What is a Healthy Company?

October 8, 2021

When a founder starts a company, profit is a distant dream. If a company is founded solely for the purpose of making profits, the founder is going to be disappointed . There are no profits in a start up  and as far as the long run is concerned, it is not promised nor assured. 95% of startup bite the dust.  

 A healthy start-up is one in which the founders started the company because they identified a need in the marketplace that was either not being satisfied at all, or that they believed they could satisfy better than others. With a start-up, the purpose of building a company is to satisfy a need. That is what gives energy to the founder. That is what he or she is passionate about. A common characteristic of company founders, I found, is pride: pride in the product or service they provide and the need it is satisfying. Later, if the need is satisfied efficiently, the company becomes profitable.

 This type of mindset, satisfy market needs efficiently,  is indispensable if the company is going to be profitable sustainably; The company should be diligent  to maintain client satisfaction. But as a company grows, the danger of losing this mindset also grows. “Professionals” are brought in and manage the company by financial ratios, often causing client needs to take a back seat at the decision-making table.

 One way to determine whether a company is fulfilling the goal of satisfying client needs is to look at repetitive sales. In my professional practice as an organizational therapist, I insist on measuring repetitive sales and not just revenues or profits.

  It’s not enough to simply decide what to do for our clients. We must also decide what to do for our stakeholders, those resources necessary to maintain client satisfaction efficiently, the investors, the workers, the community at large etc.  But that is not enough either. If we focus only on the “what to do,” and ignore the “what not to do,” eventually reality will hit us in the face. The collateral damage, the side effects of what we're doing that we should not do,  can be more expensive and dangerous than the benefits of what we are doing. For instance, telling people what to do and pushing them hard to do it might impact morale in such a disadvantageous way that it destroys the culture within an organization. This is more expensive than the benefit of achieving the goal. In such a case, the long-run costs will be higher than the short-term benefits. This is what I believe happened to President Trump. He paid attention to the “what to do’s,” in a way that I believe impacted negatively  the foundation of America's sense of fair play, of integration, of teamwork, and of mutual trust and respect. Many people agreed with much of what he was doing, and that's why he got 70 million votes. But his neglect to consider  “what not to do’s,” had collateral damage one  of which was the impact on our society and our basic values, caused 77 million people to vote against him.

As you try to service the needs of your clients, stop and think: “Are there any other stakeholders who might be impacted by what we’re doing?” And consider not only the immediate stakeholders, but also the long-term stakeholders. Consider our children and grandchildren. What's will happen to them  if, in our search for profits, we destroy the environment? Should  there  not be some self imposed constraints we decided not to violate?

 So, what should be the goal of a corporation that, if met , profits are the reward  of reaching that goal?

An organization that serves its clients for which it exists efficiently ,taking into account the various stakeholders, in the short and long run company is HEALTHY.

Effective in the short run means  satisfying client needs. Efficient in the short run means satisfying the client needs at a cost lower than the client is willing to pay to satisfy his or her need. For the long run means adapting to change effectively and efficiently.  

Organizational health should be the goal of every organization. If an organization is healthy it will have a sustainable success.  Without health it will have a very short level of success If that at all.

Written by
Dr. Ichak Adizes