What is a business health check?

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Company Pulse business health check

What is a business health check?

Probably the question we are most frequently asked at Company Pulse is “So what exactly is a business health check?” followed by “and how does it differ from an audit or financial review / due diligence / a strategic review?”

Put simply, a business health check is an all-round review of an organisation’s business health. The review should encompass all the key elements that contribute towards business health, including people, processes, infrastructure, strategy, financial results, governance and customer relationships.

A good business health check will also benchmark your organisation against those of comparable size and operating in a similar sector. Performance benchmarks are one of the best ways to see how you compare with best practice and therefore understand your relative strengths and weaknesses.

Since a business health check is so wide-ranging, the output needs to be in some form of balanced scorecard or dashboard. How else can you assess the relative importance of, say, business process quality against customer satisfaction levels or returns on investment? And, because of the breadth of the review, the results really need to be in an intuitive, graphical format.

For a business health check to be really worthwhile, it should also provide you with an action plan or road map on how to improve the business. This should contain practical measures for minimising weaknesses, building on strengths, mitigating risks and exploiting any opportunities identified. It should also propose priorities for implementation, not just be a ‘shopping list’.

Moving on to the supplementary question, there are many similarities between a business health check and other types of review. One with perhaps the greatest overlap is due diligence. However due diligence tends to be of a different nature and intent: it tends to be quite technical and detailed and relating to a specific transaction, for example a proposed acquisition of financing. Due diligence usually aims to uncover hidden negative factors – reasons not to do the deal – and not finding any problems is the ideal result. A business health check, by contrast, is looking for both positives and negatives, and seeking to understand and learn from them.

That perspective invokes similarities with a strategic review. But a strategic review often looks at potential new directions for the business: Should we enter new export markets or launch a new product line? What about mergers or acquisitions? What would be the benefits of rationalising our supply chain? In order to answer these sorts of questions a strategic review will spend a lot of time focusing on the external environment, whereas a business health check places most importance on current capabilities and how to improve them in the light of market prospects.

By contrast, an audit or financial review (which may or may not include a controls review) is almost exclusively internally focused. It also tends to focus on historical results and recent trends. Of the three other types of review considered, an audit is least like a business health check, its main concern being with finance and governance and with little or no emphasis on people, operations or other areas of critical importance.

Business health checks, therefore, stand in a class of their own. Done well, they provide an assessment of a business across all key areas; benchmark against comparable organisations; present finding in a balanced scorecard or dashboard format; and deliver a practical set of recommendations and an action plan for improvement.

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