Improving Nonprofit Performance Systems

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Abstract

Nonprofit organizations have struggled to implement any kind of performance management system, until recently. Nonprofits are sensitive to their employees, and do not want to damage the relationship with them. This paper looks at three different pieces of literature and examines how different approaches to performance management systems can improve the nonprofit sector. Servant leadership is a viable option, because many of the leadership qualities fall in line with nonprofit values. The second article examined looks at an actual system that was implemented using the input of employees. The last article focuses on different capacity builders to help all areas of nonprofit work together. This is an up and coming system for the nonprofit organizations, and further research needs to be done.

Introduction

Nonprofit organizations do not fit the typical mold when it comes to employee performance management. It is a worry of many nonprofits to have to evaluate the performance of any worker, and is often avoided. However, this paper will explore and evaluate three works of literature focusing on improving performance management in nonprofit organizations. These pieces of literature focus on different case studies involving nonprofits and the development of performance management. All the case studies focus on very different implementations, nonprofit organizations, and performance management strategies.

The first study focuses on the idea of servant leadership. Ebner & O’Connell conducted this study. The study was done to find out if servant leadership was a direct result of positive actions of service by followers. The second study focuses on how the implementation of a very specific performance management system impacted a nonprofit organization in Pittsburgh. The article goes in depth about the system did to the organization. The last study focuses on capacity building as another way of implementing a different kind of performance management system within a nonprofit organization.

Nonprofit organizations are very sensitive when it comes to money and employees. This makes it extremely difficult for these organizations to operate as a typical business. The risk they run of upsetting their employees when they do performance reviews can have a higher impact on them compared to larger, more profitable businesses. These studies understand the sensitivity of nonprofits and performance management. The common goal is to find a better way to improve performance management in nonprofit organizations.

Analysis and Discussion

Nonprofit organizations struggle to find new ways of managing the performance of their employees. Ebener & O’Connell look at how specific actions from leaders can lead to easier performance management. They studied three different church parishes and conducted studies that focused on how the people acted within the organizations. Ebener & O’Connell wanted to see how servant leadership enhances organizational citizenship and how that impacts effectiveness.

The hopes of the study were to see if servant leadership could make followers respond in specific ways. “Servant leaders encourage people to go above and beyond their own immediate interests by performing organizational citizenship behaviors” (Ebener & O’Connell, 2010, p. 315). Servant leadership could be used within nonprofit organizations as a way to manage performance. It may possibly be the ideal way because it does not involve direct conversations about performance. According to Ebener & O’Connell, this specific leadership has been associated with greater work performance.

The leaders of the three parishes all had servant leader behavior. These behaviors include showing concern, showing encouragement to others, and focusing on the importance of giving back to the community (Ebener & O’Connell, 2010, p. 315). These behaviors led people to want to behave like them and develop similar characteristics. However, for this type of leadership to work within an organization the leaders behavior needs to go along with whatever message they are portraying. This study correlates very closely to nonprofit organizations.

Nonprofits also have to worry about their behavior fitting the organizations values and beliefs. If an employee sees management performing below standards, the employee is likely to follow their actions. Implementing servant leadership into nonprofit organizations could be very helpful with performance management. According to Ebener & O’Connell (2010), “benefits are gained when leaders give followers significant control and provide access to management information”(p.321).

Managers need to show employees the type of performance they expect thought their own actions. An example of how this would work is also in the study on servant leadership. “Members in all three parishes noted that humble service on the part of the parish leaders was a source of inspiration for them” (Ebener & O’Connell, 2010, p.324). Servant leaders create a structural and cultural norm within their environment. However, servant leadership is just one way for nonprofit organizations to improve performance management.

Becker, Antuar & Everett (2011), conducted the second study focusing on the implementation of an employee performance management system. This article looked at how a specific nonprofit organization, based in Pittsburgh, went about developing their performance management system. Performance management systems are meant too manage and measure individuals, or teams (Becker, Antuar & Everett, 2011, p.255). Once again, nonprofit organizations know that the employees could find a higher paying job elsewhere. This is one of the reasons it is hard for nonprofit organizations to implement performance management systems. This study focused on only the paid employees, and not the recruitment of volunteers.

The process of coming up with this system took the company over a year to develop. Becker, Antuar & Everett (2011), noted that the company went though multiple discussions with the employees to figure out what the system should focus on, and how it would work. “The consultative approach to development resulted in a system with accompanying documentation that creates individual accountability…”(Becker, Antuar & Everett, 2011, p. 262). This is also helpful to the nonprofit organization because the employees cannot say they didn’t understand. It also allows for everyone to participate, which will make the employees more comfortable with the change.

The results from the implementation of the performance system showed that majority of employees had a positive experience. This could potentially help other nonprofit organizations to improve their performance systems as well. Becker, Antuar & Everett (2011), suggest that the system is successful, and allows for individual employees an opportunity to be more involved in their personal development within the company.

The third and final literature revolved around the idea of capacity building in nonprofit organizations. The researchers, Millesen, Carman & Bies, refer to four specific capacities: Adaptive, Leadership, Technical, and Management. Capacity is looked at as innovative, and effective solutions. Each of the four capacities focuses on different areas of improvement within a nonprofit organization. Due to this, performance management isn’t sonly targeted at the employees. This study was done by conducting a series of interviews with foundation officers and capacity builders; as well as, organizing five focus groups with 19 executives (Millesen, Carman & Bies, 2010).

After all of the interviews and focus groups were complete, the researchers noticed that each group of people were interested in pursuing different capacity building areas. This is good, because this way all of the four capacity builders will be used to create better performance. However, Millesen, Carman & Bies (2010), suggest that not all of the capacity builders will be used together. Foundations, nonprofit executives, and fundraisers all have different goals in mind. Hopefully these capacity building tools will help each of them reach the goals they want, and make working together an easier process.

Although all of the case studies are different, they all have the same goal in mind. Improving the performance management within nonprofit organizations is an emerging practice. Each of the literature discussed has conducted useful research resulting in information for the development of nonprofit organizations. These new studies make it easier for leaders in nonprofits to talk to their employees about performance without worrying about the repercussions.

Each system had positive and negative areas, but overall the results showed it is possible to have performance systems in the nonprofit sector. The servant leader seems to be the most likely fit for the organizations. The servant leader is very similar to what many nonprofits value. According to Ebener & O’Connell (2010), “the servant leader is more inclined to serve than to be served, recognize rather than be recognized, and empower rather than to flex positional power” (p.330). Nonprofit organizations are usually for a good cause, and most of the time they suggest strong moral values. The servant leader, although associated with religion, would be a good start for developing a performance system.

The case study that involved the actual implementation of a performance management system was most impressive. This case study was able to show that a system developed with the help of employees could be successful in a nonprofit business. Considering that there lies a risk in nonprofit managers evaluating employees, it is encouraging to see that majority of workers saw the system as positive. The results from this case study are reassuring.

The capacity building case study showed that performance management doesn’t always involve the employees. Nonprofit executives need to manage their performance because they have to work with both fundraisers, and foundations to keep their organizations running. The capacity building is more of an example of how people need to work together so things can run smoothly. Even with all of the research and case studies presented, it is still necessary to conduct more research. Since this is a new area of study, more case studies and experiments need to be run. Further data needs to be collected, and more nonprofit organizations need to implement performance management into their businesses. Without more findings it will be hard to know which performance management system works best for which organizations.

Conclusion

In conclusion, nonprofit organizations have more to worry about than for-profit organizations. Nonprofit organizations cannot operate like any other company. Nonprofits understand that their employees are sacrificing higher paying jobs just to work there. This makes it incredibly difficult for managers and owners to implement performance management systems. However, the literature discussed in this paper provided three different ways to get performance management systems into the nonprofit sector.

The first, and least aggressive, system was a style of leadership. Servant leadership is a way of showing people how you expect them to act. Servant leadership allows the followers to develop similar habits to the leader. As long as the behavior of the leader is in line with their message, the system will work. Servant leaders have a lot of the same qualities important to many nonprofit organizations. The findings of the case study suggest that servant leadership will lead to better performance from the followers.

The implementation of an actual performance management system proved to be a success. The researchers found that, a nonprofit company that allowed the employees to help make the system worked well. Letting the employee be involved helps to keep them on board with the changes. It also provides documentation for individual acknowledgement. The findings from this case study give evidence of a system working in nonprofit work.

The last literature case study did not involve employees whatsoever. This study was able to show that credibility building can be an effective way of performance management for the larger parts of the nonprofit sector. Identifying specific qualities to build on helps the development of stronger organizational relationships.

Lastly, even with all of the research provided, there is still much work to do. Further research needs to be conducted in order to better understand how performance management can be improved. Although this is a new area of study, there is a lot these three studies have accomplished. The implementation of these studies needs to be tried at other nonprofit organizations. This will help to better understand which performance management system works best for nonprofit companies.

References

Becker, K., Antuar, N., & Everett, C. (2011). Implementing an employee performance management system in a nonprofit organization. Nonprofit Management & Leadership, 21(3), doi: 10.1002/nml.20024

Ebener, D. R., & O’Connell, D. J. (2010). How might servant leadership work?. Nonprofit Management & Leadership, 20(3), doi: 10.1002/nml.256

Millesen, J. L., Carman, J. G., & Bies, A. L. (2010). Why engage? understanding the incentive tobuild nonprofit capacity. Nonprofit Management & Leadership, 21(1), doi: 10.1002/nml.20009