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Organizational performance: 4 ways to unlock employee potential

February 28, 2022 - 18 min read

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What is organizational performance?

2 types of organizational performance

How do you measure organizational performance?

3 factors that impact organizational performance

What is organizational performance management?

4 tips to improve organizational performance

The way we work is changing — fast. 

Our global workforce has become accustomed to working remotely. We know many organizations are pivoting to a hybrid or remote workforce

But beyond the impacts of the pandemic on our work, how we collaborate with one another has changed. How we operate and work together as a team has changed. 

In these last couple of years, we’ve seen organizations getting flatter. Companies are moving away from hierarchy and moving towards more cross-functional collaboration. 

A Deloitte report cites data around organizational performance in today’s world. Here are some quick stats: 

  • 31% of organizations say they work almost wholly in teams 
  • 53% of organizations have stated team-based work has significantly improved organizational performance 
  • 65% of organizations say developing teams is a priority 

It’s clear what the future or organizational performance holds: change and collaboration

So when it comes to organizational performance, how is your company progressing? What can your organization do to stay on its edge? 

What is organizational performance?

Organizational performance can be a nebulous concept. Organizational performance can be subjective depending on the organization, its goals, and the market. 

As mentioned, it’s important to recognize the subjective nature of organizational performance. Initially, you might think performance could be linked directly to financial performance. 

There are a number of factors that go into what’s deemed “successful” organizational performance. These factors are dependent on what’s important to the company — and what aligns with its core values.  This includes things like shareholder value, social systems, market share, or organizational culture. 

2 types of organizational performance

Traditionally, organizational performance was looked at from its output. And more than just output of results, the output of financial results. You may see organizational performance bucketed into these three categories. 

  • Financial performance 
  • Market performance 
  • Shareholder value 

According to the Harvard Business Review, we can think about organizational performance broadly. After all, organizational performance is rather subjective. 

Tactical performance 

Tactical performance is rooted in strategy, focus, and consistency. How well does your organization stick to its strategy? 

Tactical performance is defined as it sounds. It’s consistent and focused on execution. It’s delivering results when anticipated. It doesn’t allow for much wiggle room when it comes to risks, creativity, and innovation. But, it does allow organizations to stay focused, especially when resources are limited. 

When it comes to collaboration, it can be pretty straightforward. This means that teams may be used to working in silos. It could also mean that teams are executors, but not strategists. 

future-minded-leader-report

Adaptive performance 

Adaptive performance is the exact opposite. To be adaptive and agile means your organization diverges from its strategy. Adaptive performance adopts agility and flexibility. This type of organizational performance is built for change

We live in a world where there’s volatility, uncertainty, and unknown. Even the best-laid plans may need to shift. And if history has taught us anything, we know disruption and change are here to stay. 

Solid, adaptive performance gives employees more autonomy over decision-making, strategy, and innovation. It also accounts for future-mindedness, the ability to think about what the future will hold. 

organizational-performance-people-laughing-at-work

If the strategy needs to shift, an organization with adaptive performance can diverge from the original plan. But it must do so with efficiency, clear communication, and still meet employee and customer needs. 

When it comes to teamwork, collaboration is key. When your organization is adapting, you need to be really good at working cross-functionally. Collaboration and team development are areas where adaptive organizational performers invest heavily in. 

How do you measure organizational performance?

Because organizational performance is subjective, you need to identify what’s important to you. 

This will look differently depending on what your organization does. Consider looking at the market share, your organization’s purpose, and organizational culture. 

We’ve identified a few key themes to help guide how you measure organizational performance. 

Financial performance 

Financial performance is one of the most common ways to measure organizational performance. What organization doesn’t want to be financially successful? 

Your financial performance is often measured by market share and shareholder value. Or you could also consider looking at things like product market performance or shareholder return. Work with your finance teams to identify what success will look like financially. 

Resiliency and change 

We know that change is here to stay. This means your employees need to be well-equipped to weather any change or disruption that comes their way. 

Resiliency in your organization can be a benchmark metric for organizational performance. How resilient are your employees? Do your employees handle change well? What resources — like virtual coaching — can you leverage to build resiliency? 

Culture and collaboration 

Organizational culture is the lifeblood of many companies. Increasingly, we know employees want to work for companies that align with their own personal values. And, as a result of the pandemic, more employees are jumping ship to find company cultures that fit their own core values. 

Consider how you’ll measure high-performance culture in your organization. Again, this is a subjective measurement that needs to be personalized to your company. You can also measure things like employee engagement, employee experience, and employee satisfaction

It’s also important to empower collaboration and give autonomy to your employees. This fosters a high-trust culture and helps grow decision-making skills

How does your company culture resonate with your employees? Where do you need to make cultural changes? In what ways can you help teams work together better? What role does collaboration play in your organization's culture? 

Employee retention and growth 

Another great measurement for organizational performance is retention and growth. Your employee retention carries great insights. It could signal areas of opportunity, like learning and development or career growth

But it could also identify what your organization is doing well. Start measuring employee retention and career mobility, if you’re not doing so already. 

organizational-performance-person-on-laptop

3 factors that impact organizational performance

Any number of factors could impact your organization’s performance. Sometimes, these are internal factors that require attention and care. Other times, these are external factors — like COVID-19 — that may feel out of your control. 

Regardless, it’s important to be aware of the common impacts that your organization may face. 

The manager and employee relationship 

Your people managers have an incredible influence on the employee experience. If an employee and manager relationship turns sour, it can negatively impact your business. 

In fact, our data shows people managers impact employee engagement, productivity, and performance. When a leader is suffering, it’s likely the team will mirror and suffer that impact as well. For example, when a manager is low on resilience, we see a 23% decline in team performance. 

Upskilling and learning opportunities 

A lack of learning opportunities in your organization can be incredibly damaging. We know that most employees want to learn, grow, and upskill in their roles. 

When organizations provide learning pathways for their employees, the business benefits. Learning opportunities have great benefits that impact organizational performance. Here are just a few: 

External environment 

As mentioned, there are always external factors that can impact your organizational performance. We’ve all weathered the impact of the pandemic, with some industries (like hospitality or retail) taking bigger hits than others. 

But other external factors could include things like politics, economic downfalls, or supply chain issues. There are always environmental factors looming that may feel out of your control. But you can stay resilient with the help of personalized coaching

What is organizational performance management?

Organizational performance management can be complex. Let’s break down what this means for your company. In general, performance management can be bucketed into three different phases. 

Performance planning

This is the strategic planning phase. In this phase, you’ll want to identify your purpose and mission. You also will want to set goals and strategies to help achieve those goals. 

You might also identify areas — like change management — needed in this planning phase. This could mean things like organizational structure could change. This is where a lot of that cross-collaboration comes into play — and where you’ll need to invest in developing teams that work well together.  

Lean on your strategic planners to make this strategy magic happen. Strategic management helps make sure your organization is headed in the right direction. 

organizational-performance-people-working

Performance appraisal

This phase is often referred to as a diagnostic phase. The performance appraisal aspect of organizational management is essentially monitoring progress. 

How is your company tracking towards its goals? Where might you identify problems? How can you course correct to get back on track? What’s working? What’s going well? 

Performance improvement

This last and final phase is about performance improvement. After you’ve identified what’s working (or what isn’t working), you need to fix it. 

As any company leader, ongoing improvement is a part of the business. You should always be looking for ways to improve your organization, both in small or big ways. 

4 tips to improve organizational performance at all levels

It’s possible to improve your organizational performance. It all boils down to strategic planning, leadership competencies, and prioritizing individual employees. 

Invest in your leaders 

Our research shows that investing in managers has an incredible ROI on your business. When leaders are inclusive, employees thrive. We’ve found that inclusive leadership makes for more productive, more innovative, and more engaged employees. Inclusive leadership can also help reduce your turnover. 

Consider ways you can build leadership competencies with your managers. Personalized coaching can help unlock the potential within your people leaders

Build mental fitness 

We’ve found 55% of employees are languishing. They’re in this middle space of not being ill, but not well. They’re not thriving, and they’re not performing at their best. 

So, how do you fix that? Build mental fitness

A mentally fit workforce leads to more productive teams and better employee retention. Employees with strong mental fitness are more likely to recover from setbacks stronger. They’re also less likely to suffer from mental illness. 

With BetterUp, your organization can go from languishing to thriving. Consider providing access to personalized coaching for your employees. With coaching, you can build your employees’ mental fitness. 

Prioritize employee well-being 

Employees aren’t just workers who clock into their jobs. They’re human beings. At BetterUp, we believe employees are human beings first, employees second. This means we take a whole-person approach to employee well-being and mental fitness. 

Well-being is holistic: emotional, mental, physical, and financial. A diverse portfolio of employee well-being offerings can help to build mental fitness. What are some ways your organization can support employee well-being? 

Recognize (and reward) your employees

Employee recognition goes a long way. Recognition and reward boosts employee morale, employee engagement, and even productivity. 

Consider ways you can build a culture of recognition through things like merit increases, promotions, or other forms of reward

Embark on your organization’s performance journey 

Organizational effectiveness is not what it was even a couple of years ago. To keep your competitive advantage, your organization needs to continue to invest in organizational development strategies. 

No matter what methodology you adopt, you can invest in organizational strategies that work for you. It might require some organizational change and new initiatives. 

But with all key stakeholders on board, you can make incredible changes for the better. And, you'll likely find yourself better positioned to weather the complicated talent management world.

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Published February 28, 2022

Madeline Miles

Madeline is a writer, communicator, and storyteller who is passionate about using words to help drive positive change. She holds a bachelor's in English Creative Writing and Communication Studies and lives in Denver, Colorado. In her spare time, she's usually somewhere outside (preferably in the mountains) — and enjoys poetry and fiction.

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