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Performance Management in Nonprofits -- Role of the Board

09/09/2013 in

What we are learning about the role of the board in nonprofit performance management systems 

We’ve been fortunate in one of our recent consulting engagements to be helping a nonprofit that has two board members with very strong and strategic HR backgrounds.  Each has led worldwide HR for at least one fortune 500 company.  Their involvement has been very valuable to our work, helping our client implement a new performance management system and foster a new culture of high performance.

How has the board helped?

  1. Aligned Annual Organizational Goals. Starting two years ago the board began requesting, reviewing and approving detailed annual performance goals for the organization.  These goals align with the strategic plan, meaning that if achieved they would move the organization 1/3 of the way towards achieving its 3-year strategic goals.

  2. Aligned Division-Level Goals.  Starting this year the board expanded it annual goal-setting process and worked with the CEO and his executive team to establish aligned and board-approved annual organizational goals down to the division-level.

  3. Aligned annual goals for the CEO and each executive team member. The board has used these organization-wide and division-level goals to create individual annual performance goals for the CEO, and to ensure that he, in turn, is establishing clear goals for each member of this executive team.

  4. Annual reviews grounded in performance against establish annual goals. Before two years ago the board only conducted annual reviews of the CEO sporadically and often informally.  The process is now a model for the rest of the organization to follow.

  5. Reward Performance. Two years ago the board established an organization-wide compensation philosophy that explicitly ties increases in compensation, promotions, and other forms of reward to positive annual reviews based on performance.   This new philosophy has been applied to the CEO for the passed two years, and will be applied to the each member of the executive team this year.

The impact of these steps:

  1. CEO as model. When the CEO says that the whole organization will now be setting individualized SMART annual goals he can point to himself as the lead example.  When the CEO says that the organization will be holding people accountable and rewarding performance, he can point to himself.  These actions are far more powerful than words in communicating how important this initiative is.

  2. Not a passing trend. Seeing that our current work is grounded in the board’s earlier efforts helps counter staff concerns that this new high performance orientation is just another passing fad.

  3. CEO held accountable. We are fortunate to be working with a CEO who is a strong champion for the new performance management approach.  Nonetheless,  having the board hold him accountable has helped ensure that he maintains his focus on this initiative in the face of competing demands.

When we started defining and implementing this nonprofit’s new performance management approach we knew that board was going to be essential to our success, but seeing its impact up close has been revealing. We might have been successful without them, but their involvement has had made success much more likely. It’s something we will be keeping in mind going forward.

Questions for you:

  • Are you an HR professional serving on a nonprofit board?  How does your experience compare to what we’ve described?

  • Has your nonprofit implemented a new performance management system?  What role did you play?

For more information about the role that HR professionals can play on nonprofit boards, check out this brochure by the Taproot Foundation and BoardSource.  (As you may know I was the COO and VP Programs at the Taproot Foundation for 7 years and led the creation of Taproot’s Leadership Development and Strategic HR consulting practice.)