McKinsey Classics | September 2024

Perfecting people management for long-term organizational health

Companies (the good ones, at least) invest heavily in their employees. But many struggle to effectively measure how their workers are contributing to the organization’s long-term success. That’s because measuring the capabilities that help companies thrive over the long term—leadership, innovation, employee motivation—is hard to do. So how do companies effectively measure contributions to corporate health?

Three core principles can help organizations perfect their people-management systems for the long haul. First, root out unhealthy habits. That starts with taking a hard-line look at managers’ contributions to long-term health and avoiding metrics that encourage short-term gains. Second, prioritize values, which includes senior management role modeling the company’s new commitments. Third, keep it simple. Pick a handful of meaningful metrics that are owned and updated by employees.

Traditional performance metrics often prioritize short-term gains at the expense of long-term health. To help ensure that your performance management can thrive over the long term, read our 2012 McKinsey Quarterly classic “Encouraging your people to take the long view.”

— Drew Holzfeind, editor, Chicago