Nonprofits Need to Invest in Management Systems

This is the fourth in a series of articles on investments that nonprofits need to make.  The intent of this series is to bring to the surface areas of nonprofit strategy where leaders and boards of directors often underinvest.  In this series we talked about the areas of R&D, high performing workforce and high performing boards.  In this article I’d like to tackle underinvesting in management structures. As a caveat, I would suggest that this article, like the rest of the articles in this series, is intended to be a conversation starter rather than an in-depth treatment of the topic.

Every nonprofit leader and most board members understand the constant pressure of containing costs that is often imposed by donors to the detriment of the organization. “Nonprofit means that programs and services are delivered as cheaply as possible” was, and too often still is, the conventional wisdom.  This pressure pre-dates the classic 2009 article that named the phenomenon  as the Nonprofit Starvation Cycle. However, as I have been arguing in this series, nonprofit organizations that are on the leading edge refuse to be stymied by an imposed scarcity mentality.  No business, for-profit or nonprofit, that has survived the bootstrap or startup phase can afford not invest in operations and infrastructure.  Yet in my consulting practice I am often helping established nonprofit organizations push beyond bootstrap thinking when it comes to management systems.   Specifically, I believe that nonprofits need to build robust management systems across the following areas:

Core Back Office Management: It may seem like a no brainer to say that every nonprofit should have competently staffed or outsourced back office functions including human resources, finances, and technology. Unfortunately, too many midsize or larger nonprofit organizations still relay on sporadic consultant input, volunteer support, or worse yet, Google searches to support management systems. Unfortunately, as long as things are going well, nonprofits often do not take the time to ask the question if their systems are adequate to take them to the next level.  For example, believing that having standardized email software for employees, a shared calendar, and a cloud-based filing system does not ensure that you have solid information technology management systems. Having rudimentary technology systems often hemorrhages efficiency, and one fileserver hack would throw many organizations into a crisis. Often as nonprofits grow, they fail to adequately scale systems because that have not invested in a back office strategy and operational planning. Similar underinvesting in human resources, and financial management can pose significant risks to a nonprofit.

Performance Management: There are at least two dimensions to performance management to invest in.  First, performance management system is about the collective actions of the nonprofit staff members and board of directors.  I was recently working with a client who shared with me a color coded Excel spreadsheet that was directly tied to their organizational strategic plan.  It listed the core goals with columns for action descriptions, lead staff,  due date and status comments. Gray shading for those items complete or discontinued, green shading for those on track, yellow shading for those behind schedule.  This tool was performance management done well.  The management team used the tool in manager’s meetings and the teams within the organization understood where they fit into the “grid.” Achievements were celebrated and ongoing adjustments kept the team focused.

The second dimension of performance management is investing in an employee evaluation and feedback system.  Indeed, one fairly recent survey suggested that only half of employees “strongly agreed” that they know what is expected of them at work and  just over one in ten, of the survey respondents, felt that their managers helped them set performance goals or work priorities (1).  I am not talking about the old school “command and control” employee evaluations where a manager meets with employees on a once a year basis.  What I am talking about are ongoing efforts to engage and empower staff in getting the work done that matters.  Continuing my client example, the expectation of all managers in this nonprofit was that they will meet with their team members one-on-one every week. Some weeks, they are a short “stand-up” meeting in the hall and other times, a sit down meeting for more extensive discussions. The point is that there was the commitment to ongoing performance feedback for all employees.

Evaluation Management: While there is ever increasing talk about the importance of program evaluation, it is surprising how few nonprofit organizations meaningfully invest in evaluating their programs and services.  Evaluation is often seen as a competency that is beyond the reach of all but the biggest nonprofit agencies or that evaluation is only done to the degree that it is funded externally. While many nonprofit organizations can document “how much” they are doing; fewer can document “how well” they are doing what they do; and an even smaller number can document “does it matter.”  While we are only seeing the beginnings of the penalties for not being able to answer the “does it matter” question, the trend is for philanthropists and even government agencies to increasingly invest in nonprofits who have the capacity to demonstrate that they are making an impact.  This requires nonprofits to invest in their evaluation capacity today.

As with the other articles in this series, this is not an exhaustive treatment of management systems but it pinpoints the need for nonprofit leaders to abandon the “if it ain’t broke the don’t fix it” mentality.  Nonprofits on the leading-edge and who are making the greatest difference, are the ones who are constantly asking themselves “where do we need to invest to make a greater impact.”  Investing in your management systems is often the difference between staying stuck where you are today and achieving more tomorrow.

As always, your thoughts are welcome.

~Mark

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(1) “Job expectations are unclear to many employees.” TD Magazine Jan. 2016: 19.

Image: Startup Stock Photos

Mark Fulop
Mark founded Facilitation & Process in 2009 to help organizations and communities bridge the gap between where they are today and where they want to be tomorrow. He’s led dozens of Portland nonprofits, government agencies and philanthropic organizations through complex change initiatives including strategic planning, revenue planning, board development, collaboration, and facilitation.