The nonprofit and social impact guide to performance management

Without feedback, we can’t grow. This is true from our earliest stages of development: Our parents praise us when we bring home good grades and scold us when we sneak cookies before dinner, all in an effort to guide us toward those healthy behaviors that beget success. We have been conditioned to change our behaviors based on constant feedback (if parents gave their children feedback once a year, it would take a lot longer to stick), so is it any wonder that forward-thinking organizations are shifting to performance management rather than the annual review approach?
Simply put, performance management is the process of setting goals, measuring progress, and gathering feedback to better achieve those goals (or more ambitious goals). Process-wise, this breaks down into managers and employees working together to plan, monitor, and review performance. Preferably, managers are meeting with employees once a week to touch base about current projects and coach them towards success. It’s a process that has been taken on by values-based, vision-driven, participative for-profit companies and nonprofits alike.

Why annual performance appraisals don’t work

Right now you might be thinking, “Hey! Our appraisals have worked for years. Why should we change?” Performance appraisals are cited by managers as their second-least-favorite tasks (second only to firing an employee), so I’m guessing your defense of appraisals is not due to your love of the assignment. Appraisals often  only reflect what the manager can remember, and understandably so. However, this means focusing on the most recent work. Because managers often dislike the tasks, appraisals are put off so they do not cover an exact year to year, which could result in an employee feeling like their managers do not care about their professional development.
Annual performance appraisals do not take into account performance overall, and are frequently swayed by opinions rather than data. This is partly due to the documents many organizations use to track annual reviews, with questions like, “Does the employee exhibit enthusiasm?” or “Are they achievement oriented?” — which do little to track actual performance or happiness.

Why performance management works

Performance management, on the other hand, occurs more frequently, so managers are only expected to remember what happened in the last week, month, or quarter. Feedback is given immediately, so employees can learn and improve at a faster pace. Because managers and employees are continuously updating and coaching one another, they’ll get to know each other’s work styles. This understanding leads to more empathetic and comprehensive feedback on overall performance.
For the data nerds among us, performance management also requires managers to set SMART (Specific, Measurable, Achievable, Realistic, and Timely) goals for employees. During review, these goals provide you with solid data to use as the basis for recognition and reward decisions. Though project management allows for empathy, it also ensures that management is not swayed by bias or opinions. Finally, because of this data and personal understanding, managers can be more confident that they are being fair and consistent with staff members, and employees can be more confident that they are being treated fairly. Performance management allows for organizations to enhance capacity and foster a supportive environment.

How to implement performance management at your organization

Now, that’s all good in theory, but how do we do it in practice? Lucky for you, it only takes 3 steps: Set expectations, coach consistently, and review performance.

1. Set expectations

Craft a job description that is clear about expectations and requirements. Revisit this job description regularly (we recommend every quarter) and discuss where your employees’ strengths and weaknesses lie. Negotiate opportunities for employees to stray from their original job description, and be flexible when you find they have talents you had not anticipated.
As mentioned before, managers should also set goals for employees to improve their skills. If possible, make this process collaborative. Set specific, measurable, achievable, realistic, and timely goals for different parts of their job description. If they are an email marketer, set a goal for a certain number of email signups per month. If they plan events, encourage them to have X number of attendees, a retention rate of Y%, or to raise $Z. Whatever the goals are, make sure they align with both the strategic direction of the organization and the employee’s professional aspirations.

2. Coach consistently

Continuous feedback is the name of the game. Managers should provide both positive and constructive feedback. When appropriate, identify and recognize employee wins in public. When necessary, follow the situation, behavior, impact model to point out what happened, what the employee did, and how it impacts you or other people on the team. This model makes it clear what the issue was, while keeping the criticism from getting personal. Finally, give employees opportunities to flex their skills, and share resources to help them grow in new areas.

3. Review performance

In a timely manner, review employee’s goals and analyze their performance. What goals were they able to accomplish? What was easy for them and why? What goals were they unable to achieve? What was challenging and why? Provide overarching feedback on these results, as well as guidance on how they can improve. Use these meetings to go over their job description, and reevaluate what is and isn’t working. Based on all of this data, you can then confidently negotiate the terms and conditions of employment, as well as career development opportunities like lateral moves or promotions.
Lather, rinse, repeat! Performance management is an ongoing, continuous process that can be extremely rewarding for both manager and employee. Got management tips? Tweet them at us @WholeWhale.