Not for profit

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ACCA F5 - Performance Management 

 

Either a small community charitable trust or association of professionals/environmentalist or association of member states founded for specific purpose like WTO or international organisations devoted to fight against poverty and natural calamities or one established to protect fundamental human rights, all these different types of institutions fit within not-for-profit. Objectives of not for profit include social, philanthropic, cultural and environmental issues.

(NFP) Not-for-profit organisations do make profit but does not (make the money available) distribute to increase the wealth for its members. The profit earned and donation received is used to accomplish its stated mission. Profit generated is recognised as surplus and is retained as further source of capital. Normally, they are registered as tax-exempt organisations in state tax authority.

Cost accounting perspective: The quantitative nature of money (in form of grant and donation) and the qualitative nature of the (goods/services) benefit offered to members or targeted societies/individuals with intention to maximise the benefit to final users/receiver within limited resources available creates challenging cost environment for NFP's. I.e. NFP needs to target (value for money) VFM accounting through benchmarking, performance indicators, 4E's (Economy - resource utilization, Efficiency - process improvement, Effectiveness - output measurement and Expedition/Timely - information) and value audit.

 Human resource in not-for profit is even more complex issue. Large number of volunteer staff at operational level increases turnover rate and curb managerial power to dismiss poor performing staffs. Organisations should address non-financial motivational needs of operating staffs in order to retain them for long term.

Conflict of interest between multiple stakeholders of NFP is a common issue. This creates barriers in performance appraisal and tension in resolving conflicts. Organisations involved in conflict adopt conflict management strategy. Cyert and March conflict resolving strategy involves - prioritization, negotiation/satisfying, sequential attention, side payments and exercise of power. However, the later two (side payments and exercise of power) are not suitable for NFP's.

Not-for-profit organisations - part 1

Not-for-profit organisations - part 2

Communication

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Communication is used to inform, misinform, counsel, sell, buy, confuse, confirm, advise, teach, learn, reveal, persuade, accept, affirm, clarify, motivate, criticize, deny and conceal.

Communication is a social interaction through messages. Message is classified as:

Ø  Verbal/Oral communication - (public speech, conversation, discussion, telephone, face to face, conference)  and non-verbal communication -(symbols, emotion, picture, written - letters, circulars, orders, reports, forms, manuals, newsletters, book)

Ø  Formal (vertical, horizontal, diagonal ) (job interview, sales counters, taking part in meeting) and Informal communication (grapevine, rumor, gossip) (Private discussion with friends, coffee shop conversation)

The communication model (Shannon and Weaver)

Sender - Encode - Channel - MESSAGE - Channel - Decode - Receiver - feedback (ensures massage is understood)

Communication means transfer of information from one party to another. Effective communication is timely flow of accurate information to right people. Different chain of communication presents in organisation. A vertical chain of communication refers to top-down or bottom-up approach, horizontal chain means communication between managers and employees of similar designation, wheel and circle chain refers to flow of information in participative and democratic culture and all channel communication is a non-formal communication. In an organisation, from sharing mission and vision of an organisation to advising, informing and regulation a simple task involves the flow of information by means of communication.

Barriers of effective communication: Encoding barriers (lack of sensitivity to receiver, lack of communication skills, insufficient knowledge of the subject, information overload, emotional interference), Transmission barriers (physical noise, medium used, conflicting message, long chain) Decoding barriers (Psychological noise/emotional distractions, Lack of interest and knowledge, communication skills, physical distraction)

7C's of overcoming communication barriers: Clarity - of information, Credibility - of source of information, Content - organised, Context - relevant, Continuity - follow up, Capability - of encoder and decoder, Channel - senses - see, hear, taste, smell and feel

Introduction to communication

ACCA Article: Communicating core values and mission 

Personal effectiveness

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Do you know how organised you are? Do you know your weakness? Do you know your strengths? What is SWAT analysis? How you use SWAT to rediscover a brand new YOU? Is qualification all that your employer care? What is the expectation of your employer from you? What is your efficiency level? Are you satisfied with your performance? What is your next target? How you plan to achieve it?  And, what means personal effectiveness?

Answer to these questions is simple. "Everything Grows." As like we do, our expectations, dreams, vision and organisations everything grow bigger. The growth creates an opportunity to advance in carrier, stay abreast with changes and to defeat rivals.  Therefore we need to organise ourselves which is termed here as 'personal effectiveness'.

Personal effectiveness stands for organising activities, identifying problems, simplifying problems, prioritising, tackling problems, acquiring help and fulfilling assigned task. There are not any defined quantitative tools, which measures personal effectiveness at work. No two individuals' performance is identical in all respect. This is the unique strength that every individual have. Employer need (job specification) defines qualitative standards expected from a person appointed to a position.

What is the expected personal effectiveness from an operational staff, a line manager, an office secretary or a director? At directorial level, personal effectiveness is like a brand power to the company and to office secretary it is about self-esteem. At managerial level, personal effectiveness is increased performance of the process and to the operational staff level is it is increased effort to work.

Growth is not just the need it is a natural phenomenon. This simple understanding compels individual to plan for development. He/she identifies his/her current position and trace a way forward to achieve a set target. Individual's SWOT analysis is the start point for improved personal effectiveness. This is like looking in the mirror and correcting ourselves.

Mentoring, coaching and counseling are views from second party used to analyse individual's effectiveness.  Mentoring facilitates learning and provides guidance in overall development, coaching focuses on specific areas for development and counseling renders practical suggestions to solve problems.

Training and development

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Kolb (1984) suggests that learning is the creation of knowledge through the transformation of experience.

Formal learning: learning typically provided by an education or training institution, structured and leading to certification.

Informal learning: learning from daily life activities related to work, family or leisure.

Non-formal learning: learning which do not either have curriculum, syllabus, accreditation and certification but are structurally organised. E.g. seminars, tuition, CPD events

Kolb's learning theory identifies the importance of using senses for learning.

Abstract conceptualization (Thinking/Hearing) - brainstorming and creating new ideas or collaborating ideas

Active experimentation (Doing) - doing thing differently (i.e. evolution and revolution of process)

Experience (feeling) - is developed being (involved in) a part of process or program you undertake.

Observation and reflection (Watching) - reviewing and reporting - is continuous process

Kolb argue that learning process involves resolving tensions between (thinking and feeling) and (watching and doing) in 4 learning style. They are:

Divergent = feeling and watching

Assimilation = thinking and watching

Convergent = thinking and doing

Accommodative = feeling and doing

Learning style - Honey and Mumford

Style	Activities
Activist	brainstorming, group discussion, competition
Theorist	models, statistics, stories, quotes, background information
Pragmatist	case studies, think on how to use learning in reality, problem solving
Reflector	self analysis questionnaires, feedback from other, coaching, interviews

Training and development:

As mentioned in earlier article, organisations use performance appraisal technique to identify training need. Beside this as company grows bigger continuous job analysis and organisational analysis of external and internal environment also help determine the need for training and development.

Training means providing essential job specific skills required for employees. It target specific goals, for instance understanding a process. Carrier development focuses on broader skills applicable in wide range of situation. This involves decision-making, thinking creatively and managing people.

Training development and learning reduces individual's/group's performance gap (expected-actual) and keep employees abreast with changes in external environment. It creates a flexible internal environment and assists in HR management. It addresses the need to cope with long-term and short-term challenges faced by the individuals and organisation.

Performance appraisal

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Performance appraisal is a continuous review and assessment of individual's expected and real contribution in relation to the benefits provided. As effective appraisal system ensures goal congruence, fact analysis/real contribution, fair approach and continuous/frequent review.

Appraisal helps to manage human capital, link reward to performance, understand training needs and career development of an individual. Significant portion of organisation cost ties up with employees as training and development program. Increased turnover rate increases the cost associated with staff. Performance appraisal addresses this issue by aligning the interest of employee and organisation.

Beer et al identified four criteria for performance assessment. They are the 4 C's. Commitment (of employees to assigned work), Competence (innate and developed), Cost effectiveness (optimal utilization of workforce) and Congruence (job design to match organisational and employees need).

Appraisal integrates reward, training and development together.

Ø  Reward - Individual's performance related pay (compared to his/her peer) is determined using different performance measurement tools and techniques. Continuous appraisal helps continuous review of reward.

Ø  Training needs - Appraisal identifies the need of personal/group training and development to increase individual/group competency and in a cost effective way.

Ø  Career development - Appraisal focuses on new and existing job design and personal specification for present and future available opportunities for individuals. It analyses individual capacity to handle high-level task and identifies individuals for promotion.

Individual appraisal requires subjective analysis in various issues. Therefore, appraisal process faces number of barriers. J Lockett suggested six barriers of human performance appraisal. They are confrontation (angry disagreement), judgement (one-sided), chat (conversation), bureaucracy (form filling), event (ceremony) and unfinished business (continuous review).

To overcome the barriers and make appraisal process effective management should use different techniques. Managerial experience and skills used in appraisal process are questioning, listening, persuading and verbal communication.

ACCA Article: Understanding the importance of appraisals