5 Red Flags of an Unhealthy Organization

December 1, 2017

5 Red Flags of an Unhealthy Organization

Organizational health measures how well a company delivers value, in addition to its viability and growth potential. In a healthy organization, all parts are aligned and work smoothly and efficiently together to achieve a common goal, demonstrating resiliency and positive internal and external stakeholder relationships.

In people, ill health can be detected by observing symptoms such as poor complexion or shortness of breath. Organizations, too, signal poor health in unmistakable ways. Being aware of the symptoms of poor organizational health can help a leader intervene in time to prevent damage to the organization or slip-ups in the market.


How Healthy is Your Organization? Five Tell-Tale Symptoms to Consider


1. Siloed information and resources. Different parts of an organization often possess information and/or resources that could empower other parts or individuals within the organization in making the best decisions. However, if that information or if those resources aren’t shared, then the value is lost.

Take product development, for example. The ultimate success of a product development effort depends in large part on the product development team’s ability to fully grasp the needs of the end user. Typically, other functions within an organization—such as customer service, marketing, and sales—routinely collect customer data that might help product development understand the customers’ needs. However, this data is frequently not shared across functions.

On the other hand, the product development team may create a superior product, but fail to communicate vital information about it to the sales and customer service teams. This lack of proper education about the product can ultimately depress sales and may even result in the marketplace failure of a product that might otherwise have been profitable had the story been told effectively to the customer.


Just like routine physicals for people, regular organizational health assessments can help a company discover and treat impending issues before they get out of control.


2. Shadow organizations. Poor delivery on the part of one department or function within an organization can cause individuals or other parts of the organization to attempt to fix the issue on their own. When this happens, it can result in redundant “shadow organizations.” For example, if the HR department doesn’t respond timely to hiring requests, another department may resort to hiring their own recruiters. The formation of shadow organizations diverts resources from the core goal of the function that develops it, and can result in reduced efficiency and inconsistent results.


3. Misalignment of goals. Sometimes, two functions in an organization may find themselves working at cross purposes. In one case, the IT department of an organization I was working with wanted to improve call center productivity by installing a predictive dialer. The customer service department, meanwhile, had begun a customer service improvement initiative. Unfortunately, the new predictive dialer didn’t give agents enough time to write up their previous calls before having to take the next one, which caused their customer service performance to decline. Even though the goals of both departments were good, their lack of communication and coordination led to sub-optimal results.


4. Inefficient resourcing practices. Cost efficiency is an admirable goal, but cost management not applied thoughtfully can backfire. For instance, a hiring freeze can be a viable short-term cost containment practice. However, if it goes on too long it can create alignment problems, as leaders are denied the human resources needed to execute.

Another example of inefficient resourcing is the knee-jerk tendency to add manpower as the solution to resource needs. In reality, “do we have enough people for this?” is not always the best question. Often, it’s better to first explore other options, such as “what technology might solve this issue?” or “how can this work be streamlined so our current staff can handle it efficiently?”


5. Structural inefficiencies in management. Over time, an organization’s cumulative responses to change can inadvertently result in too many, too few, or poorly balanced layers of management. This can interfere with decision making and create inefficiencies within the organization. For instance, the approval process may be hindered by the presence of unnecessary layers of management. On the other hand, if the span of control is too wide, managers may find themselves overwhelmed with paperwork and unable to manage in an efficient manner.


Preventive Care Starts With Awareness

As an individual, you are responsible for paying attention to your body’s signals of impending illness. It’s no different with your organization: as a leader, it is your job to proactively monitor your organization’s health.


Ask yourself these two questions:

  1. Do you routinely assess your organization for signs of ill health? Just like routine physicals for people, regular organizational health assessments can help a company discover and treat impending issues before they get out of control. Schedule time on a regular basis to examine your organization for the red flags listed above.
  2. What structures or procedures do you have in place to enable regular organizational health assessments? Or if you don’t yet have anything in place, how can you best incorporate this into your organization? One solution that works well for many companies is to include an organizational health assessment as part of your annual strategic planning. For some companies, annual planning consists primarily of budget planning, but including a day or two to assess how well your organization functions, how well aligned resources are to the organization’s most strategic work, what inefficiencies can be improved, and what ways the organization can be restructured to enable performance can bring a new dimension into the planning process. The Cube model of organization alignment is an excellent tool that can help any leader assess how well their organization is aligned to strategy and set up to deliver.


Scheduling regular health checks for your organization can help you budget and plan for success far more effectively, and proactively address issues before they become major problems. If this is something you haven’t been doing, consider taking a good look at the health of your organization on a regular basis, and see what a difference it makes. 

The Authors: 

Principal of AlignOrg Solutions, Reed Deshler specializes in developing strategic organization designs and helping companies bring them to fruition. He has guided organizations, including 3M, Abbott, Hertz, Chevron, Cisco, and General Mills through change successfully and helped them solve complex organizational challenges. Reed is co-author of Mastering the Cube: Overcoming Stumbling Blocks and Building an Organization that Works. He regularly writes and speaks on issues related to organization transformation and ways to implement—and create buy-in—among stakeholders for new business designs.

To learn more about Agile organization design, download AlignOrg Solutions’ complimentary guide, Unleashing the Power of Agile: Organization Design Implications.