5 Tips for Effective, Meaningful Performance Reviews

Originally published by on July 25, 2014 in In the News,Published by BWF

Client Advisory – June 25, 2014

It’s the end of June, ending many organizations’ fiscal years, academic terms, and fundraising cycles. Now is also the time of year that many organizations conduct their performance reviews, set goals for the next year, and think about how the next year’s budget might be allocated. With so many moving parts, it can become easy to treat performance reviews as just another part of the routine. Performance reviews, however, are one of the most effective tools for successful talent management and staff retention, especially in a competitive hiring environment.

BWF’s research and data have shown that staff greatly value and want meaningful management and goals.However, few organizations utilize performance reviews to provide this value to staff, with high-performing frontline fundraisers reporting more dissatisfaction with their performance review process than their peers. Below are five strategies that development organizations can use for more effective performance reviews.

  1. Encourage both parties to come prepared to the meeting. The evaluation forms (both supervisor and staff) can be completed and distributed prior to the review meeting with the staff member. This allows the meeting to focus on setting meaningful goals, discussing ongoing concerns, and addressing the most important topics first. Having access to the evaluations before the formal performance review also ensures that neither party will be walking into the meeting blind. Since one-on-one time focused on a staff member’s performance and development is rare and hard to come by, preparing the basic materials beforehand gives team members more time to effectively be heard by management and understand what their managers are asking of them.
  2. Develop strategies behind metrics. Metrics are a hot topic for frontline fundraisers in particular. In many ways metrics drive activity. BWF data has shown that those fundraisers who are assigned outcome-based metrics perform better than their peers. Stronger fundraisers go on more calls, yes, but they also ask earlier and make more ambitious solicitations. During a performance review, dicussion can be on the overall strategies behind metrics. (What do the overall numbers for the year mean for a fundraiser’s average month? What percentage of time should be spent on top prospects? Etc.) For those who have not met or exceeded their metrics for the year, the performance review is an opportunity to discuss where the team member is spending his or her time, assess the strength and composition of his or her portfolio, and evaluate the adequacy of metrics in tracking the responsibilities and priorities of the individual.
  3. Set long-term goals beyond metrics. Under-performers are going to be most focused on those short-term goals to get their performance up to par, but for high performers and average performers, short-term goals have less meaning. In the development field, we live in a world of long timelines and high turnover. Campaigns last seven years and up, philanthropic initiatives can be around for decades, large gifts are pledged over years, and decisions are made in months and years, not days. However, due to the competition for talent in the field, chief development officers and development staff are likely to leave before several of these big initiatives are met. Setting long-term goals (what you hope will be achieved by the end of and after the campaign as well as end-of-year and intermediate goals) communicates to your team that you expect them to be around for a while and that you have a plan for them to grow. Linking their personal goals to broader team and development goals links their behavior and activity back to the mission and impact of your institution, a factor that has been linked time and time again to driving engagement among non-profit employees.
  4. Incorporate meaningful professional development and leadership opportunities. Most development shops have some amount of budget set aside for professional development, often designated for conference attendance of some variety. However, a performance review is the opportunity to discuss more long-term growth with team members, setting aside time and management buy-in not only to discuss event attendance, but also to brainstorm on implementation of newly learned skills, identify areas for career growth in leadership and management, and discuss mentorship and partnership options. So much professional development in this field concentrates on gaining technical skills (making the ask, learning a new database, etc.), but BWF data has shown that the professional development topic area most frequently requested by frontline fundraisers is team management and leadership. Leadership is not as easily taught in a conference session or periodic brown bag, and the performance review is a great opportunity to provide concrete next steps for team members to grow throughout the year.
  5. Review communications and contact practices with management. One of the most frequently cited reasons for development staff dissatisfaction is the lack of access to or attention from management. From the management side this is easy enough to understand: senior managers in development shops are often overworked, managing full portfolios, large teams, and complex systems simultaneously. Regardless, we cannot afford to ignore staff needs: staff performance is too critical to our goals, and other job opportunities are too prevalent. The performance review is the ideal time to discuss how each team member can build more open communication channels to management and for the manager to evaluate his/her own responsiveness to staff needs. Addressing this regularly in performance reviews also can build standardization of communication across the staff and help the manager set the terms with which they are most comfortable being contacted proactively.

The five strategies above are aimed primarily at performance reviews for those team members who are already effective or very effective in their positions. Low performers require more guidance in clarifying what deficits are present and setting action steps for improvement. However, for all shops, performance reviews are a tool for staff satisfaction and retention that is underutilized. When these meetings are glossed over or lack strategy, the negative effects go beyond the lost opportunity of setting ambitious goals and growing the skill set of your team. Skipped or ineffective performance reviews communicate to your team members that they are not a valued priority of your organization. Since development is a relationship-driven and human capital field, that message should not be further from the truth.

Copyright © 2014 Bentz, Whaley, Flessner & Associates, Inc.

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Something Worth Reading: “The Human Capital That Wins the War: Engaged Workers”

I stumbled over this article post today while perusing linkedin. In the past we’ve talked about how fundraiser performance doesn’t follow the traditional bell curve, well this article touches on a theory for why this is true not only in development, but across sectors: the lack of engaged workers. In particular Mr. Hope says:

You can hopefully call up the same list in your own heads right now. Many people would call this your 20/80 list. The 20% of the people who end up doing (and often even voluntarily signing up to do) 80% of the heavy lifting, consistently; within your company, government, organization, school, unit, department or group. I call this my 8-10 List

1-5 is mediocrity. Even the Bible suggests, “be hot or be cold, but if you are lukewarm I will spat you out.” Translation: even God does not like mediocrity. 

5-7 is entertainment. It’s the person you date, but you do not marry. 

8-10 is excellence. Not black excellence, or brown excellence, or white excellence, or male or female excellence, or Republican or Democratic excellence. It’s just excellence. It’s real leadership. 

Looking at your own development shop – who are the 8-10s as described by Mr. Hope? What is different about their behavior? Do you treat these individuals any differently? The most effective development shops are those who can find those strong workers and retain them. But, what Mr. Hope does touch on, is that sometimes the difference between a 5-7 and a 8-10 is not potential or intelligence; it’s engagement. Great leaders are often expected to be leaders and given the freedom to use their creativity to solve interesting and new problems. What leadership expectations are we putting out there for development professionals? Has the era of metrics and benchmarking brought measurability at the expense of creativity and performance?

Five Types of Ethical Non-profit Incentive Pay Structures for Fundraisers

An excerpt from a lively LinkedIn discussion on incentive pay

An excerpt from a lively LinkedIn discussion on incentive pay

We’ve talked about what we do know about incentive pay in the non-profit fundraising sector. I knew this was a hot topic in our field (hence the desire to discuss). The response online (I regularly post this blog in a few linkedin groups), however, demonstrated just how passionate (and articulate) both sides of the argument are. Many of those who opposed incentive pay showed great concern for bonuses negatively influencing fundraiser motivations and behavior.  An ethical incentive pay structure would need to be aware of and account for that concern.

We have seen non-profits who have successfully used incentive pay as a component of their talent management strategy. In general these organizations have structured bonuses in one or a combination of the following five scenarios:

Development Office-wide Bonuses (1)

Most non-profits try to increase overall giving each year, with many boards setting macro goals that are quite ambitious. In the for-profit world this model is often referred to as “profit-sharing”, where the entire team gets an even (or clearly striated) cut of profit over goal each year. In non-profits this type of bonus is uniform across the full development staff (for example: a $2,000, award which is either paid to all eligible participants or to none). The decision as to whether to pay the bonus at the end of the year is based upon predetermined office-wide criteria and goals. In many cases of this model staff participate in the selection of the relevant goals – one of which is always the comprehensive dollar target for the year. The bonus is paid at the end of the year to all staff without regard to individual performance. Either the entire staff receives the bonus or none receive it.

Individual Bonuses based on metrics and goals (2)

Since so many development shops already devote a lot of time towards fundraising metrics  and goal-setting it follows that those who pay individuals bonuses can use those same metrics to determine incentive pay. In this scenario the most common set-up looks at performance versus original goals in 4-5 categories (major gifts secured, proposals presented solicitations, visits, team work, etc). This system is formula-based, with those fundraisers who reach 100% of or exceed all goals to receive the maximum bonus (most frequently 4-5% of base income) and those who fall below goal receiving a calculated, lower payout.  In some cases manager input and qualitative goals do apply here, but they become very difficult and controversial to measure related to actual income.

Team-based incentive payouts (3)

Many institutions, especially those decentralized amongst units and programs, prefer to structure incentive pay around overall team performance in meeting goals, securing income, and building constituent relationships. In about half of these cases incentive pay is determined  by the unit or program’s leadership, while the remainder still have central control over incentive pay. Bonuses are also often divided in these cases into two categories of staff: fundraisers and support staff.

Superstar individual financial recognition (4)

This model is almost entirely used in conjunction with the other incentive pay systems described above.  Usually modeled extensively towards top talent retention and recruitment this type of bonus pay is used to reward those few individuals whose achievements far exceed those of their peers (reaching 110%+ in all goal categories for example). Qualification for this level of recognition is set and known to all staff members and typically less than 4 individuals at an institution qualify each year. The actual payout of the bonus can vary widely, but usually amounts to an additional 25-30% of the bonus level set up by the base incentive pay system.

Hybrid Incentives with Multi-level Goals (5)

This is perhaps one of the most interesting types of programs one can find in incentive pay.  In order to encourage more teamwork and organizational cohesion while stimulating individual performance several institutions set up a set amount for bonuses that is tiered and divided by several categories of performance. An example of how this would look would be:

  • First, if the development officer fails to meet  its goal all bonuses across the board would be decreased by one third.
  • Second, if the team failed to meet its goal, bonuses for all members of the team would be reduced by one third.
  • Third, if the individual failed to meet personal goals, there would be no bonus for that individual.

 

 

You’ll notice that none of these scenarios tie bonuses directly to a percentage of gift income, much less individual gifts. In many cases any income or pay is coupled with “softer” incentives such as flex-time, vacation, etc.  AFP’s argument against such practices remains widely accepted by the non-profit community, even those who implement incentive pay.

What We Know About Incentive Pay for Fundraisers

The next few weeks I will be posting several discussions that focus on the topic of incentive pay for fundraisers.  This is a hot topic in development right now. For some managers financial incentive pay is a possible avenue to inspire and reward performance and gift income. For others the idea clashes strongly with the idea of non-profit and charity missions and cultures. Opinions aside, here are a few things we do know about incentive pay*:

piggy bank

Incentive pay has been around the non-profit sector for a while.

In the early 1990’s the rise of incentive pay was also a hot topic, with up to 25% of surveyed non-profits reporting some level of performance-base bonuses for managers and leaders. That’s at least 20 years of debate, reform, and revisions of incentive pay programs for fundraisers. While bonuses have been used in the for-profit sector for  much, much longer, it is important to remember that this is not a new topic and that it is also likely that incentive pay will be around for a long time in the future.

Incentive pay is more common in large fundraising shops.

Large shops have more developed metrics and management structures. It follows then that there is a wider variety of management strategies for these staffs. Most models of incentive pay can be found in development shops with ten or more frontline fundraisers. This often stems from a desire to even out performance, which, as we’ve mentioned, can be greatly unbalanced even when accounting for portfolio capacity.

For large institutions the likelihood of incentive pay increases when there is a separate entity or foundation leading development.

Many healthcare centers and universities hire fundraisers under the broader institutional umbrellas of human resources. In such cases there are more restrictions on compensation and position structuring. It is more common, therefore, to find incentive pay when development is “owned” by or falls under the supervision of a separate foundation or other managing entity, which can offer more flexibility in compensation packages and management.

Many incentive pay plans are based on group goals.

Based on the results of benchmarking studies anywhere from 60-75% of institutions who offer bonus compensation based on performance structure those payouts around group or team goals. In many cases a fundraiser might also qualify for additional pay based on his individual performance, but that can only be reached one the team goal and threshold has been met. Group goals also tend to bring in and attract junior level talent and be more inclusive of non-frontline fundraising staff.

Tying incentive pay directly to gift income is uncommon.

The AFP Code of Ethics explicitly condemns this behavior as it promotes self-interested behavior by employees and is widely frowned upon by donors.  Incentive pay is not used as a sales commission in any common model for a few reasons. The first is the same objection raised by the AFP about the ethical implications of personally being able to profit from a gift. The second lies is the sheer logistics, team work behind, and complexity of most very large gifts, any one of which which could dramatically swing incentive compensation that would be based on income alone.

Most bonus plans offer 10% of salary or less in incentives.

By their nature non-profits are extremely budget conscious.  Since most non-profits have ruled out the structure of a “commission-like” incentive pay development shops must budget each year for bonuses without knowing overall income. As a result even those organizations that have embraced and institutionalized incentive pay do not structure it to outweigh or even significantly compete with base salary,

The direct effect of incentive pay on long-term performance and retention is still widely unknown.

Those who support incentive pay use largely anecdotal evidence as to its benefits and impact on development shop performance and staff retention. There have been very few large scale, longitudinal studies that concretely point to incentive pay having a consistent positive effect. This doesn’t mean that incentive pay doesn’t have this effect, just that the exact impact is unknown or, more likely, is inconsistent due to the wide variance and circumstances across non-profit organizations.

When one looks at the discussions on the positive impact of work culture, vacation pay, and hour flexibility on employee satisfaction and performance, it is possible to dismiss incentive pay as unnecessary in the non-profit field. However, based on what we do know, this is not a topic that will disappear anytime soon.

Financial bonus structures for non-profit employees is a controversial topic, and we will weigh the detriments and benefits in a later discussion as well as feature a “Point/Counterpoint” debate on the topic between two guests this month. In the meantime feel free to contribute your thoughts on the topic in the comments below.

 

 

 

* based on benchmarking studies, field research, and personal interviews with leaders in development.