an environment where they co-create the sense of value they bring.

Leadership focus must turn toward a state of thriving rather than merely managing outcomes. This makes sense after reading "Languishing" by Corey Keyes, a book that explores the process of moving from languishing to flourishing. Thriving across all life domains is possible, and organisations focusing on thriving are profoundly rewarded in terms of culture, productivity, and employee satisfaction. In healthy organisations, leaders focus on the individual and what thriving looks like to them.

Creating a thriving workplace involves providing opportunities for growth and development, recognising and celebrating achievements, and fostering a supportive and inclusive culture. Leaders should strive to understand the unique needs and aspirations of their employees, offering personalised support and resources that enable them to reach their full potential.

5. ROI on technology

Technology is both a necessity and a curse in most organisations, and McKinsey’s report confirms this. The expectation to constantly innovate, improve communication channels, and enhance information storage and collaboration is ever-present. Building a business case at the outset to validate ROI is vital, especially in these fast-paced and uncertain times. From coaching executives and their teams, I know the huge stresses that arise in organisations constantly adopting new technologies. The pressure of constant learning, on top of existing duties, impacts both leaders and their teams’ productivity.

To effectively manage the integration of new technologies, leaders must prioritise training and support for their teams. This includes providing clear guidance on how to use new tools, offering ongoing learning opportunities, and fostering a culture that embraces change. Additionally, leaders should regularly evaluate the impact of technology investments to ensure they deliver the expected benefits and contribute to the organisation's overall goals.

6. Social responsibility

In recent years, social responsibility has come to the forefront. There is an increased need for employers to demonstrate social responsibility. This is especially true for younger generations in the workplace who assess organisational health through this lens. Organisations need to get ahead and stay ahead of what social responsibility means to them and then truly live it.

Social responsibility extends beyond philanthropy and includes sustainable business practices, ethical decision-making, and a commitment to diversity and inclusion. Organisations that prioritise social responsibility not only contribute positively to society but also enhance their reputation and build trust with stakeholders. Leaders should integrate social responsibility into their strategic planning and daily operations, ensuring it is a core aspect of the organisational culture.

These McKinsey insights are essential tools and frameworks for today's leaders. Excellent leadership is not a fixed approach; it is a response to the demands of the time and the emerging social and economic trends that inform the operating environment. Reinvigorating your leadership is a daily proposition. Your organisational health relies upon it.

Stay ahead in the changing landscape of organisational health by embracing these key leadership practices. How are you adapting your leadership style to meet today's challenges?