April 22, 2004

Performance Evaluations Can Help Workers Improve -- and Help Charities Reach Their Goals

Before Carol B. Wittmeyer's arrival at Medaille College, fund raisers at the Buffalo institution were evaluated by only the most rudimentary standards: whether they arrived at work on time and how they carried out basic office tasks.

But after Ms. Wittmeyer was hired in October as the college's vice president for institutional advancement, she knew that system had to change if Medaille was to effectively compete for donors' dollars. The department's employees needed to be measured on their fund-raising performance -- not on their ability to work a full day.

As a result, she quickly began creating a new evaluation system that measures whether employees are hitting specific targets. By June, Medaille's fund raisers will know whether they are visiting enough potential donors and if they are on track to meet their revenue goals.

Some workers, Ms. Wittmeyer says, find the new scrutiny uncomfortable, but she believes that employees will come to appreciate the specific goals. "On the one hand, I think they like knowing what's expected," she says. "On the other hand, the expectations are very high. It's very stressful for them."

Some nonprofit employees and managers see annual performance reviews, on which pay raises usually depend, as time-consuming exercises that neither boost workers' productivity nor clearly measures their true value to the organization. But human-resources consultants and nonprofit managers say effective organizations need such evaluations to get the most from employees.

Nonprofit organizations have been notably lax in creating effective evaluation systems for their employees, according to a study conducted in February by Bridgestar, a project of the Bridgespan nonprofit group, in Boston, that provides management consulting to other nonprofit groups. Of the 225 senior nonprofit executives surveyed, only 51 percent said they have received performance reviews during the past 12 months.

What's more, the survey also found that nonprofit employees are less likely to receive formal reviews the higher they climb in their careers. Only 42 percent of the nonprofit chief executives surveyed by Bridgestar say they had reviews during the past year, and 38 percent of nonprofit leaders reported either never having had a review or not having had a review during the past two years.

Of the organizations that do conduct evaluations, many told researchers that they are unhappy with their systems and are looking for more effective ways to review their employees and set goals, says Stephen Pratt, Bridgestar's director of learning communities. "Performance evaluations are not being widely implemented," Mr. Pratt says. "Where they are, they are being implemented in very nonproductive ways."

Measuring Commitment

Nonprofit organizations are less likely than businesses to use performance-evaluation systems, largely because of the work culture of charities. While for-profit companies are focused on the bottom line, nonprofit groups are more concerned with fulfilling goals that are difficult to quantify. "In the for-profit sector, people are accountable for financial performance," Mr. Pratt says. "When someone has a mission-based job, it is often harder to measure and hold them accountable."

In addition, he says, charities are restricted by shortages of time and money. In many small organizations, human-resource duties fall on the shoulders of overworked managers who may not have the time to evaluate each employee.

But for organizations that are striving to get the most out of a small team of workers, an effective evaluation system is essential, says Francie Dalton, a professor of business management at the University of Maryland at Baltimore and a management consultant who works with nonprofit clients. Without an effective employee-evaluation system, organizations are more likely to condone substandard performance and alienate their best workers. "High performers will leave organizations that tolerate mediocrity," Ms. Dalton says. "If you cannot keep your high performers, you will become mediocre."

Nonprofit groups that don't have effective evaluation systems also run the risk of turning off donors who are concerned about fiscal responsibility. "There's a lot of pressure to [evaluate], especially post-Enron and post-American Red Cross," says Rhonda Thompson, vice president for client services at the Center for Nonprofit Management, a nonprofit group in Dallas that offers consulting to charities. "The appeal for nonprofits is to state their case for return on investment."

Crafting Standards

Evaluation systems can be difficult to create and may be viewed as an intrusion by workers, says Ms. Dalton. But without them, she notes, employees may never understand what is expected of them, and managers may never truly know which workers are pulling their weight. "It's the antithesis of comfort that produces success," she says. "If you are unwilling to subject yourself to scrutiny, you will not have a high-performing organization."

The challenge, of course, is to create a system that works. Most nonprofit managers and human-resources consultants agree on what doesn't work: basing evaluations on observations and traits rather than on measurable performance. Effective evaluation systems, experts say, avoid the subjective and instead focus on measurable results and behaviors.

Employees at different levels of a group's hierarchy should be evaluated according to different sets of standards, says B.J. Gallagher, a Los Angeles human-resources consultant whose nonprofit clients include the American Lung Association and the Feminist Majority Foundation. For example, she says, lower-level employees should be measured on their behaviors, such as whether they show up to work on time or answer phone calls in a courteous manner.

By contrast, higher-level employees should be judged on the outcome of their efforts, Ms. Gallagher says. "You don't care as much how they did it, as long as they get results," she says. "A lot of organizations -- both nonprofit and for-profit -- get hung up on treating everyone like they are an hourly employee. It's a very old mind-set. It's very hard for people to understand that. But I pay them to work smart, not hard."

Managers should create evaluation standards based on specific goals, not on random observations, says Ms. Dalton.. Typically, she says, that can be accomplished by using fill-in-the-blank criteria. For example: "The employee will execute a successful fund-raising campaign when her or she ______." The blank might be filled in with a statement such as "increases contributions by 15 percent over the previous year" or "attracts 20 new donors." The point, Ms. Dalton says, is that the blank must be filled in with something measurable, attainable, and easily understood by both the employee and the manager.

Giving Feedback

By creating specific, measurable goals, managers will have more credibility when they deliver evaluations, Ms. Dalton says. Employees, meanwhile, will know what is expected -- and will know ahead of time whether they are meeting their goals.

Such a system is especially effective if an employee's performance falls short, since the manager will no longer have to worry about giving unexpected bad news, says Ms. Dalton: "It's easier to deliver because it is based on evidence rather than emotion."

Human-resources managers disagree on how evaluations should be conducted. Some, such as Mr. Pratt of Bridgestar, believe employees should not be responsible for writing part of their own evaluations. "In the cases where I've done it, I found it to be a rather hollow exercise," Mr. Pratt says. "Self-examination is important. But the best executives tend to be their own worst critics anyway."

Ms. Gallagher, however, says employee self-evaluations can be useful to managers. "I've found by doing this that poor performers have an inflated sense of how good they are. Good performers have the opposite impression of themselves," she says. "Often, I could help the good performers see how good they really are. It was a little harder with the poor performers."

An effective evaluation will help poor performers understand where they are falling short, because the review will require employees to articulate how they approached a particular task or goal, says Ms. Dalton. "You have to make them be specific in assessing their own performance," she says. "Instead of simply telling the employee what you think of their performance, you may be surprised to learn that they did a number of things well and they may be out of touch in one area."

Effective performance reviews can also take many shapes. Some larger organizations, for example, use what is commonly called a "360-degree" evaluation, which involves having an employee's managers, subordinates, colleagues, and clients review that employee's performance. The process, says Mr. Pratt, offers a detailed picture of the subject's total performance -- but can also be time-consuming and costly.

Ms. Gallagher, however, says that even simple evaluations can be effective. "Keep it to one sheet, if you can," she says. "The important thing is the discussion, not the paperwork. The whole point of performance reviews is to make sure at least once a year that the boss is talking to the employee. But if you're only talking once a year, the boss is doing a terrible job." The key, she says, is to create a basic system that allows the manager to provide active, ongoing feedback to employees.

When the Special Libraries Association, in Washington, revamped its employee-evaluation system two years ago, it deliberately tried to create a process that was both continuous and objective, says Lynn Smith, the group's deputy executive director. The new system spells out clear objectives for each of the group's 35 workers and measures each employee's ability to meet those goals each quarter. In turn, Ms. Smith says, workers understand the expectations and can determine easily whether they are meeting them.

"It was a big change for us, in terms of people feeling like they will be rewarded for doing good work," Ms. Smith says. "Everything was about favoritism before. Now people have something to refer to. They have things spelled out."

While most organizations that evaluate employees focus on individuals, evaluations can also help improve the performance of groups or teams of workers. For example, the North Texas Food Bank, in Dallas, has seen a noticeable increase in productivity since July, when it adopted a new system of goals for teams within its 45-employee organization, says Jan Pruitt, the charity's executive director.

Teams get monthly, one-page reports that measure whether they are meeting specific performance standards in areas such as food collections, inventory, donations, and hits on the group's Web site. Listed next to those goals is the food bank's performance in those areas.

While employees reported feeling additional stress when the new evaluation system was introduced, Ms. Pruitt says, they have since embraced it -- largely, she says, because it gives them a better idea of where they fit within the charity's overall mission. "We know our projections, where we're hitting those projections, and where we're falling short," she says. "It's crystallized where we are headed."

Does your organization give employees performance evaluations?