Nonprofit organizations, like public and private sector organizations are facing increasing pressure to demonstrate how well they perform and their plans for future improvement. In recent years, the field has witnessed a surge in attention to the conceptualization and measurement of organizational performance and effectiveness. (1) Most of this research focuses on managing performance at the organizational level and determining the crucial explanatory factors that can be influenced and manipulated in order to foster performance improvement. An essential part of this process of measuring and fostering effectiveness is managing the performance of organizational members. Typically this is accomplished by a performance management process, as the ability of nonprofit organizations to meet their goals is directly dependent upon the ability of the staff to perform effectively in the management and delivery of services. (2) As Twomey and Twomey (3) note: "the human resource function is increasingly important in shaping the new organization in which the quality and commitment of people is key to survival. Every aspect of human resource management needs to be reassessed but none is more pivotal or difficult than performance appraisal." While the efficacy of performance management for both public and nonprofit organizations has been recognized, there currently exists a paucity of research in nonprofit organizations specifically that provides useful direction for nonprofit practitioners and scholars in the continuing quest to improve nonprofit effectiveness.
This study addresses this gap in the nonprofit knowledge base by comparing the utilization of different components of a performance management system from the perspective of management and frontline staff. It identifies five models of performance management that organizations in this study adopted, with one model representing what appears to be the most comprehensive or best practice for nonprofit organizations. First, this article reviews research in the nonprofit and human services literature on performance appraisals, the most often research performance management tool. Second, it discusses the study's design, including data collection and analysis. Next, the article compares the organization's espoused practices with staff's perceptions of performance management practices, exploring the degree of alignment between the two perspectives. Finally, the article identifies different performance management models adopted and presents several important lessons learned from this study.
Performance Management and Appraisal: A Review of the Knowledge Base
In exploring performance management, one must start with an explanation of the process of managing individual employee performance. The process of managing individual performance is similar to the models used to manage performance at the organization level. Typically, the process starts at the top of the organization with management developing a performance management policy. Managers primarily control "performance by influencing inputs (e.g. skills by training) and by the feedback provided by outputs (assessments)." (4) The ultimate objective of a performance management process is to align individual performance with organizational performance; the process should signal employees about the organization's goals, priorities, and expectations and how well they are contributing to them. (5) An organization's performance management process, however, is subject to interpretation by individual employees. Employees do not necessarily react to the signals in the same way, requiring the need to think about and develop theories and ideas concerning how these employees may respond and to factor that into the performance appraisal and management process. Guest (6) in particular suggests that the impact of human resource management (HRM) practices, such as performance management, depends upon the employee's perception and evaluation, prompting the need for nonprofit management scholars studying performance management to recognize the crucial role of employee perceptions and to incorporate them into the analysis and construction of performance in these organizations. …