While I can't find a source, it's a relatively common standard that I've seen used in multiple places, including in the psychology classes that I took (or sometimes dropped in on) in college.
The distinction is most useful because many mental illnesses aren't necessarily qualitatively different than "normal" or "healthy" human behavior and cognition; they're just more extreme versions. For example, normal people regularly engage in compulsive rituals, and engaging in these rituals is sometimes beneficial to them--consider a baseball player's ritual at stepping up to the plate, or a basketball player's ritual when stepping up to the free throw line. But if you start engaging in rituals that are a little too compulsive and too disruptive to "living a normal life", that's when it crosses the line into obsessive-compulsive disorder.
However, even if you can life a "normal" and successful life, that doesn't mean you aren't harming the people around you, unless you harm them enough that the long-term social consequences end up hurting you. Most cluster B personality disorders end up with the disordered person alienating people and suffering the consequences of their antisocial behavior. But if you're a high-functioning narcissist or whatever and you get away with everything...?
Here's a rather snarky example of this standard being applied to a certain alleged narcissist (whose name I'll redact in my quote, below, since this person's identity is a bit of a distraction from the more general point): https://www.nytimes.com/2017/02/14/opinion/an-eminent-psychi...
> Most amateur diagnosticians have mislabeled <<a prominent individual>> with the diagnosis of narcissistic personality disorder. I wrote the criteria that define this disorder, and <<this person>> doesn’t meet them. He may be a world-class narcissist, but this doesn’t make him mentally ill, because he does not suffer from the distress and impairment required to diagnose mental disorder. <<this person>> causes severe distress rather than experiencing it and has been richly rewarded, rather than punished, for his grandiosity, self-absorption and lack of empathy.