What is performance management?
Nonprofit organisations work in complex settings tackling complex issues. Nevertheless, they are committed to continuously enhancing their social impact and contributing to the public good. Increasingly, though, non profit organisations are under pressure to work more efficiently and effectively to cope with limited resources. Additionally, requirements to work transparently and prove impact continue to gain prominence. This raises the question: How and with what tools can nonprofit organisations be supported in enhancing their performance?
One of the tools that has gained traction in the public and nonprofit sector is performance management. Performance management comprises strategic planning, performance measurement and strategic learning.
The proposition of performance management is that:
- Strategic planning determines clear and measurable goals for an organisation to set the strategic priorities. In that way, resources are employed according to these priorities and everyone in the organisation pulls on the same string towards these goals.
- Performance measurement allows an organisation to keep track of the attainment of its goals. It provides data of how an organisation is doing and where adjustment to the current course is needed to achieve the overall objective.
- Strategic learning closes the feedback loop. It ensures that the data generated from performance measurement is not lost but channeled into strategic decisions. In that way, the intention is that an organisation learns and builds on past performance.
The combination of these three elements aims to offer a holistic tool for nonprofit organisations to strategically improve their performance giving equal attention to quantitative and qualitative aspects.
How can it add value to the work of nonprofits?
For her master thesis, our Junior Advisor, Sarah Abdelatif studied the value of performance management for nonprofit performance. The study surveyed organisations in the Netherlands and complemented this data through interviews with professionals in the nonprofit sector.
The quantitative data from the research shows that performance management can positively contribute to the performance of nonprofit organisations if it is applied as a holistic model. The research finds that performance management can add value to the work of an organisation if each element of performance management informs the other. This means that strategic planning sets out the goals, performance measurement tracks these goals and the produced performance data is channeled into decision-making.
The qualitative data from the interviews reinforce these findings. The findings particularly highlight the importance of building upon performance data to learn from that data. Importantly, the study underlines the need to dedicate resources to the process of performance management. Specifically, formally dedicated staff and time renders this tools more useful to an organisation.
How can you leverage performance management?
As the findings of this research illustrate, the most crucial, yet the trickiest part of performance management is to effectively base decisions on performance data. For continuous improvement, make sure that your data does not go to waste and fulfils a purpose beyond external accountability. Reviewing, organizing and managing your performance data is therefore the most important takeaway.
At Data4Development, we have made this challenge our purpose: we support organisations to lead by data driven knowledge. If you are looking for ways to get more value out of your data and use it in a more strategic way, get in touch with us to find out more.