The concept of organizational maturity generally refers to the evolutionary process of an organization building its people, processes, and technology readiness and capability through the adoption of quality practices.

With regard to performance management practices in the organization, maturity relates to the adoption level of dedicated performance management tools, the shaping of internal performance management processes, the mechanisms, processes, and relations through which performance management systems are run and administered, the build of the performance management architecture itself, and the degree of the performance management system’s integration.

Organizational maturity models provide a transitional set of common characteristics against which maturity can be assessed. The performance management perspective on organizational maturity provides us with five levels of evolutionary growth: Initial, Emergent, Structured, Integrated, and Optimized. Each maturity level is characterized by a common approach towards the organization’s main operational levers: Tools, Processes, Governance, Architecture, and Integration.

1st Level of Maturity: Initial

The initial or inceptive organization, although curious about performance management practices, is not generally familiar with or is completely unaware of the tools that can support the implementation of the performance management system in the organization.

While the organization is vividly trying to lay the foundations of the performance management system itself, its processes are too inconsistent. Despite the disconnect between internal processes and overlap of activities, the organization is overly focused on immediate outcomes.

In this stage, the performance architecture is itself incipient, with strategic planning practices that are mostly informal and mainly rely on top management experience. Performance measurement is not a common practice in the organization, being either nonexistent or very limited. KPIs are vaguely defined for the organization with no formal consensus regarding the KPI calculation methodology, nor is there any monitoring of centralized evidence of these KPIs.

The organization’s identity is poor and its direction is unclear, which translates into limited awareness of employees in regard to what matters for the organization and limited transparency in actions and performance levels. The outputs of organizational initiatives are unidentifiable as accountability is unclear, and there is limited visibility into the manner in which projects are linked to organizational objectives.

At this maturity level, a lack of active involvement from senior management to support the performance management architecture is commonly encountered. Internal communication systems are not yet well structured and there is a poor overall knowledge level with regards to what performance measurement and management systems generally imply.

Usually, this generates a weak acknowledgment towards the importance of using KPIs. There are no initiatives used to motivate or increase engagement levels among employees. Innovation is not facilitated in any way and individual performance is not measured or rewarded.

2nd Level of Maturity: Emergent

The emergent organization will have begun to discover and experiment with performance management tools. While internal processes are still uncoordinated and performance management tools are still unstandardized, the need for improvement is strongly enunciated.

Activities for consolidating performance management practices in the organization are planned and expectations defined. In the case of emergent organizations, the performance management architecture can be perceived as transitional. The strategy at this maturity level is a formal documentation that does not provide the added value expected of it.

There is poor formulation of organizational objectives and misalignment between different levels of the organization, mainly due to ineffective communication. Some of the basic performance measurement practices such as KPI selection and KPI documentation are slowly employed by the organization.

The KPI selection process is exercised without minding designated criteria, methodology, or techniques. Some of the KPIs selected are also documented, although there is no standardized approach towards the use of KPI documentation forms/templates. Data collection is becoming more structured, and in some areas of activity, visual representation tools are used to track the progress of KPIs.

Although there is a formal process of reviewing and reporting on performance, performance review meetings do not deliver the much-needed insight into decision-making that the organization might require. Additionally, a performance-oriented culture exists but is not supported by consistent communication initiatives from leadership.

Senior management is aware of the importance of measuring performance and has a basic knowledge in this area, but there is a certain formality with the efforts submitted in this direction. Managerial positions are accountable in terms of performance results, but measuring individual performance is not a widely used practice in the organization.

3rd Level of Maturity: Structured

The structured organization will have already selected and defined the most suitable performance management tools for the organization. Such an organization will have already gained control of its main performance management processes. There is a well-coordinated effort in standardizing performance management practices across the organization, with defined process flows and upgraded process activities.

The approach towards adopting the performance management architecture is, however, still inconsistent. Strategy monitoring tools, such as scorecards, dashboards, and portfolio of initiatives are used, but they are not cascaded to the lower levels of the organization.

A more structured approach towards selecting KPIs is observed. The KPI selection criteria is clearly defined and commonly agreed upon by internal stakeholders. Moreover, KPI selection tools and techniques are gradually enhancing this process.

A streamlined KPI documentation process is employed based on a standardized KPI documentation form. The process of setting targets for KPIs becomes increasingly comprehensive by means of data sourcing, market data comparison, and benchmarking. The reporting process relies on standardized templates and guidance to create the final report. Performance review meetings take place at the end of each performance management cycle and are well-organized. As learning and improvement is not yet formalized in organizations with this maturity level, progress seems to happen rather naturally.

Moreover, the performance culture is supported by a strong business case for measuring performance across the organization which is communicated across the organization.

Awareness level among employees is moderate to high in relation to organizational main objectives and performance levels. Templates and procedures are developed to support the performance management cycle. The system’s governance is well defined. In most cases, employee performance is tracked, and it involves the assessment of individual objectives and KPIs. Rewards are offered to employees in addition to training opportunities for performance improvement.

4th Level of Maturity: Integrated

The integrated organization carries out a dynamic process of continuous change. There is an overall effort to increase efficiency through waste reduction, while performance management processes are becoming cross-functional and streamlined. The main focus of the organization revolves around cascading and alignment. There is a general acknowledgement of the benefits that such tools bring to the organization.

At this level, the cascading of the performance management system is closely monitored, and the wider purpose is now achieving homogeneity. During this endeavor, performance measurement adds value to the organization through the effective use of performance management tools and adequate system governance.

An integrated KPI selection process is observed, and a streamlined KPI documentation process is already employed. The KPI target setting process is increasingly complex. Data gathering is supported by a standard software solution, and most of the KPIs are monitored in scorecards and dashboards. Business intelligence (BI) tools are also commonly used for reporting, which makes the process relatively fast and accurate.

In addition, performance management is structured as an organizational capability. While the performance culture relies on effective communication that reaches all internal and external stakeholders, performance measurement is integrated in all activities at all organizational levels and enables a certain level of autonomy in the working environment.

At this stage, there exists a strong culture of learning and improvement which fosters innovative ideas. Employee performance evaluations are aligned to the entity’s strategy, and performance is stimulated through a combination of financial and non-financial rewards. Investments are made to constantly improve the quality of the working environment and boost employee engagement.

5th Level of Maturity: Optimized

The optimized organization will have used standard performance management templates and perfected and/or automated them. Performance management processes have been tried and tested. There is a whole process of re-engineering and re-positioning them for the better benefit of the organization. The system is transparent, and SMART initiatives enable continuous performance improvement.

At this stage, the organization sees strategic planning as an important process that is well integrated with other key processes. The strategy itself relies on simple and clear tools, making it easier to cascade and align across the entire organization. Awareness on what the organization desires to achieve is high even among front-line employees.

Optimized organizations also consider performance measurement an important organizational process that is well integrated with other key processes. To facilitate this, KPIs rely on simple and clear tools to collect data. At this maturity level, in most cases, there is a state-of-the-art selection process for KPIs. All monitored KPIs—whether operational or individual—are aligned to the corporate strategic objectives. A centralized KPI library consolidates the internal know-how on how these metrics are calculated and reported in the organization.

Usually, the target setting process involves establishing meaningful performance levels, which trigger positive behaviors from employees. The process is completely automated and systems are integrated, relying on the latest BI technology. All KPI results are displayed in dashboards and scorecards compliant with data visualization best practices.

Modeling and other advanced data analysis techniques are commonly used by organizations with optimized performance management systems. These organizations usually rely on BI tools to report on performance and track progress of organizational initiatives. It is characteristic of organizations at this level to have a flexible performance management system able to easily adapt to changes.

The performance management system is widely used within the organization, and stakeholders are actively engaged to improve current processes. The organization has managed to translate performance management into everyone’s job. The role of each employee is clear, enabling staff members to make consistent decisions aligned with what the organization aims to achieve.

At this stage, organizations invest in technology and the well-being of their employees. The working environment is stimulating and manages to leverage individual talent. Highly motivated employees benefit from considerable autonomy, which nurtures innovation within the entity.

Gamification is a common practice within the entity to engage and develop employees’ skills. To supplement this, the bonus system is comprehensively rewarding and based on multiple performance components (i.e. individual, team, and organizational).

Final Thoughts

The organizational maturity model detailed in this article highlights the main stages an organization traverses when trying to successfully implement its strategy and performance management system. Many organizations tend to overlook the complexity of implementing a performance management system as well as how it ties into already-established organizational processes.

By absorbing other systems and processes in the organization, the performance management system also implicitly performs a health check on operations.

The five stages of performance management system maturity provide a valuable view of a performance management system implementation project. All change comes with growing pains, which is why we must pay attention to the organizational processes it impacts along its trajectory.