| Author's Name: Mark Schultz
Date: Thu 07 Sep 2017
The ongoing public furore around the behaviour of some of our financial institutions has shone a light on the issue of performance measures, reward systems and the resultant organisation cultures. As last month we looked at culture and the contribution it makes to achieving long term success, in this article we will look at the role of performance management in our quest for both good governance and organisational sustainability.
Performance evaluation has long been the cause of much discussion and debate at the board level of non-profit organisations. The reason is quite simple – what the board and the CEO agree on what will be measured determines what the organisation, management and staff will focus on during the year. Consequently, the establishment of a performance management system is of utmost importance in the governance of all NFP and commercial organisations.
Whilst the commitment to an organisations performance management system generally requires a considerable commitment of resources and in many cases, some trial and error, there are some general guidelines that will assist the process:
Furthermore, a performance management and evaluation system requires a benchmark or target to enable effective assessment – an isolated number means nothing, it only comes to life when compared to pre-determined target and subsequently a trend. The benchmark/target should therefore contain the following key characteristics, the SMART principles:
S – specific, nothing vague
M- measurable and the information relatively easy to collect
A – achievable, within the capacity and capability of the organisation
R – realistic , some degree of stretch but not so that it demotivates
T – time bound , not open ended
The discussion on KPIs should be around the results achieved, not the interpretation of the words.
And this is the area of biggest risk – if we choose the wrong KPIs, we will focus the organisation on the wrong outcomes. Organisations must implement a balanced approach to their performance management responsibility and next month we will discuss in greater detail the concept of “the balanced scorecard”
In summary, most non-profit organisations are about affecting some degree of change, for the better, in the areas in which they operate – whether it is education and training, mental health, the justice system or homelessness to name just a few. With the ever increasing demands on the public purse and private contributions, those organisations that can demonstrate that their initiatives are delivering quantifiable results in terms achieving real and positive change in their area of operations are in a much better position to retain and attract funds to continue their work.
The challenge then is not only in service delivery, but just as importantly, in the performance management and evaluation systems we have in place to demonstrate the results we achieve through the investment of our resources. The KPIs chosen should be relevant to both internal management and external assessment of performance and add value to the overall management of the organisation at both board and operational level. If your performance management system does not provide this level of value, then it’s time to review , update and implement a new approach . The investment will be worth it.