After over 10 years in development, Organizational Maturity Rating (OMR) is a highly sophisticated, analytical methodology that gets under the organizational ‘skin’ and offers an analytical perspective to complement conventional financial and investment analysis. It is designed specifically for the purpose of assessing Total Stakeholder Value (TSV)
OMRs follow the same type of rating scale as the credit rating industry. This ranges from AAA to D with 22 gradations. The default rating, for an organization using a conventional HR function, is ‘B’. Our OMINDEX OMI Global is simply a list of all the organizations currently rated.
OMS LLP is approved by the Maturity Institute to carry out Organizational Maturity Ratings (OMR) and analysis. This views the value potential of an organization from two distinct perspectives: –
- Total Stakeholder Value: both step change, through innovation, and incremental improvements measured by way of specific reference to baseline improvements in the four key variables of Output (O), Costs (C), Revenue (R) and Quality (Q) of product and/or service.
- Operational Risk: the probability of significant business risk attributable to ineffective HCM.
A company may be producing relatively high financial returns based on conventional criteria (EBITDA, ROCE, RONA etc.). OMR identifies additional value creation opportunities that arise from greater integration of HCM, business strategy and operational planning. An OMR captures a whole system view of Total Stakeholder Value
The methodology that underpins OMR covers the key criteria for determining the quality of leadership and management capability with respect to HCM. Markets will change, economic cycles will come and go and business models may have a natural life cycle but organizational maturity analysis identifies underlying fundamentals for sustainable value generation. Where these are in place the organization will gain competitive advantage through adaptability and agility. Where effective HCM is absent the organization will be susceptible to instability, risk and long-term value erosion. The OMR approach is therefore designed as a reliable and predictive indicator of relative competitive advantage and future performance.
Re-rating, downgrading and upgrading
Organizational maturity rating takes a radically different perspective towards company valuation. OMRs are designed to be long term performance indicators and are used for predictive purposes. As we analyze the fundamentals of any organization we do not usually expect these to change significantly in the short term. Therefore we would only re-rate when necessary or in response to what we believe to be a significant set of events, such as wholesale changes of leadership and strategy (e.g. see Barclays note).