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A healthy organisation

Guest post by: Douglas Long

Article Overview: Providing cash flow is positive, there are key areas that will determine whether or not an organisation is healthy. Answering these questions will highlight possible “ouch” points that need to be addressed.

A healthy organisation

Some years ago a colleague of mine, Jim, had his annual medical. His doctor was very thorough – checked everything including giving him an ECG. Eventually the medical was finished. “Thanks, Doc”, he said. Then, as he turned to leave, Jim dropped dead from what was later shown to be an aortic aneurysm.

There was (and is) no criticism of the doctor or of the quality of the medical examination. This was just one of those tragic things that sometimes happen.

I thought of this recently when hearing of another business failure.

In the case of my friend Jim, there were no indications that anything was wrong. He was fit, exercised regularly, ate healthy food, was a non-smoker and only a very light drinker – only about 2 beers a month. All of the physical and mental indicators were that he should have lived a long time. But something went wrong – and despite immediately receiving great medical care (Jim was, after all, still right beside the doctor in his surgery), nothing could be done.

Jim’s case may be an exception among health conscious individuals – many medical issues are totally unpredictable - but most business failures are predictable and a health check can be valuable.

When I’m called in to help a business assess where it is at and what it should be doing – a bit of a “medical” on the business – my first queries are simple:

· What is your bank balance right now – today?

· What are your receivables – the money owing to you?

· How much of that will you receive this week? This month?

· How much of it has been due for more than 30 days?

· How much money do you need to pay out this week? This month?

· How much of it has been due for more than 30 days?

· What is the value of your current “work in progress”?

· When will you be able to charge for this?

· When do you expect payment to be received?

· What extra payments will you be liable for before this work is completed?

The answers to these questions give me a “quick and dirty” indication of the health of the organisation because they give me an indication of current cash flow issues – and positive cash flow is the life blood of a healthy organisation. Based on these answers I can advise whether intensive care (talk to your Board and bankers/financial advisors “NOW” because your situation is seriously bad) is required or whether some other action is more appropriate.

This isn’t rocket science. Most good managers understand the importance of these issues and keep a close check on them. But neither are these the sole indicators of organisational health.

Following the answers to these first questions, I divide my attention into the 5 areas that ultimately determine health and sustainability and, among others, I ask the following questions:

1. Knowledge. How clear and focused are the vision, purpose, and objectives/goals of the organisation (both qualitative and quantitative) and how well are these known, understood and believed in throughout the organisation?

2. Strategy. In broad terms, how does the organisation intend to make its vision a reality – to attain its objectives/goals.

3. Non Human Resources. Does the organisation have the right resources to operate affectively and how does it ensure that the right resources are available at the right time and in the right place for the right people?

4. Structure. What is the decision making process? What is the lowest level in the organisation where decisions can be made and what are the repercussions of making the wrong decisions? What is the decision making environment within which the Executive Team operates? How can this be improved?

5. Human Process. What are the labour turnover figures and how do these compare with your targeted turnover rate as set out in your business plan? What are you doing about any discrepancy? What are your recruitment processes and how could these be improved? How do you develop and maintain the requisite level of competence at all levels of personnel and how could this be done better? What process do you use to monitor customer/client satisfaction and how could this process be improved? How do you monitor the external environment that will or could impact on the organisation and what use do you make of this information? What is your relationship with the various trade unions / professional bodies that are represented in your organisation and how could these be improved? What process is used to get on-going, real time feedback from personnel on issues and concerns?

Providing cash flow is positive, these are the areas that will determine whether or not an organisation is healthy. Answering these questions will highlight possible “ouch” points that need to be addressed.

Of course, just as with my friend Jim, having and passing a regular health check doesn’t mean that tragedy won’t occur: but it sure reduces the probability.

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Article Tags: cash flow, healthy organisation, leadership, organisational development, peak performance, strengthening an organisation



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