Steps to Successful Performance Management

In part one of this series, I argued that a theory of change can serve as a blueprint for performance management that creates a meaningful context for achieving accountability and also provides a means to focus measurement and monitoring, thus tossing a life-ring to organizations “drowning in a sea of data.”

Contrary to what many believe, implementing a performance management system is not simply a technical matter of choosing and implementing a database. Rather, it involves building organizational competencies and capacity using a set of critical, interdependent actions. I present these actions in a linear sequence below, but of course they are highly interactive.

Step 1: The organization’s leaders embrace the need to manage the organization rationally, efficiently, and with ongoing attention to the quality and effectiveness of its work. Readers may be surprised to learn that in the nonprofit sector this is a rarity.

Step 2: The organization develops an organizational Theory of Change (ToC) regarding how it creates and sustains the delivery of socially valuable goods and services. The ToC articulates a) the domain within which the organization works, b) the results it is working to achieve and the indicators it will use to assess its outcomes, c) the program and/or services it will provide to achieve its outcome objectives and d) the competencies and capacity required to do so. Such a ToC addresses far more than program logic models; rather, it looks at the organization as a whole, inventories its capacities and developmental needs, and itemizes its resource requirements so that it can create its goods and deliver its services reliably, at high levels of quality, and over the long haul. Note: Even so-called “evidence-based programs” delivered by agencies with limited capacity to manage performance will be of little social value.

Step 3: Using the ToC as a framework, the organization develops key metrics and the targets it will use to track its performance, both organizationally and within programs. It also builds processes for doing so and using this information to make ongoing adjustments as indicated. Part of this work involves bringing staff at all levels of the organization to a point where they understand the outcomes, indicators of service quality, and performance targets well, and are committed to working in ways that drive up their own functioning and the performance of the organization as a whole.

Step 4: The organization implements a performance management data system, and uses it to manage work at the individual, program, and organizational levels—in real time—to achieve the highest degree of success possible. Therefore it must be extremely user-friendly. This often is not the case, and hence there typically are enormous quality problems with internally generated performance data.

Step 5: The organization routinely uses performance data to learn from and deepen the organization’s understanding of its work, align the staff and leadership of the organization behind shared performance expectations, learn from experience and make data-driven adjustments as indicated, and invigorate the organization’s commitment to working relentlessly, passionately, and productively to achieve its mission.

A final word

The worst error to make in implementing the five steps outlined here is to do so in a top-down, command-and-control manner, and to implement a performance management data system that mirrors this. Rather, organizations that have been successful in using performance management have recognized how profoundly transformative it is—that it is a giant step forward in an organization’s development and that the organization can never again be what it was before undertaking this process. In recognizing this, the leaders of such organizations take the time and dedicate the resources necessary to include staff at all levels and within all key roles of the organization in the processes outlined above.

While, as I describe in Working Hard—and Working Well, the process of arriving at an organizational theory of change can be relatively brief (say, four to six days), experience shows that most organizations will need three to six years to implement all the new, but essential, capacities and competencies it will identify. A considerable investment, but one that the organization’s intended beneficiaries fully deserve.

David Hunter was recently joined by Mario Morino, chairman of Venture Philanthropy Partners and author of Leap of Reason, and Sam Cobbs, CEO of First Place for Youth, in a discussion of Working Hard—and Working Well and the building blocks necessary for nonprofits to become high-performing during the PerformWell webinar, “Lives on the Line: Why and How Mission-Driven Leaders Are Embracing Performance Management.”

Read more stories by David E. K. Hunter.