11 Steps To Conducting an Organizational Assessment

Similar to how a performance review evaluates employee performance and potential, an organizational assessment helps leaders understand how the business is doing. This is important, especially given that 20.4% of businesses fail within a year of opening, 49.4% within five years, and 65.3% within 10 years. 

Understanding why an organization succeeds or fails requires looking into every aspect of the business. This offers insights into how the organization can build resilience, adapt to change, and prepare for the future.

This article explains what organizational assessment is all about, HR’s role in it, and how to conduct one.

Contents
What is organizational assessment?
Why organizational assessment is important
6 types of organizational assessment
When to conduct an organizational assessment
11 steps to conduct an organizational assessment

What is organizational assessment?

Organizational assessment is a comprehensive audit of an organization’s people, processes, and platforms. The point is to understand the company’s inner workings so you can discover how best to leverage what’s going well and revamp what’s not. 

Organizational assessment involves:

• Appraising the organization’s performance, culture, capabilities, and overall health
• Identifying its strengths and weaknesses and discovering opportunities for improvement
• Aligning its goals, resources, and structure with one another
• Improving the organization’s efficiency, culture, and employee engagement.

Why organizational assessment is important

An organizational assessment takes an in-depth look at the condition of an organization, revealing strengths to capitalize on and vulnerabilities to address. You can use this knowledge to strengthen and protect the company’s long-term success.

Organizational assessments bring value in the following ways:

• Matching the organization’s strategies, structure, and culture with its objectives
• Recognizing skills gaps, leadership weaknesses, operational inefficiencies, and other areas for improvement
• Determining the efficiency and impact of services, policies, and programs
• Increasing employee engagement and productivity by encouraging employee input and improving work culture
• Mitigating risk by detecting potential threats and vulnerabilities promptly
• Supporting continuous improvement by building a future-proof organizational assessment framework.

6 types of organizational assessment

There are a few common types of organizational assessments companies can conduct to meet their specific needs and objectives. These include:

1. Organizational culture assessment

An organizational cultural assessment evaluates whether a company’s culture is as its leadership claims. As such, it examines whether the work culture, employee experience, and practices correspond with organizational goals and values.

2. Organizational needs assessment

An organization may make the wrong assumptions about why it fails to hit all its targets. An organizational needs assessment gathers data from diverse perspectives across the company to identify barriers to goal achievement. 

Leaders can then use this information to tackle challenges and plan the next steps to maximize the company’s chances of success.

3. Organizational health assessment

A healthy organization demonstrates resilience and strong performance despite changes and challenges. An organizational health assessment analyzes structures, management practices, and employee experience to understand what changes and resources the company needs to strengthen itself.

4. Organizational skills assessment

The skills an organization requires of its employees typically change based on shifting business needs. A skills gap analysis reveals a workforce’s existing skills, allowing you to identify any gaps between current capabilities and what the company needs to achieve its short and long-term objectives.

5. Organizational leadership assessment

Unqualified leaders can impede success. An organizational leadership assessment gauges leadership’s effectiveness in different areas and detects untapped potential. This assessment highlights growth areas for existing leaders and identifies prospects to build a viable leadership pipeline.

6. Organizational risk assessment

Awareness of possible hazards gives you time to prepare for them and limit or prevent their negative consequences. Organizational risk assessments identify potential dangers to the business and analyze their likelihood and frequency. With this information, you can decide how best to mitigate or even eliminate risks.

HR tip

Conduct an organizational assessment against a validated model of organizational functioning, such as the Burke-Litwin model, Weisbord’s Six-Box model, or McKinsey 7-S framework. Using a validated model can help you understand which factors to examine and how to gather the right data.

When to conduct an organizational assessment

Organizational assessments are a helpful way to understand the organization’s as-is functioning. This is valuable whenever you want to discuss targeting improvements, making strategic changes, or preparing for large events such as mergers and acquisitions. Scenarios where you should conduct an organizational assessment include:

Before major changes 

Ahead of a significant organizational change, an organizational assessment can help leaders decide how to prepare their people and operations for impending circumstances, such as:

• Corporate restructuring
• Merger or sale
• Decreasing or enlarging operations
• Launching a new initiative or product
• Expanding to new markets
• Revamping core processes
• Implementing new equipment, tools, or software.

After major events

After any major event (planned or otherwise), an organizational assessment can help you deal with incidents such as:

• Changes in key leadership
• Post-merger or acquisition fine-tuning
• A highly competitive job market with limited available talent
• Economic downturns
• Altered shareholder interests and demands
• Catastrophic events (natural disasters, war, pandemics).

Periodically

Conducting organizational assessments on an annual or biannual basis contributes to constant strategic alignment and improvements that can minimize business complications and disruptions. Periodic organizational assessments can serve the following purposes:

• Detect red flags before they become a problem
• Uncover gaps and blind spots in systems and structures 
• Discover opportunities for innovation and continuous improvement
• Anticipate staffing needs.

HR tip

Conducting an organizational assessment when the company is strong and stable can reveal what’s making that happen, as well as expose and mitigate potential problems before they cause harm.

When problems arise 

No organization can avoid challenges or crises, so it’s important to have a systematic process to address such issues. Instead of simply being reactive by putting out small fires whenever they happen, organization assessment can help you develop more comprehensive, long-term solutions to prevent such fires from occurring in the first place.

An organizational assessment is a reliable technique for uncovering and handling circumstances such as:

• Shifting customer expectations
• Internal conflict and low employee morale
• Increased turnover
• A sharp decline in performance or productivity
• Elevated production costs or demands to increase budgets.

11 steps to conduct an organizational assessment

“Organizational assessments fail when they lack a clear purpose. You end up collecting massive amounts of data that are not helpful. Always start by asking, ‘What problem do I want to solve?’ This should dictate the scope and areas of focus for the assessment,” says Dr. Dieter Veldsman, Chief Scientist (HR and OD) at AIHR.

When planning to conduct an organizational assessment, follow these 11 steps:

Step 1: Define your objectives

Start by clearly defining the organizational assessment’s objectives. You must understand exactly why your company needs this assessment, or it will be a generic, unfocused exercise. Pinpointing its purpose and expected outcomes ensures it will be targeted and provide actionable insights. 

Align the objectives with the organization’s mission and strategic goals. For example, if the organization is undergoing a restructuring, possible objectives could be to identify skills gaps, determine readiness for change, or assess organizational culture.

Step 2: Set the scope of your assessment

After establishing the intent of the organizational assessment, set parameters for it to ensure you don’t deviate from the objective. The scope of an organizational assessment should include:

• Focus areas (i.e., culture, organizational structure, processes, etc.)
• Participating departments or geographic locations
• Timeline
• Cost and resource allocation.

While it’s important to set boundaries, you should also allow for reasonable flexibility as the scope of your organizational assessment may require tweaks along the way.

Step 3: Identify relevant stakeholders

Determine which parties will be involved in the organizational assessment. Engaging the right stakeholders allows for different perspectives, ensuring a more thorough and efficient process.

Stakeholders may include: 

• Leadership teams or individuals
• Manager/department heads
• Employee representatives
• Technical and subject matter experts
• External partners.

Some stakeholders are obvious choices due to their roles and seniority, but you can include others as well, depending on their availability, credibility, and objectivity.

HR tip

Always identify a diverse set of stakeholders who can give you different perspectives. Leader’s views are often very different from those of employees doing the work. For an assessment to be meaningful, you need to incorporate and surface a diversity of views and look for common themes to validate.

Step 4: Select the right assessment type

The type of assessment(s) you need to conduct will depend on the objectives and scope you set. For instance, let’s say you are conducting an assessment to prepare a new product line. You could perform a leadership skills assessment to determine if the company has enough qualified, effective leaders to take charge of this new venture.

Step 5: Collect data via the most suitable methods

The next step is to collect the information you need to drive the assessment. Collecting both qualitative and quantitative data will provide a more well-rounded perspective. Common data collection sources for organizational assessments include:

• HRIS (HR information systems)
• Surveys and questionnaires
• Focus groups and interviews
• Financial records
• Process observations
• Internal communication and collaboration platforms
• Industry benchmarks
• Policy and procedure reviews
• Strategic planning documents.

Step 6: Analyze the collected data

Once you’ve compiled all the relevant data, it’s time to analyze it so you can make sense of it. This involves the following procedures:

• Reviewing the data for inconsistencies and inaccuracies
• Formatting and visualizing the data with charts, tables, and graphs
• Comparing data across departments, geographic locations, employee groups, etc.
• Detecting patterns, relationships, trends, and themes in the data that reveal organizational strengths and weaknesses
• Requesting input from subject matter experts to corroborate your findings.

Depending on the number of data sources you can access, this stage can be highly complex. If possible, involve a stakeholder with data analysis expertise to aid in this part of your organizational assessment.

Step 7: Make recommendations and develop action plans

From the data analysis, you can make evidence-based proposals to fulfill the organizational assessment’s objectives. Establish what’s most urgent, what’s most feasible, and what will make the most impact so that you can prioritize your next steps.

You can then develop a plan to carry out your recommendations. Here are some tips for forming an effective action plan:

• Explain the change and why it’s necessary
• Present the data that supports this recommendation
• Demonstrate how the action supports the organization’s priorities
• Specify a timeline and how you’ll measure progress and success
• Describe how to overcome potential barriers
• Outline the required budget and resources.

Step 8: Communicate your findings to the relevant parties

Prepare a report conveying the organizational assessment findings and action plans. Use the charts, graphs, and tables you’ve assembled to display the data in an easily understandable visual format. 

Present the report to the relevant stakeholders. To tailor the information to different audiences, you may want to have separate versions—such as an executive summary and a more detailed report. Invite feedback and allow for discussion time to ensure effective communication and buy-in.

“Organizational assessments can, at times, breed suspicion among employees. They may wonder why you want to know certain things or if their jobs are in danger. It’s important to explain why you are doing this assessment and provide feedback on the findings. Of course, you can’t share all of them. But make sure you do share what you can to give the process credibility and build trust among stakeholders.”

Dr Dieter Veldsman, Chief Scientist (HR and OD) at AIHR

Step 9: Implement and monitor the necessary changes

Set the sequence and phases for executing the action plan. You can ensure productive implementation by relying on the following considerations:

• Communicate the vision and expected outcomes from the changes
• Assign responsibilities and promote participation
• Anticipate probable situations and plan for worst-case scenarios
• Observe progress and make modifications when warranted
• Maintain close contact with stakeholders
• Initiate feedback loops to determine the impact of the changes.

Step 10: Document best practices

An organizational assessment should tell you what’s working and what isn’t for your company. For example, when considering how to assess organizational culture, you may have learned that several pulse surveys attract higher employee participation rather than a longer culture survey. 

Keep notes and records about what to continue doing and what to change ahead of the next organizational assessment. This will help ensure you can reference the most effective measures that save time and resources and produce better-quality organizational assessments.

Step 11: Follow up

Continually review the action plan and its outcomes to determine its impact. This extends to addressing obstacles employees face and making necessary adjustments to help them overcome these obstacles.

Recognize and support advantageous changes and new behaviors to ensure the action plan’s long-term sustainability. Additionally, update stakeholders on your observations and ask them for input. All these actions help keep the momentum going and ensure you are constantly updated on what is happening and what needs to happen at your company.

To sum up

When leaders have a strong grasp on their organization condition and capabilities, they are better able to make plans, set goals, and allocate resources to drive business success and benefit the workforce. You can enable this by planning and conducting organizational assessments.

An organizational assessment may be a demanding process, but the visibility it provides can result in changes that make a significant difference in your company’s performance, resilience, and longevity.