This report highlights how many in the sector are above global averages on organisational health, yet there are key areas where the sector can improve to unlock future growth.
McKinsey & Company Australia and New Zealand and the Australian Scholarships Foundation partnered in 2021 on a major research effort to provide a deeper understanding of the drivers of organisational health and capability needs across Australia’s social sector.
Australian not-for-profits shone above their global peers in terms of commitment and a deep sense of mission, yet many organisations need to strengthen operational discipline. Talent growth has largely stalled in the sector; the continued pressures that COVID-19 has on communities is a roadblock to organisations having the capacity to build employees’ futures.
The report takes an organisational health lens – how well an organisation aligns around a mission, executes against this ambition, and renews itself over time. The McKinsey Organisational Health Index examines:
- outcomes (how healthy is your organisation?) and
- practices (what behaviours do your organisation adopt to stay healthy?).
The three capabilities of the healthiest NFPs
Three capabilities were unearthed that the best organisations have developed:
- growing talent,
- executing with excellence, and
- system shaping.
The research shows that the sector has strengths to build on across each capability, but also opportunities to unlock further impact.
Building these capabilities comes more easily to some than others. While 60 percent of the organisations surveyed scored above the global median on system-shaping practices, 40 percent did so in operational excellence. Only 35 percent were above the global median when it came to practices required for talent growth and performance management.
About this research
The research uses McKinsey & Company’s ‘Organisational Health Index (OHI)’– a diagnostic tool McKinsey have used with 2000+ organisations (6 million+ responses) globally over two decades. The OHI measures how ‘healthy’ an organisation is, how it aligns around mission and strategy, executes with excellence, and renews itself to sustainably achieve its aspirations.
Findings are based on 4,000+ OHI survey responses across 37 prominent Australian social sector organisations and sector CEO roundtables and in-depth case studies on non-profits who are out-performing, even in the current environment.
This research collaboration continues in 2022 with further research planned for release later this year.
The full report includes six case studies on charities and how they are achieving organisational excellence.
How healthy charities are building organisational health
Not-for-profit organisations share their stories on practices they have adopted to stay healthy.
Three capabilities to boost the not-for-profit sector’s impact
COVID-19 made the not-for-profit sector’s value clearer than ever, with demand doubling for many services. But now the sector is under immense strain. Sam Sayers, CEO of the Australian Scholarships Foundation, and Roland Dillon, Partner at McKinsey & Company, discuss the path forward. Read the full article.