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What's a business diagnostic and is it worth doing?

Microscope looking at samples
Put your business under the microscope with a diagnostic

It's natural in business to focus on solving problems and dealing with challenges. That's, at least partially, what leadership is about. Too often, and of course not deliberately, those problems and challenges are dealt with superficially.

For example, business owners frequently tell us things like this: "we seem to have higher employee turnover than our competitors". It's a statement that, for many businesses, is no doubt true. It also describes a situation - high employee turnover - that could have many different solutions depending on the underlying cause of the turnover.

To deal with this challenge (and others like it), leaders could do several things:

  • At the extreme, they might ignore the issue and hope that time will take care of it (unlikely to work...of course);

  • They could make one or two assumptions about the likely cause or causes and devise solutions based on those assumptions (they might get lucky);

Stick figure thinking and chewing on pencil
A business diagnostic can de-risk your problem solving

  • they could "ask around" among employees for suggestions (it's doubtful they'll get totally honest responses);

  • they could undertake a deeper analysis of the issue (that's a better start...).

You can see that this single issue example creates a range of options.

But, of course, businesses are full of multi-dimensional challenges which multiply the complexities of developing appropriate and effective plans.

Which is where a business diagnostic can help.

What is a business diagnostic exactly?

There's no single definition of, or approach to undertaking, a business diagnostic. In our language:

A business diagnostic is a tool that can give a business clarity about how it's positioned to meet its growth aspirations.

It looks across your business to identify what's going well (that you should continue to do or do more of) and what might be hindering your growth plans (that you need to review, adjust or stop doing entirely). It will help you address those issues you know about and identify those you don't.

The objective is to draw out the information you need to make informed decisions about improvements you can make in your business.

A business diagnostic is not entirely unlike a medical examination

It's a little like taking a complete medical - that's designed to take a "whole of body" approach and draw out information about you to help you make informed decisions about what changes you might make in your life to improve the shape you're in physically.

As a practical business diagnostic example, ours here at GrowthCatalyst focuses on all the elements of a business that set it up for sustainable long-term growth. It takes a Q & A approach and includes questions covering a range of business issues, starting with bigger picture items (vision, strategy and business plans and their alignment to business purpose) and moving through people-related matters, client-focused issues, marketing and financial outcomes.

There are, of course, different approaches...this one works well for our clients.

How should it be implemented in your business?

Again, there are several possibilities.

We believe it's best to conduct a diagnostic in person on the business premises. That said, it's something that can be done online where necessary.

At the very least, the owner(s) of the business and their leadership team should provide their responses to all the diagnostic questions. Beyond that, it's up to the business to decide who else should provide input.

Team in conference room looking at laptops
It's good to get a cross-section of your employees involved

It's great if all employees can do so, but where that's not possible, ideally everyone in people leadership roles should be included along with other "influencers" in the business - those people who may not necessarily be in particularly senior roles but for other reasons are held in high regard by other employees. It's great to get a mix of people at different levels of seniority, along with those who have long service as well as newer members of the team.

As you probably can tell, it's all about getting as broad a cross-section of participants as possible. You're looking for an understanding of the consistency of views about the business from those most important to its proper functioning - leaders and employees.

Following the data collection process, you should be provided with a report that details both findings from the process and recommendations about the next steps.

What are the characteristics of a good business diagnostic?

Bear in mind that a business diagnostic should be tailored to meet your specific needs. Off-the-shelf examples with little flexibility may produce a good outcome, but one where you can influence the structure and implementation will be more likely to deliver a great result.

There's no doubt that a comprehensive diagnostic will involve an investment of time and money, so it's essential to get what you need from it. So here are some pointers:

1. Know your objectives

The possible reasons for running a business diagnostic are many and varied. You might be a new CEO of a business needing a deep (and independent) review of the business.

Or similarly, you may be the new owner looking into non-financial issues that typically aren't addressed in traditional due diligence processes.

Some businesses like to perform a diagnostic when growth has stalled, and the reasons are unclear.

A diagnostic is also a great "stepping off point" for every level of planning in your business, from strategy to business and action planning, as you can imagine.

Because it’s such a versatile tool, you must be clear on why you believe you need it to get the best outcome. That will drive everything from design to implementation to reports, recommendations, and, most importantly, your follow-up action plans.

2. But don't have desired outcomes in mind

By this, we mean don't run a business diagnostic purely to "prove" something you already believe to be the case.

Again, taking the employee turnover example, you may believe it's related to salary and want to prove the point.

What an independent diagnostic might tell you, though, is that people are leaving because they don't get how their role contributes to the longer-term success of the business...what's the purpose of the business? Where's the business heading? You could be surprised to learn that addressing these key concerns might lead to more engaged employees who are less likely to leave.

3. Ask the right questions in the right way

Clearly, the questions asked, issues explored, and data collected must relate to the objectives you set for the diagnostic process.

Be clear and targeted with diagnostic questions

All questions must be clear and specific and not open to interpretation. Using multiple-choice responses where possible helps with consistency in responses and analysis. That said, don't be afraid to allow some free text responses where appropriate - some people just love to "colour outside the lines" and provide additional feedback.

Last, it's a good idea to finish with a question like "what else would you like to tell us about the business". Again, it's a good way to extract feedback and suggestions that could otherwise be missed.

4. Involve the right people in the process

This isn't an exercise purely for the business owner(s).

At the very least, you should include all those who report to the business owner/CEO, which will help determine how aligned that group is. But you don't have to (and shouldn't) stop there.

You can (and really should) also include other "influencers" in the business - those who aren't actually in leadership roles but to whom their peers look for guidance and support. If you don't know the views of this group, the diagnostic is a great way to find out. Finally, it's good to involve both longer-serving employees and new hires for pretty obvious reasons.

5. Provide appropriate and timely feedback to participants

Your employees who take time out of their busy day to participate in the diagnostic process will be keen to get at least a preliminary understanding of the findings from the exercise.

Banner that says "we hear you"
It's important to keep your team updated about the diagnostic results and what's happening next

It’s important to update the team periodically on how the analysis is unfolding and some of the steps the business will be taking as a result. Communication is critical because those who've provided their input want to know someone is listening.

6. Act on the results

This probably doesn't need to be said, but there's little point in going through the diagnostic process unless you're prepared to act on what the results are telling you.

That doesn't mean you need to immediately do everything recommended. But it does mean you should prioritise those recommendations and build an action plan for your next steps, which includes a process for reviewing progress.

7. Take regular follow-up pulse checks

Your follow-up process should include regular, shorter "pulse checks" focusing on the actions being implemented as a result of the initial diagnostic.

It's important to understand how your leaders and employees perceive the initiatives being taken post-diagnostic because they may or may not be achieving the desired results. a diagnostic worth doing?

In a word, definitely, as long as you tick all (or most of) the "characteristics" boxes mentioned above.

The right mindset is a prerequisite to a successful and valuable diagnostic.

Remember, your diagnostic should tell you what's working well in the business.

But you also need the mindset that accepts that:

  • It's not a failure to discover that some things in your business could be done better or differently for an improved outcome;

  • It's not a failure to discover your employees (or a representative sample of them) don't understand what the business stands for and how they contribute to its success;

  • It's also not a failure to know, with certainty, that improvements could be made to basic processes in the business.

What is a failure is if you ignore those things...

Do you want to put your business under the microscope?

And build a plan to achieve your growth aspirations?

Our Sustainable Growth Audit and Roadmap will help you create a purpose-driven, workable and time-effective action plan for growth.

We invite you to contact us to arrange a face-to-face or virtual conversation.

Alternatively, you can book a time for an initial discussion here.

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