How do you approach performance management in your nonprofit organization?

Many nonprofits find performance management to be challenging. You’ve got a lot on your plates, often spread among a few staff, and performance management can seem like another task on a long list.

However, it’s a critically  important task. When done effectively, performance management strengthens the organization’s culture and ensures that the individuals within it have what they need to succeed.

We encourage all nonprofits to have a robust performance management process as part of their broader strategic efforts. Here are our tools and tips for making it happen.

What is Performance Management?

Performance management is an ongoing process of supporting and developing your team members regarding their performance. It should always align with organizational goals so that you can link individual performance to organizational outcomes.

There are three critical things to keep in mind about performance management.

First, the performance management process should help the supervisor and staff member strengthen their working relationship. This is key. As you may know, the number one reason people leave their jobs is because of a poor working relationship with their boss. 

Second, effective performance management must be a regularly implemented process. It is not a once-a-year review. Annual performance appraisals are just one part of a far broader performance management effort. The best systems ensure that the team member always knows how they’re doing so that their annual appraisal isn’t a surprise. (We outlined how we manage performance at Mission Met here).

Third, performance management is not a one-way process where the staff member takes guidance and direction from the supervisor. Rather, it should be about an employee taking their own professional development into their own hands, self-evaluating themselves, and leaning on the supervisor for guidance. While, of course, the supervisor ultimately does provide an evaluation, the entire process should be driven by the employee’s efforts. In this way, your staff members will be leading their own development and, importantly, the supervisor isn’t tasked with such a large load of evaluations. 

How Do You Measure Performance?

How you measure performance should be unique to your organization. There are multiple ways to measure, so it’s essential to start by choosing metrics that make sense for your people and wider organizational goals.

One vital question is, what does “performance” mean in the context of your organization? What are key metrics that indicate your team is meeting your performance goals? How do you define results from your activities that show meaningful, measurable, and sustainable activity? Should you include metrics that further your mission or ensure your organization’s longevity?

Nonprofits are unique because they answer to board members, donors, and other key stakeholders, rather than company owners or shareholders. They’re mission-driven rather than profit-driven, yet roles such as the executive director still require financial measures.

Nonprofits are mission-driven rather than profit-driven, but performance management is still key.

The metrics you choose should demonstrate how the individual contributes to organizational goals. You can use different metrics, including objective data, where the data provides the basis of the evaluation, or subjective measures, where someone (or the board) evaluates based on what they’ve seen.

As a general rule, objective KPIs tend to be more impactful. They help to demonstrate a fair, balanced approach to performance. It’s simple to measure if an executive director aims to bring in 20% more funding this year than last year. Either they achieved that goal, or they didn’t.

On the other hand, subjective measures such as rating someone on how well you think they communicate or engage with stakeholders may be considered unfair. A subjective measure can be prone to bias during evaluation, especially if there are personality clashes or if perhaps the person evaluating hasn’t spent a lot of time with the team member.

If you let data tell the story, both the staff member and the supervisor will have clarity regarding what the objective is.

What Makes Performance Management Effective?

We can share a few tips about effective performance management in a broad sense:

1. The system is set up so that everyone knows the expectations, how managers evaluate them, and how those KPIs link with critical organizational goals. It is fair and accurate to all those it impacts.

2. As stated earlier, the employee should drive the process for their own development and self-evaluation. 

3. The KPIs directly impact vital organizational goals. Every KPI should have a clear purpose and relevance to your organization to be effective.

4. The performance management system should be an ongoing process, providing regular feedback. It should be efficient and simple when put in place -- you don’t want it to be something that takes inordinate amounts of time to manage.

5. The system should involve formal development, mentoring, or coaching. The idea is that you want your people to succeed and to keep delivering at a higher level.

As Bloomerang put it: "It will undoubtedly mean a little more work upfront, first identifying performance measures and making employees aware of expectations. However, once it gets rolling, real-time nonprofit performance management can pay proverbial dividends by exceeding organizational targets and, hopefully, help create space on the director's plate for new possibilities and opportunities."

How Are Performance Management and Strategic Planning Linked?

Performance management should be part of your broader strategic planning activities. We frequently talk about how strategic planning should involve a cycle of evaluation and development, and performance management should be the same.

Your performance management activities should directly feed into strategy. You should base your individual KPIs on what you want to achieve strategically. A once-per-year performance evaluation isn’t any more effective than having a retreat to create a strategic plan and never looking at it again.

Nonprofits can benefit from adopting a cyclical approach to performance alongside strategy. To make it even more impactful, take a collaborative approach, engaging team members in the process.

We like this extract from SHRM: "As for goal setting, it can be a collaborative exercise. Meet in the middle and agree on terms aligned with organization-wide and team-level strategic priorities.” Having a strategic plan in place will be the best tool to help with goal setting.

When performance management is a frequent exercise, it helps you:

• Monitor your results and check on progress toward goals.

• Be proactive. Sometimes things have changed since goal-setting, and you might need to alter your strategy mid-way through.

• Allocate resources. For example, perhaps a metric is lagging because there simply aren’t enough resources focused on it.

• Keep stakeholders informed of progress.

What Tools Can Help?

There are a range of tools out there that can help with performance management, depending on your needs. Some nonprofits still go for some type of file, either paper-based or via a spreadsheet tool such as Excel. We adopt a lot of ours from the forms found at Manager-Tools.

There are also some performance management tools available in cloud-based software form. We always suggest that if you opt for purpose-built software, you look for something that is the “right size” for your organization. Some tools will be too big and feature-rich. Look for something that meets your must-have requirements without going overboard. Some examples include Monday.com, Leapsome, and Ascender. 

We covered suggestions for choosing software and how technology can help you gather data on performance here.

Conclusion

Performance management is an essential task for nonprofits so that you can directly attribute an individual's contributions to overall goals. This process helps you keep activities on track and ensure that the work your team members do is meaningful.

A key to performance management success is not a once-per-year evaluation activity. It must be a regular task where team members take the lead on their own development and get support from their supervisor. There shouldn’t be surprises at annual appraisals.

Lastly, performance management should go hand-in-hand with your strategic plan. It should be a meaningful exercise that supports strategy rather than a checkbox activity.