McKinsey research shows that healthy organizations—those with strong performance cultures—consistently outdo their peers. To understand the state of organizational health in Southeast Asia, we analyzed data from more than 200,000 respondents to McKinsey’s Organizational Health Index (OHI) survey, covering nearly 40 companies over a five-year period (see sidebar, “Understanding organizational health”).
Overall, we found organizational health in the region to be robust. Many organizations have built thriving cultures, characterized by a strong sense of employee ownership; this is reflected in sound economic performance across the region. Yet there are significant differences between the healthiest organizations in Southeast Asia and the rest, with the healthiest organizations putting much greater focus on fostering innovation. Likewise, companies in the global top quartile of organizational health apply practices that many Southeast Asian companies could emphasize more—both to empower and engage employees, and to make smarter use of data and technology.
We assessed our OHI data through three lenses—common strengths of Southeast Asian organizations, differences between healthy and less healthy organizations in the region, and applicable insights from companies with the greatest organizational health globally. From this analysis, five big themes emerged for Southeast Asian companies to achieve or sustain excellent organizational health (Exhibit 1).
Leaders of organizations in Southeast Asia now have the opportunity to build on the region’s strengths and learn from the best practices of the world’s healthiest companies—while considering the economic and cultural nuances of their country’s context. In this article, we present several tried-and-tested strategies they can consider to transform their organizations’ culture, health, and performance.
Encouraging accountability and ownership—Southeast Asia’s signature strength
In most Southeast Asian companies, employees feel accountability and ownership, underpinned by a sense of belonging. Our data show that this is the signature strength of organizations across Southeast Asia, irrespective of their standing on the OHI. It is reflected in high ranking for practices such as personal ownership, consultative leadership, consequence management, and rewards and recognition. Crucially, employee ownership is supported by an environment where employees can develop a strong sense of belonging and connection. All these practices rank in the top 12 practices for Southeast Asian organizations, indicating the high emphasis placed on the associated behaviors (Exhibit 2).
The widely felt accountability and ownership in Southeast Asian companies underpins a second standout strength—their capacity to focus on customers, external partners, and society. Southeast Asian organizations typically prioritize the needs and satisfaction of their customers and use customer feedback to shape and improve their offerings. At the same time, they invest in their relationships with business partners, and they have an increasing sense of social responsibility.
Proactively focusing on reinvention and talent development—lessons from Southeast Asia’s healthiest organizations
While Southeast Asian organizations typically share broad strengths and opportunities, a closer look at the data shows there are significant differences between the healthiest organizations in the region and the rest.
Notably, the healthiest companies have a proactive focus on organization-wide reinvention, with both top-down innovation and employee innovation ranking higher. Leaders are actively involved in the innovation agenda of the organization, but they understand that innovation is not just the responsibility of a select few—they deliberately create an enabling culture that allows employees at all levels to drive innovation and improvement, contribute meaningfully, and grow personally.
A second characteristic of Southeast Asia’s healthiest organizations—closely linked to their capacity for innovation—is their strong support for employees’ learning and development. These organizations emphasize improving skills and capabilities in the workforce, and their leaders demonstrate empathy and concern for employees. These actions go a long way to creating an environment that fosters talent development.
In both of these areas, there are opportunities for other Southeast Asian companies to emulate their peers with the strongest organizational health. They can work to create a culture of innovation and reinvention at an individual and institutional level, and they can put greater emphasis on empowering and developing employees.
Empowering and engaging employees, harnessing data—global best practices that matter for the region
Our data also pointed to several practices where Southeast Asian organizations generally lag the healthiest organizations globally. Three areas stand out as opportunities to strengthen organizational health (Exhibit 3):
- Empower talent through formal mechanisms and adaptive leadership. While employees have a sense of accountability and personal ownership, most Southeast Asian companies could do more to ensure employees feel empowered in their roles. A key step is to formalize the performance management process, using formal feedback to evaluate, develop, and deploy employees. Leaders have a key role to play in demonstrating empathy for employees and creating learning opportunities that develop their skills.
- Engage employees with the organizational strategy. A strong shared vision and strategic clarity are less common in Southeast Asian organizations than in leading global organizations. In the healthiest organizations around the world, leaders focus on creating a compelling narrative of their broader vision and communicating a clear strategy road map. Southeast Asian organizations can adopt these practices to involve employees in company strategy and help them see how their daily tasks fit into the organization’s vision, which help foster a sense of purpose and significance.
- Utilize data and technology to accelerate decision-making. Data-driven decision-making and tech enablement are among the lowest ranked practices in the region. Globally, however, they are among the most important practices of organizations in the top quartile of organizational health—and these organizations leverage data analytics and innovative technologies to gather valuable insights for decision-making.
Five strategies to improve organizational health
Leaders of organizations in Southeast Asia now have the opportunity to build on the region’s strengths and learn from the best practices of the world’s healthiest companies—while considering the economic and cultural nuances of their country’s context.
To transform their organization’s culture and health, leaders can consider the following strategies.
Make culture the hero, not an afterthought
Building a thriving organizational culture requires a focused effort on aligning the company’s current state with its aspirational goals. It is about making the necessary “from” and “to” shifts, starting from where the organization is today to where it aspires to be tomorrow—a mindset required across all levels of the company, particularly among leadership. Senior leaders need to be fully committed to embed culture at the core of business strategy; without their active involvement and accountability, any cultural shift may fail. Recognizing that culture is not a side project or an optional add-on, but is integral to long-term success, can be a strong push on the road to success. However, with the current ever-changing business landscape, creating the right environment needs to be addressed urgently—culture must evolve rapidly to keep pace with competitors. If it is an afterthought, the strategy will likely not stick, and the desired outcomes may remain elusive.
Proactively design a strategy-backed operating model
Leaders need to ensure that their operating model enables an effective strategic plan and creates alignment across process, people, and technology. This is crucial for driving effective execution and creating consistency across the organization. It is a joint responsibility of senior management, particularly the “G-3”: the chief executive officer (CEO), chief financial officer (CFO), and chief human resources officer (CHRO). These executives are vital to creating a strategy that deploys financial capital with human capital to achieve the business’s goals. Strategic workforce planning becomes a key component and needs to go beyond just having the right headcount: It is essential to ensure that the workforce is equipped with the right skills and up-to-date expertise to face the evolving challenges and demands of the modern business world. By proactively addressing these skill gaps and aligning the workforce with strategic objectives, an organization may be better equipped to succeed. An operating model that balances the right size with the right skills will likely enable an organizational strategy to thrive in a rapidly changing environment.
Align talent with value
This practice is essential to obtain a clear understanding of the skills, capabilities, and headcount necessary to achieve a company’s strategic goals and ambitions. This involves identifying the gap between its current state and the desired future state—and moving beyond traditional workforce planning. Organizations need to pinpoint the roles and skills that are vital to executing their business strategy effectively. With this clarity, leaders can assess the current workforce baseline and devise strategies to bridge any gaps. Allocating top talent to critical roles can yield disproportionate value: McKinsey research has shown that top performers in key positions can be up to 800 percent more productive than average performers. Forward-thinking companies integrate this strategic approach with broader talent considerations, such as putting the right talent in the right location, and ensuring they have the appropriate mix of skill levels and seniority needed to build a high-performing workforce.
Put the ‘manager’ back into performance management
To grow an organization’s talent base, managers need to be empowered to provide meaningful feedback and support. The real challenge is shifting the mindset—investing in the right people and differentiating performance with courage and clarity. This requires the ability to have honest, constructive conversations that focus on development. Performance management should be led by managers, not outsourced to HR, making it a continual, human-centered process. When managers take ownership, a more engaged workforce can be developed to foster growth throughout the organization.
Build employee muscle to understand and utilize data outcomes
To achieve meaningful outcomes, organizations need to invest in talent as much as in technology. While technology is essential, it can only be enabled through developing a workforce capable of solving problems, translating data insights, and fostering curiosity about the data with which employees work. This means investing in management’s ability to interpret data, structure solutions, and inspire bold, innovative thinking. Organizations need to embrace new ways of working with data and technology, rather than resisting or avoiding them. By prioritizing digital skills and encouraging a mindset that embraces change, organizations can ensure that their people are equipped to use technology effectively. In turn, this approach can create a culture where data-driven decisions are at the forefront, driving smarter outcomes and improved efficiency.
Companies in Southeast Asia have the opportunity to boost their organizational health by utilizing the region’s strengths while learning from global counterparts how to improve in areas that are lagging. By focusing on intentional management practices that foster personal and professional growth, Southeast Asian companies can benefit from more satisfied employees and achieve more holistic, resilient, and sustainable growth amid the changing global environment. The most successful transformations are often underpinned by the commitment of the entire leadership team, embracing both regional advantages and global best practices to remain competitive and adaptable in a rapidly evolving marketplace.
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