Organizations change forms. They either do so in response to the external environment or as a result of organizational change. Too often thrown around and bandied about, change is no longer the buzzword in performance management. The word we have been faced with more frequently these days is transformation. Organizational transformation refers to such activities as re-engineering, redesigning, and redefining organizational systems. It can involve operational refinement, strategic reconfiguration, or corporate self-renewal.

Of most interest in regards to the performance management discipline, strategic transformation can be defined as the process of redefining business objectives, developing new competencies and harnessing internal capabilities to drive sustainable competitive advantage and meet market opportunities. Major Challenges Encountered in the Strategic Transformation Process In a world of fast-paced change, the requirement for swift adaptability is the most difficult to fulfill. Not only do organizations today seek transformation, but they expect a speedy completion cycle to come with it. This requires a level of alignment and integration that most organizations are not yet prepared to handle.

Major transformational challenges also come with the following:

A. Mapping the transformation process

Despite being involved in leading the transformation process, most organizations fail to dive into the end-to-end roadmap and experiences that come with the transformation process itself, thereby increasing the potential for risk or failure.

B. Shaping a clear strategic identity

With most organizations, the importance of an organizational identity is generally perceived from a marketing perspective and seldom from a more intrinsic perspective, which requires engaging the organization’s internal and external stakeholders.

C. Employing the right framework and tools

The main reason organizational transformation does not often deliver the value sought is because it does not follow through on a solid framework and comprehensive set of tools that link organizational strategy to transformational ambition and strategy execution.

D. Strengthening internal capabilities

Most organizations fail to engage and drive focus on the capabilities required to achieve transformational change. While pivoting on the preservation of their resources, many organizations tend to save on the most important cost of transformation: the cost of knowledge acquisition through training.

E. Adding communication best practices

For most organizations, the transformation process does not manage to instill shared perspectives and agreed-upon objectives. This is mainly due to faulty or absent communication, that consequently leads to lack of transparency and common vision.

Managing Strategic Transformation With a Strategic Maturity Assessment

In the transformation process, a maturity assessment provides a means to overcome challenges. Traditionally, a performance maturity assessment refers to the examination of internal programs, management systems, and procedures to assess whether the organization is achieving economic efficiency and effectiveness with its available resources.

A strategy and performance management maturity assessment is more specific in the sense that it assesses the design and application of the performance management system (PMS) within an organization by analyzing several or all of its components.

Some of the main reasons the strategy and performance management maturity assessment can be a valuable tool for managing strategic transformation are as follows:

• Provides a solid framework that guides an organization through the transformation process

• Enables comparison between the design of the PMS as it is and the PMS as it should be

• Identifies the gaps in the current design of the Performance Management System while providing best practice recommendations on how to close them for full integration

• Maximizes the added value generated through transformation by elevating current performance management practices to best performance management practices in terms of design and functionality

• Ensures sustainable progress in the transformation process by providing a roadmap for successful strategy implementation and continuous improvement thereon

• Educates stakeholders to embrace communication, continuous learning, and improvement

• Justifies further investments in people training, process improvement, and technological infrastructure to successfully conduct strategic transformation throughout the whole transformation cycle

The GPA Unit and Its Strategy and Performance Management Audit

Under its Global Performance Audit Unit (GPA Unit), The KPI Institute (TKI) is addressing organizational transformation through its Integrated Maturity Model Frameworks.

The framework is built on maturity models that cover five components of a strategy and performance management system with the ultimate purpose of achieving full integration among these components: Strategic Planning, Performance Measurement, Performance Management, Performance Culture, and Employee Performance Management.

The purpose of the maturity assessment is to indicate the strengths and weaknesses of the existing strategy and performance management system within an organization, as well as improve current performance management practices to the point where integration is achieved.

The GPA Unit provides a maturity assessment report that relies on insights collected from three sources: evidence-based assessment, perception-based analysis, and interview-based analysis.

The methodology used includes primary research— both quantitative (survey) and qualitative (interviews)—as well as secondary research (document analysis). These three perspectives provide a comprehensive overview on the maturity level of the organization’s strategy and performance management system.

• Evidence-Based Assessment

The evidence-based assessment relies on the submission and review of a comprehensive set of internal documents collected and submitted by the client organization. These documents are examined based on a set of 112 statements that reflect best practices on strategy and performance management and capture the main characteristics of the existing strategy and performance management system as scored by the performance assessor on a scale of 1 to 5.

• Perception-Based Analysis

The perception-based analysis is based on a survey designed to reflect the opinion of employees on strategy- and performance related practices within the organization. The survey contains 160 statements that reflect on best practices and are rated on a scale of 1 to 5 based on the extent to which they are applied in the organization.

• Interview-Based Analysis

The interview-based analysis is performed using an interview guide which reflects both the evidence- and perception-based analyses to ensure consistency in results and gain a better understanding of the maturity assessment findings. The existence, use, and characteristics of relevant internal documents are validated during the interviews. Meanwhile, statements with the highest variation in the perception-based survey are further discussed for the sake of clarity.

The Strategy and Performance Management Maturity Model Framework

The maturity level of the organization’s strategy and performance management system is determined by the overall scores of both the evidence- and perception-based assessments. Statements in both the evidence- and perception-based assessments are rated on a scale of 1 to 5 (1 – to a very small extent, 2 – to a small extent, 3 – to a moderate extent, 4 – to a large extent, and 5 – to a very large extent), based on the extent to which they apply in the organization.

Strategically Transforming Emergent Organizations

An emergent strategy and performance management system is one that does not benefit from formally recognized and well-articulated strategic planning and execution processes. Emergent organizations generally make random, ad-hoc use of performance measurement practices, while also using little data in the decision-making process to ensure performance improvement.

So, perhaps the most important question to answer here is: “How does one successfully transform an emergent organization?”

Here are some recommendations from a strategy and performance management maturity assessment perspective:

1. Connect strategic objectives to organizational KPIs.

In many organizations, strategy fails to deliver on its promises. The most common reason for this is the misalignment between the strategic plan and the KPIs or the metrics the organization tracks.

2. Enable the use of performance management tools to drive strategy implementation.

KPIs make objectives quantifiable, providing visibility into the performance of individuals, teams, departments, and organizations and enabling decision-makers to achieve desired outcomes. An organizational scorecard draws together the most relevant KPIs selected for the organization and groups them under strategic objectives. The major strength of the balanced scorecard (BSC) is it articulates business vision and strategy while ensuring company-wide acceptance of the performance measures enacted to achieve the overall desired performance for the organization.

Dashboards are used to easily grasp the pulse of the organization’s day to day operations and take actions based on KPI results. The benefit of the dashboard is that it invariably complements the organizational scorecard by monitoring KPI data on a more granular level, with direct insight into the efficiency and effectiveness of operations.

The portfolio of initiatives can be used both at the organizational and departmental levels to improve the management of projects and track the performance of each initiative.

3. Cascade the main performance management tools to all organizational levels.

Once defined, designed, and developed, the main performance management tools should be cascaded to the organization’s lower levels. In this case, workshops are recommended as they provide the ideal format to ensure that the objectives and KPIs selected for the organizational scorecard and dashboard are accurately cascaded down to the departmental, divisional, and employee levels.

4. Ensure alignment between the different levels and components of the performance management architecture.

Considering the strong volatility of the corporate environment, organizations are required to dedicate time and resources in ensuring alignment between the strategic direction intended to be pursued with selected KPIs and associated initiatives. In many organizations, strategy fails to deliver due to the misalignment between the strategic plan and KPIs tracked by the organization. For this reason, it is highly recommended to review and ensure realignment at least once during a performance management cycle.

5. Document and map all key processes related to performance management.

The first step in creating internal capabilities that support the development and consolidation of an organization’s strategy and performance management system is to map/document all the key processes related to strategy, performance measurement, performance management, employee performance management, and performance culture within the organization.

6. Include all the key organizational performance improvement procedures and tools in the performance management manual.

The manual should include: the benefits of the performance improvement process for the organization, presentation of the performance improvement tools and techniques, descriptions of performance improvement processes, approach to engaging stakeholders in different processes, and the roles and responsibilities of all stakeholders involved in performance improvement.

Armed with all this useful knowledge, you are now better prepared to face a strategy and performance management maturity assessment. Get in touch with the GPA Unit to take the next step into achieving measurable performance improvement for your organization.