ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

Welcome to the latest edition of Leading Off. We hope you find our insights useful. Let us know what you think at Alex_Panas@McKinsey.com and Axel_Karlsson@McKinsey.com.

—Alex and Axel

Good organizational health is the best predictor of long-term success. But managing its key elements—a company’s culture, behavior, and management practices—is becoming more challenging. New technologies, evolving workplace norms, and other disruptions are forcing companies to fine-tune how they operate and how they manage their people—both of which are critical to improving their health and their bottom line. For leaders, this can make their jobs more complicated and demanding than ever. This week, we look at ways to manage the constant changes that are affecting organizational health.

AN IDEA

Play by the (new) rules

Over two-plus decades, McKinsey’s Organizational Health Index (OHI) has helped leaders identify which practices drive the strongest performance—and recognize if their organizations have any of them in place. The latest OHI results highlight six practices reflecting the areas of most profound change in these fast-moving times: purpose, leadership, decision making, employee experience, technology, and social responsibility. “How leaders navigate these changes may well dictate whether their organizations simply survive or truly thrive,” say McKinsey senior partners Aaron De Smet and Arne Gast and their coauthors. For example, leaders can enhance employee engagement and raise productivity by clearly articulating the organization’s “why”—that is, its fundamental purpose—rather than simply explaining what the strategy is and how to execute it. “Our new research found that this involvement can be shallow and transactional when it isn’t tied to a deeper sense of purpose and meaning,” the authors note.

A BIG NUMBER

4.2x

That’s how much more likely companies are to be healthy when they are run by decisive leaders, according to McKinsey’s OHI research. McKinsey’s Alex Camp, Arne Gast, Brooke Weddle, and Drew Goldstein say that making quick decisions and committing to them is a more effective style than authoritative leadership, which is based on using authority, pressure, and influence to get things done. Decisive and empowering leadership became increasingly important after the COVID-19 pandemic, which put more pressure on organizations to transform themselves swiftly. “Decisive leadership is not just for times of crisis, however; it’s a requirement for any business that just wants to keep up,” the authors say.

A QUOTE

“What you need to pair with that data-driven decision making is an open and trusting work environment, where people feel it’s safe to raise questions.”

That’s McKinsey’s Bryan Hancock on how organizational health is shifting in the new world of work. In an episode of the McKinsey Talks Talent podcast, Hancock and McKinsey’s Brooke Weddle note that putting more data in the hands of frontline employees can help foster more innovation, which is one of the OHI’s nine key outcomes. That practice requires a strong process for collecting and evaluating the best ideas from people at all levels of the organization. “A lot of times, a frontline employee on the ground can say, ‘Here’s five ideas for how this could go better,’” Weddle says. “Organizations that listen, in a structured way, can be very effective at driving that continuous improvement.”

A SPOTLIGHT INTERVIEW

Putting employees first and treating them with the same care given to customers will help companies become healthier, Columbia University business professor Stephan Meier says in a McKinsey Author Talks interview. “The 100-plus years of scientific management demonstrate that we have thought about workers as cogs in a machine and not really as human beings,” he says. “Businesses have to treat workers differently and humanize them in order to thrive.” Just as companies prioritize customer service and care, they can embrace a similar approach for employees—offering more personalized support and dismissing the outdated mindset that employees are motivated by money alone. “Customer centricity is not only about lowering the price. It’s about improving the customer experience,” Meier says. “Similarly, employee centricity is not only about increasing the wage. It’s much more about increasing the employee experience.”

— Edited by Eric Quiñones, senior editor, New York

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