Professional Documents
Culture Documents
A Global Check
A Global Check
of Today’s Organizations
For further information:
DeAnne M. Aguirre, San Francisco: deanne.aguirre@booz.com
Gary L. Neilson, Chicago: gary.neilson@booz.com
Booz & Company
11/17/2005
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With the addition of a “country” field in April of 2004, Do these complaints sound familiar?
we began capturing information on geographic location, ■ “Everyone agrees on a course of action, but
and we now have profiles submitted from more than
nothing changes.”
100 countries. The site has been translated into 12 ■ “There goes another opportunity while we wait
languages, including German, Japanese, and Chinese.
for a decision.”
In short, the data are from an extraordinarily broad ■ “It’s a great idea; it’ll never happen.”
cross-section of global organizations and provide a ■ “I’m either micromanaged or left holding the bag.”
robust sample with which to test our hypotheses. ■ “The businesses and functions just aren’t working
Global Diagnosis: Most Organizations Are Unhealthy together to get results.”
Nearly 50,000 profiles completed over two years by ■ “I don’t feel motivated to go the extra mile.
individuals around the world are consistent with one What’s in it for me?”
central hypothesis: Most organizations are unhealthy. ■ “We have the right strategy and a clear implemen-
That is, most respondents describe their workplace as tation plan; we just can’t seem to execute.”
inherently ineffectual. Our “genetic marker” for an
These are some of the symptoms of organizational
organization’s health is its ability to quickly translate
disease and dysfunction. These are the counterpro-
important strategic and operational decisions into
ductive behaviors that undermine an organization’s
action: 54% of survey respondents answer that their
success and lead, ultimately, to its competitive margin-
organizations cannot.
alization.
Organizational health, in other words, is the ability to
The ability to execute, like health, is not something
execute. Healthy companies get things done. Unhealthy
you can hire or mandate. It is inherent, embedded in
companies do not. They stumble and, ultimately,
the organization’s “genes,” and expressed in the thou-
stagnate.
sands of individual decisions and actions that collec-
3
Exhibit 1
Org DNA ProfilerSM Database Includes a Broad Cross-Section of Organizations
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Source: Org DNA ProfilerSM data collected from www.orgdna.com, based on 30,000 responses; Booz Allen analysis
tively constitute and define performance. The first step Twice as many identified Europeans have taken the
in resolving execution breakdowns is to understand survey as identified Americans, and their responses,
how these fundamental traits of an organization influ- overall, tend to be much healthier. In fact, comparing
ence and, in some ways, even determine, how each the proportion of healthy profiles reported across coun-
individual thinks and acts on the job. That behavior is tries with sufficient data2 shows every European coun-
what drives results. try ranking higher than the United States (see Exhibit 3
on page 4). What’s more, this finding holds across all
As Exhibit 2 shows, less than a third of the 30,000
revenue segments and management/staff levels.
respondents who have completed surveys on www.
orgdna.com report traits and behaviors consistent with A second arresting finding is that China is one of the
a “healthy” profile. More than half the survey respons- most robust nations when it comes to organizational
es resulted in one of the four “unhealthy” profiles, health. More than half (54%) of all surveys completed
Passive-Aggressive being by far the most prevalent in China resulted in a healthy profile, versus 31% in the
(for more detail on the Passive-Aggressive organiza- overall sample3 and only 33% in the United States.
tion, see “Passive-Aggressive Predominates” box). Exhibit 2
In other words, by a margin of nearly 2-to-1, respon- Unhealthy Profiles Outnumber Healthy Ones Almost 2-to-1
dents declared that their own organizations could not
execute: strategic and operational decisions were not ���������������
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quickly translated into action. Hence our most salient ���
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finding is a very simple and sobering one: Most ���� ���������
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organizations, by their own employees’ admission,
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Some Countries Are Healthier Than Others �����������
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then we have received more than 15,000 responses
with complete location information, which reveal signifi-
cant differences across regions and countries. *
Respondents who generated an “inconclusive” response reported traits and behaviors that
either match multiple profiles or display uncommon patterns.
Source: Org DNA ProfilerSM data collected from www.orgdna.com, based on 30,000
2 responses; Booz Allen analysis
Those with 100 observations or more
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30,000 responses.
4
Exhibit 3
Regional Distinctions in Organizational Health
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Source: Org DNA ProfilerSM data collected from www.orgdna.com, based on 12,958 responses; Booz Allen analysis
Passive-Aggressive Predominates*
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The largest number of Org DNA ProfilerSM respondents— their performance is not accurately appraised (see chart
more than 25%—characterize their organization as suffer- below).
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ing from a cluster of pathologies we place under the label
That said, the Passive-Aggressive organization is not one
“Passive-Aggressive.’’ The category takes its name from the
�� quiet but tenacious resistance, in every way where bad outcomes can be attributed to individuals’ hostile
organization’s
or perverse intentions. It is, in fact, a place where mostly
but openly, to corporate directives.
well-intentioned people are the victims of flawed processes
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In Passive-Aggressive organizations, people pay those and policies. Passive-Aggressive organizations are the result
directives lip service, making only enough effort to appear of entropy and expediency and historical accident, laced
compliant.��Looking more closely at Org DNA ProfilerSM ques- with the occasional bout of bad behavior left uncorrected.
tion-level results, however, it is clear that execution is far Ultimately an organization becomes Passive-Aggressive
from their highest priority. In contrast to responses from the because that is the path of least resistance: it reflects a
healthiest �Resilient organizations, people working in Passive- decision made by all the individuals in an organization, most
Aggressive organizations feel strongly that they do not know of them well-intentioned, to not fight what they believe they
which decisions they are responsible for, that no decision is cannot change.
ever final, that good information is hard to obtain, and that
The Root Causes of Passsive-Aggressive Behavior
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* Adapted from Neilson et al., “The Passive-Aggressive Organization,” Harvard Business Review, October 2005.
Source: Org DNA ProfilerSM data collected from www.orgdna.com, based on 30,000 responses; Booz Allen analysis
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Exhibit 4
Healthy Organizations Report Greater Profitability
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Analyzing the question-level data further, three traits All Industries Suffer Significant Organizational
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appear to be especially strongly correlated with orga- Dysfunction ��������������� ��������
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health among respondents from the United Looking across the entire data set, no industry emerg-
States. Among U.S. respondents generating “healthy” es as particularly healthy. Even in the “healthiest”
profiles: � industry (real estate), less than half of survey respons-
es result in a healthy profile. And it gets much worse:
■ 70% agree that “information flows freely across
in the least “healthy” industry (utilities), less than one-
organizational boundaries.”
quarter of responses indicate a healthy organization.
■ 61% agree that “field/line employees usually have
the information they need to understand the bottom Exhibit 5
line impact of their day-to-day choices.” Execution and Adaptability Correlate with Superior Profitability
■ 60% agree that “everyone has a good idea of deci- ��� ��� ���
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Relative profitability is reported using a survey question that asks respondents to indicate whether their companies are: “more profitable” than their industry’s average, “less profitable,”
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“about the same,” or “unknown/inapplicable.”
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Exhibit 6
Sector-Level Differences in Organizational Health
Sample Size: 303 1,175 674 601 284 3,794 1,096 496 1,152 624 848 2,858 511 460 744 1,531 709 862 1,460 666 954 702 585
55%
Unhealthy 58% 58% 58% 58%
60% 60% 60% 62% 63% 64% 64% 65% 66% 66% 67% 67% 68% 68% 69% 70% 70%
76%
Healthy 45%
42% 42% 42% 42%
40% 40% 40% 38% 37% 36% 36% 35% 34% 34% 33% 33% 32% 32% 31% 30% 30% 24%
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Source: Org DNA ProfilerSM data collected from www.orgdna.com, based on 23,089 completed observations; Booz Allen analysis
The unhealthiest industries are remarkably consistent Still more evidence that decision rights are unclear
across revenue segments, so organization size alone in unhealthy organizations is that three out of four
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does not drive this result (see Exhibit 6). For example, responses from “unhealthy” companies agree that
as compared to other industries, utilities and health- decisions,��once made, are often second-guessed, as
care fall in the bottom “health” quartile in all four compared to 37% of respondents from “healthy”
revenue segments. Capital goods and energy com- companies. �� Second-guessing is a common symptom
panies are among the bottom six industries in three of ill-defined or poorly articulated decision rights.
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out of four revenue segments. We believe that these
That said, simply clarifying decision rights won’t serve
unhealthy organizations survive because they compete ��� ���
as a cure-all. Decisionmakers cannot make effective
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in regulated and/or capital-intensive industries where
decisions in the absence of accurate and relevant
high barriers to entry likely protect them from failure. �
In contrast, more “healthy” industries—professional
services, commercial services, hotel and leisure, real Exhibit 7
estate—tend to be more openly competitive. Decision Rights are Unclear in Unhealthy Organizations
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information. And, as the next finding indicates, incom- organization size (measured by revenues) shows that
plete or inaccessible information is a hallmark of the responses from small organizations are more likely
unhealthy organization. than those from larger ones to result in a healthy pro-
file (see Exhibit 9 on page 9). In other words, smaller
Inadequate Information Flows Plague Unhealthy
organizations are generally more effective at execut-
Organizations
ing. By contrast, large organizations are more likely to
Despite decades of advancement and investment in
manifest dysfunctional traits and behaviors and report
IT, most organizations still have difficulty getting
unhealthy profiles.
information where it needs to go. The responses to
Org DNA ProfilerSM questions on information show a These results and our experience working with clients
marked disparity between healthy and unhealthy of all sizes suggest that organizational DNA changes,
organizations (see Exhibit 8). or mutates, as organizations grow and adapt to
changes in their competitive environment, and that
A mere 16% of those respondents who described their
these changes are often for the worse.
organizations as unhealthy report that information
flows freely within their organizations, and only one in Altitude Determines Attitude: Senior Management Is
five feel that field and line employees have the infor- High on Organizational Health
mation they need to understand the bottom line The Org DNA ProfilerSM has generated interest at every
impact of their day-to-day choices. More than three level: 23 percent of respondents identify themselves
times as many “healthy” respondents agree with as senior management, 19 percent as middle manage-
these statements. ment, 17 percent as line management, 18 percent as
business unit staff, and 17 percent as corporate staff.
Only two in five “unhealthy” respondents agree that
Our survey results indicate sharp differences, however,
line managers have the metrics they need to drive the
in perception between senior management and the
business, that their organization rarely sends mixed
rest of the organization. At the same time, the four
signals to the market, and that important information
non-senior-management groups show remarkable con-
gets to headquarters quickly. Healthy respondents
sistency in their outlooks.
are twice as likely to answer these questions in the
affirmative. More than any other group in the organization, senior
executives responding to the survey perceive their
Larger Organizations Are Less Healthy
organizations as high-functioning, reporting healthy
While our data are cross-sectional rather than time-
profiles more than half of the time (see Exhibit 10 on
series, they suggest that “healthy” growth is hard to
page 9).
achieve. Specifically, examining profile distributions by
Exhibit 8
Information Stagnates in Unhealthy Organizations
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Source: Org DNA ProfilerSM data collected from www.orgdna.com; Booz Allen analysis, blank answers excluded
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Exhibit 9 Exhibit 10
Organizational Health Declines with Size Senior Management’s Bullish Attitude Sets Them Apart
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For more information on remedies, see RESULTS: Keep What’s Good, Fix What’s Wrong, and Unlock Great Performance, by Gary L. Neilson and Bruce A. Pasternack, Crown Business, 2005.
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Research Methodology
Similar in nature to familiar individual personality assess- and identify differences across industries, functions, man-
ments, the Org DNA ProfilerSM (www.orgdna.com) categorizes agement levels, and the like. When we create a custom
organizational character based on employees’ responses Org DNA ProfilerSM for a client, we tailor the demographic
to a 5-minute survey comprising 19 questions (see below). questions to establish the comparison groups that are most
Responses to the questions are fed through proprietary soft- relevant to that client’s situation (e.g., what division/location
ware that assigns the organization described to one of seven a respondent works in, whether he or she came from
prototypical profiles. an acquired entity, etc.).
The website is open to the general public, and visitors can On both the public site and the company-specific sites,
anonymously complete a profile of their organization. In individual responses are strictly anonymous: no names
addition to answering the 19 questions, respondents also (company or individual) are requested or revealed. The
provide demographic information (e.g., their organization’s data collected are used for analysis and comparison
size and industry, their own level and department in the purposes only.
organization). We use these data to categorize responses
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Also Contributing