6 Steps to Nonprofit Performance Management
Nonprofit performance management is a practice that is probably being employed, at one level or another, by nonprofit directors or program managers, though perhaps not formally or even recognized as such. As a concept, it may suffer from some definitional confusion due to its strong association with the field of Human Resources management, which is easily observed through a simple google search. But there is another important use of the term that reflects strategies for managing the performance of human service organizations and their programs, and with it, the companion term, performance measurement. Developing a basic understanding of these two terms and how they relate to service delivery efforts and outcomes could prove beneficial to nonprofit managers.
A Basic Definition of Nonprofit Performance Management and Performance Measurement
Performance management, as defined by Hatry (2014), is “the practice of public service managers using performance data to help them make decisions so as to continually improve services to their customers.”
It is easy to see how this definition also applies to managers of nonprofit service programs. The “decisions” made by managers translate into changes or refinements to management practices and/or service delivery efforts in order to bring about improved performance. This performance is gauged through the ongoing review and use of data that make up the set of selected performance measurement indicators. While performance measurement data has historically focused on outcomes, the concept of performance can be defined more broadly to encompass a variety of areas, as Wholey (1996) suggests, including “economy, efficiency, effectiveness, cost-effectiveness, or equity,” among other areas. Therefore, it is critical that we carefully consider the scope and focus of performance management and measurement objectives when selecting key success indicators.
The Challenge of Implementing Nonprofit Performance Management Systems
While performance management and measurement appear relatively straightforward in concept, moving to formalize these within an organization requires careful thought and planning. This is due to a number of factors.
For example, one study exploring performance measurement implementation within several nonprofits identified a number of challenges with the selection of client performance indicators. These issues included:
- Obtaining data that precisely measure client outcomes, particularly as this relates to the measurement of change over time;
- Differences in the nature and the complexion of clients’ presenting issues and how this can complicate the interpretation of outcomes; and
- Issues surrounding the selection of measures, which are often dictated by funders (Carnochan, Samples, Myers, & Austin, 2014).
There also may be challenges in selecting indicators related to service activities to the degree that a program model is not clearly specified or formally described within a program document such as a logic model or theory of change. Moreover, implementing approaches to address these issues may require significant investments in the development of staff capacity to collect and use data to guide management efforts, as well as the purchase and configuration of an information system to efficiently manage and report data in ways that can help drive performance.
A Few Practical Steps to Move Efforts Forward
Given some these challenges, here are a few steps that are likely to be a part of any performance management and measurement implementation process.
- Determine the goals of the system. It is important to clearly outline the goals of performance improvement efforts. These could focus solely on performance in relation to the outcomes of services; management and service efforts, themselves; or some combination of the two (which is more likely to be the case). To the extent that both processes and outcomes comprise the performance system, thought should be given to how these two areas theoretically and operationally relate to each other; that is, how performance in one area is likely to lead to improvements in others.
- Involve key stakeholders from across the organization. Carnohan et al.’s (2014) study identified the importance of obtaining broad-based input from organizational stakeholders in efforts to define performance measures. Direct line staff are likely to have insights into the strengths and weaknesses of measures related to services and clients, while managers can assist in the identification of strategic measures that are important to the operations of the organization. Bringing stakeholders together can help to ensure that measures are valid and useful, while also helping to gain staff support as the system is implemented.
- Work through a careful selection of indicators. Of course, this is the most critical area, which should be guided in large part by steps 1 and 2, above. Additionally, candidate indicators should be judged against a set of criteria that extend beyond their relationship to specific focus areas. This might include such things as measurement validity and reliability, consistency of data collection, ability to measure change and performance, ease of interpretation and use, or association with related measures (i.e., the ability to predict change in related measures).
- Determine how data will be collected, managed and used. This step could be either a small or large undertaking to the extent that an information system is in place and most or all needed indicators are being collected. Each selected indicator should be mapped to its sources and described in relation to how and when it will be analyzed. Also, their specific operational uses within performance management and measurement processes should be specified so that decision makers are clear on how the larger system will operate.
- Identify needed changes in organizational processes and staff capacity development efforts. Implementation of a performance system will likely require some role shifting in order accommodate processes related to the collection, management, analysis and use of data. It may also be important to determine who has access to data and for what purposes. Lastly, it may be helpful to identify what, if any, additional staff capacity is needed in order to best utilize collected data, including support to management staff on how data can be translated into actionable changes within management practices and/or service efforts.
- Consider starting small. While this is not a step, it may be clear that implementing a performance system can be a complex undertaking. Therefore, it may be best to start with the selection of a smaller number of measures that provide a limited, though meaningful, level of monitoring and performance review. In this way, the system can grow and be refined through experience, bringing staff and systems capacity along as it goes to scale.
Managing human service programs is complicated. Nonprofits are often under-resourced; managers are required to juggle and oversee the needs of multiple, sometimes overlapping, programs; program models may be inadequately defined rendering management of their implementation difficult; and data on service activity and performance may be hard to obtain and even more difficult to organize and analyze. At the same time, the need to demonstrate performance has been increasing due in part to diminishing resources, increasing calls for accountability and the demand for stronger proof that outcomes are being achieved. As a result, developing a useful nonprofit performance management system with related measures might realistically be viewed as an essential component of effective program management and service delivery. Hopefully this blog has provided some helpful information about how these approaches can benefit nonprofit performance, as well as a few ways you might start this journey for your organization.
Carnochan, S., Samples, M., Myers, M., & Austin, M. J. (2014). Performance Management Challenges in Nonprofit Human Services Organizations. Nonprofit and Voluntary Sector Quarterly. 43(6), 1014-1032
Urban Institute. (2014). Transforming Performance Measurement for the 21st Century. Washington, DC: Hatry.
Wholey, J. S., (1996). Formative and Summative Evaluation: Related Issues in Performance Measurement. Evaluation Practice, 17(2), 145-149.