Strategizing and Organizing for Performance and Health

It has long been recognized that strategizing and organizing need to be interlinked, but organizations have found it difficult to find a practical payoff from this insight, at least in part because of the complexity of carrying out both processes at the same time. During their extensive experience as consultants with McKinsey & Company, the authors have developed the ‘metaphor’ of ‘performance and health’ to articulate the organization's objective function. This has helped them think about strategy and organization rigorously without getting overwhelmed by the complexity.The practical payoff from this approach is threefold. It helps organizations avoid some common pitfalls while devising strategy, such as focusing too much on positional advantage and not enough on execution. It makes sure that the enactment of strategy is cognizant of the organization and vice versa, often by allowing the same interventions to tackle both issues. And finally it helps to define the sometimes-nebulous concept of ‘health’ in order that it can be measured and managed with the same rigor that performance is. Doing this successfully will require changes in mindsets and behaviours across the organization, though in particular at the top. However, as well as the advantages mentioned above, it will also free boards to focus where they say they want to focus: on long-term company health.