Why real-time nonprofit performance management is best

The nonprofit executive director’s time and energy are precious commodities, particularly in small organizations where a single individual is often the director of HR, IT, finance, and, well…everything. It’s easy to see how performance evaluations (not to speak of nonprofit performance management) can feel like another large spoonful on an already heaping plate. Nevertheless, performance management is critical to organizational success, and directors who want to deepen their organization’s impact have to make space for it.

There are several reasons organizations need performance management systems, but they all add to this: performance management links individual performance to organizational outcomes. A survey of 278 organizations, primarily multinational corporations, found that organizations that implement performance management systems are 51% more likely to see positive financial results than other organizations. As we know, financial health is critical for nonprofit organizational success as well as for-profits.

Nonprofit performance management vs. evaluation

First, we have something to clear up—a performance management system is not synonymous with annual employee evaluations. Performance management is an ongoing process of identifying, evaluating, and developing team members’ performance aligned with an organization’s strategic goals. Performance appraisals are one small part of performance management systems (Agunis, 2013). In a nutshell, a performance management system is bigger and better than an annual evaluation.

Building a nonprofit performance management system

Performance management systems work to identify, measure, and develop an organization's human capital in a way that aligns with organizational goals and strategy (Agunis, 2013). However, instead of recommending or copying a particular model, organizations should be thoughtful about building a performance management system that reflects organizational culture and meets each team member's individualized needs.

Here are some practices that will help your organization get started:

Start by assessing organizational competencies and culture.

The key to implementing a useful performance management system is first understanding your organizational culture and core competencies. What core values and beliefs are shared throughout the organization? What behaviors characterize the culture? How do you get things done? These answers will determine what dimensions of employee performance matter most to the organization and how your performance management should look.

Connect individual performance to organizational outcomes.

After you have a handle on your organizational culture and values, identify how each role in the organization connects to them. This is a critical feature of performance management systems because it requires that organizations “identify what individuals must do to make the organization succeed.”

Consider adopting SMART goals and ensuring they align with those of the organization.

Build in frequent, constructive feedback loops.

One of the key features that distinguishes performance management from performance evaluation is regular feedback. Rather than one big annual meeting where an employee receives extensive feedback — most of which they probably can't act on because so much time has passed — performance management systems feature ongoing feedback. Regular coaching and constructive feedback help employees understand what's expected of them and recognize where they excel or need to improve. Over time, regular feedback reinforces excellence and helps employees course-correct quickly when they have the opportunity to do so.

Evaluate the whole person.

Agunis (2013) recommends that performance management systems consider performance in terms of both results and behaviors. While results-focused goals, such as SMART goals, are measurable and important, behaviors also matter significantly. "Behaviors are processes and means through which results are achieved" (Agunis, 2013, p. 89). In other words, it matters that an employee meets a fundraising goal, but it also matters how they achieved that goal. Did they collaborate effectively? Did they uphold the values of the organization? Were they accountable when they made a mistake?

Include a development plan.

Don’t just evaluate employees. Invest in them. A great performance management system has a development plan component. What professional growth opportunities exist within the organization? What skills can the organization help an employee build? Where does the employee want to go in the organization? Employee development demonstrates an organization’s commitment to its people. And since nonprofits often struggle with staff retention, investing in employees' long-term growth is one effective strategy for keeping them around.

Make it a process, not an event.

The entire purpose of a performance management system is that it is ongoing. Employees and supervisors benefit most when their relationship is characterized by frequent check-ins and consistent feedback. Formally, this may look like quarterly or monthly one-on-one meetings, as opposed to an annual appraisal. Informally, the supervisor should be providing regular feedback as it occurs, rather than storing it for a meeting.

Performance management and equity

The nonprofit sector is currently doing its own necessary reckoning with equity, diversity, and inclusion. Performance management is an area ripe for such scrutiny. Most performance management systems are built on Western, mainstream cultural assumptions about what it means to work well and be professional. If your organization is committed to equity, your performance management system should reflect that commitment, too.

Consider the following as you build or evaluate a performance management system from an equity lens:

• Who gets to define what behaviors matter? Organizations should seek input from team members at all levels — including those with marginalized identities — about what values and behavioral norms are important.
• Do your performance criteria include culture fit? While culture can be hard to define, sometimes performance criteria include items like “represents the organization,” “assimilates with the team,” or “maintains a professional appearance.” If you can’t define clearly what this looks like, it may be difficult to evaluate equitably, and criteria like these can disadvantage employees with marginalized identities.
• Who is doing the evaluating, and are they trained? “Bias in performance appraisals is pervasive and it affects historically marginalized groups the most” (Emerson & Murphy, 2015). Evaluators should receive training to reduce bias, and organizations should consider peer-evaluation and 360-degree feedback.

A word of caution: don’t use equity as an excuse to not hold staff accountable. Rather, let equity-informed perspectives help you build a performance management system that is fair, thorough, and most beneficial for employees and the organization.

Article referenced: Agunis, H. (2013). Performance management. Upper Saddle River, NJ: Pearson.