Government agencies often undertake complex missions that can have a large impact on society. Whether they involve modernizing infrastructure or establishing nationwide health programs, such missions could be described as “big, hairy, audacious goals”—the term coined by management experts Jim Collins and Jerry Porras in their book Built to Last. But measuring the success of such efforts can be difficult. Many public sector agencies tend to fall back on conventional performance indicators such as financial management, speed and efficiency, and effectiveness.
The challenge is that these indicators largely gauge only short-term performance. They may not always align with long-term goals such as economic prosperity, improved health outcomes, stronger national security, or resilience. It can also be tough to see how different initiatives come together to produce a cohesive overall outcome. This is where the concept of organizational health—in simple terms, how effectively leaders “run the place”—becomes important. While organizational performance offers a point-in-time snapshot of how an agency is delivering on its mission, organizational health shows how it is poised to deliver sustained long-term results.
For more than two decades, McKinsey has conducted research affirming that organizational health is a valuable source of competitive advantage across industries.1 Our Organizational Health Index (OHI) assesses the strength of organizations against nine outcomes and 43 management practices that build that strength. Our work has shown that in the private sector, healthy companies see three times the total shareholder return compared with their less-healthy peers.2 In a recent survey of 2,807 US public sector employees (see sidebar, “About the research”), we found that US government agencies also stand to gain considerable benefits from boosting organizational health. Key focus areas for leaders could include instilling a focus on purpose among employees; creating a supportive work environment that encourages innovation, autonomy, and ownership; nurturing talent development and deployment; and motivating staff through recognition and career opportunities.3
About the research
The insights presented in this article are based on a panel survey administered from July to August 2024 to 2,807 US public sector employees in the federal (n = 734), city (n = 680), county (n = 451), and state/regional (n = 942) governments. Respondents answered survey questions from the Organizational Health Index (described below), as well as additional questions of relevance to the public sector (for example, public sector organizational performance). These survey panel insights are based on individual employee responses and are not representative accounts of the public sector organizations.
What is the Organizational Health Index?
The Organizational Health Index (OHI) is a diagnostic that measures critical elements of a high-performing culture in an organization. The index draws from a proprietary database of more than eight million respondents from more than 2,500 organizations across a range of geographies and industries. The index aggregates employees’ and managers’ views on the management practices and employee experiences that inform an organization’s performance across nine dimensions or outcomes. An overall score is assigned so companies can see how they compare with others in the database. The result is a detailed view of the health of an organization (exhibit).
Launched in 2003, the OHI model is updated regularly to reflect advances in organizational science and changes in the state of organizations more broadly. The 2023 update includes factors—such as agility, resilience, inclusivity, and employee experience and well-being—that have become more pronounced in the wake of the global pandemic, macroeconomic shifts, geopolitical unease, and other global trends.
Healthy employees, healthy organizations
Employee sentiment may be considered a good benchmark of organizational health. Among the respondents to our survey, US public sector employees who report that their organization is healthy, when compared with those who say their organization (in both the public and private sectors) is unhealthy, are nearly twice as likely to report that their organization is better at delivering its mission (Exhibit 1).
Furthermore, more than half of government employees who perceive their organizations to be healthy are likely to recommend their employer to friends and relatives. In contrast, only 16 percent of respondents who report that their organization is unhealthy say the same (Exhibit 2). Government employees who report that their organization is healthy are also more likely to say that they are growing professionally, have flexibility in their career path to allow for evolving goals and interests, and feel energized by their work.
Five healthy practices for the US public sector
To shed light on potential focus areas for US public sector leaders, we examined the practices that significantly predicted whether government employees in our sample believed that their organization was healthy (Exhibit 3).4 These practices supplement our foundational power practices across sectors.5
Create clarity and purpose
In any business context, it is a no-regrets move to focus on strategic clarity. This means translating vision and strategy into measurable and clearly articulated objectives that leaders share with employees across the organization. We find that US public sector employees who report that their agency has a clear and compelling common purpose are 2.1 times more likely to say that their organization is healthy. A well-known historical anecdote illustrates the importance of making clear connections between employee roles and the purpose of the organization. The story goes that in the early 1960s, President John F. Kennedy allegedly asked a janitor at NASA’s operations center what he was doing sweeping the floors. The janitor replied, “I’m helping put a man on the moon, Mr. President.” The janitor understood and truly felt he was a valuable part of something bigger than himself and understood the importance of his contribution to the larger goal.6 More recently, Sarah Webber, former COO of the state of Arizona, described the value of purpose, not only in delivering government transformations but in retention: “Besides just resources, for people to keep showing up to work you have to provide purpose: allowing folks to feel that they can make that impact and take control of that, is critical.”7
Cultivate a supportive and sustainable work environment to encourage innovation
Our findings underscore the importance of supportive leadership and a sustainable work environment, including healthy working norms, organizational connectivity to break down silos, and embracing multiple viewpoints when making decisions. Among our survey respondents, those who report that employees across levels are encouraged to innovate are 2.2 times more likely to report that the organization is healthy. For example, one state’s Department of Motor Vehicles faced a service backlog due to deferred transactions during the COVID-19 pandemic. The organization evaluated the backlog and systemically considered a range of initiatives—tested through a series of innovation pilots—to service transactions through digital channels. This required different ways of working and crowdsourcing potential initiatives and insights across all levels, including the front line.
Provide autonomy and foster ownership
Personal ownership—instilling a sense of personal investment in one’s work—is another practice that emerges as critical across sectors. Our survey results show that employees who say their organization is healthy are also twice as likely to say that their leaders give others the freedom to take the initiative and make decisions. The US Department of Veterans Affairs (VA) set out to meaningfully change its culture to regain military veterans’ trust in the wake of a 2014 controversy over their access to medical care.8 This required a mindset shift from an internal focus on doing what was best for the VA to a citizen-focused mindset of doing what was best for veterans. Leaders were held accountable for designing and delivering against priorities to reinforce the culture change; in addition, they were tasked with empowering staff to work based on principles rather than rules that may have been out of date or inapplicable to specific situations. The VA case illustrates a notable shift toward leaders empowering and guiding self-managed teams as opposed to acting as directors who command through structured hierarchies.9
Develop and deploy talent
US public sector employees who reported that their agency strategically deploys talent and resources were 2.1 times more likely to report that their organization is healthy. Our results also highlight the importance of developing people and providing consistent and constructive feedback. The FBI brought this to life during its post–September 11 transformation by establishing a 100-person team to quickly train staff on desired behaviors, skills, and mindsets. The team upskilled a cohort of 600 employees, who then rolled out the training to all 40,000 FBI employees across 56 field offices in nine months. The rollout happened in five waves and delivered two weeks of robust in-person instruction for all personnel and six weeks of on-the-job training for new roles—resulting in a long-term positive impact on the agency’s organizational health.
Recognize employees and give them the opportunities to advance
Finally, our findings underscore the importance of motivating employees through meaningful nonfinancial rewards and recognition, as well as career opportunities. For example, US public sector employees who report that their employer provides clear and equitable career opportunities are twice as likely to report that their organization is healthy. State governments may be uniquely positioned to provide equitable career opportunities by tapping into talent pools that are not accessible to private sector organizations. For example, one state’s chief administrative officer’s organization partnered with its department of corrections to provide people who were incarcerated with skills that were in short supply within the state’s government, such as computer coding. After release and with appropriate screening, they were then offered job opportunities in state agencies, with a focus on web development and webmaster jobs.
A way forward to bolster organizational health in the US public sector
The insights above illustrate the benefits of improving organizational health. But only a structured approach can ensure that any health and performance improvements are sustained. We suggest the following course of action for leading large-scale change.10
Aspire and assess
Leaders can do this by baselining, which is the act of establishing a comprehensive, initial view of their organization’s performance and health against which they can measure differences over time. This is important for two main reasons. First, starting with a full baseline highlights gaps in data that can balloon over time and establishes a shared understanding across the organization about what matters. Establishing indicators right at the start simplifies the work of ongoing monitoring, improving the chances of follow-through in the long term, and helps socialize the criteria that teams should focus on improving. Second, a comprehensive baseline helps leaders determine which issues are bottlenecking performance and which strengths are most valuable to amplify.
Investing up front in identifying the right indicators can pay dividends later: it equips leaders with the insights to invest in the dimensions of organizational health likely to yield the largest performance gains. For example, the US federal government deploys the Federal Employee Viewpoint Survey, including the Performance Confidence Index, which encompasses employee responses to four statements that provide a high-level view of workforce effectiveness.11 Combining this with an in-depth analysis of organizational health could provide a comprehensive baseline to drive change.
To illustrate, the OHI includes a management practice regarding how often the organization gathers competitive insights. We have found that this practice is critical across industries, including in the public sector. For example, a government agency that provides healthcare could look to private sector health systems when making decisions to ensure that it is considering the latest industry trends. Using this baseline, the agency could align on a behavioral aspiration to support the strategy. The aspiration then defines the behavior and mindset shifts needed to make any desired changes.
Architect
A set of targeted initiatives are essential to start action on behavior and mindset shifts. When designing these initiatives, it is critical to actively involve employees across the organization in shaping the future culture. These initiatives should include a targeted communications strategy explaining why employees are being asked to change as well as capability building to support the shifts that the organization is asking employees to make in their daily work. Both have a demonstrated impact on transformation success.12 This approach ensures that the change resonates with employees across levels and departments within the agency, thereby fostering greater support and momentum for the initiatives.
Act and advance
Once initiatives have been designed, agencies should prioritize, sequence, and deliver them in waves to institutionalize the necessary behavior and mindset shifts. As implementation of these efforts continues, it is critical to track their progress regularly, including monitoring whether the necessary behavior shifts have been embedded in daily work. This may involve continuous-listening efforts, such as pulse surveys, that allow for iteration as needed.
Healthy, high-performing government agencies are essential to meet the needs of the public in a rapidly changing economic and business environment. Improving organizational health in this context is challenging, but there are mission-delivery and talent benefits to getting this right. Agency leaders who cultivate healthier organizations create better places to work for employees and a better government for the American people.
