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Exhibiting Good Practice without Formalization

Exhibiting Good Practice without Formalization Author: Try L. Muller Date: September 18, 2009 Introduction Piedmont Housing Alliance (PHA) is a small nonprofit organization [20 employees] that provides fair housing advocacy, housing counseling, and workshops for community education & outreach. This paper will attempt to lay out the framework for best practices in human resources management within small organizations such as PHA. Little is known about the human resource practices of small nonprofits because most of them do not have formal human resource departments or individuals designated to perform these tasks. Whether or not a human resources system is formalized, a bottom line of good human resource practices is essential to the continuing success of an organization. Small nonprofits face a considerable amount of challenges that are specific to this human services industry: often no HR management training, scarce financial resources, volatile government funding practices, and a lack of universal guidelines to adhere to. Consequently, much of the HR functions are left to the organization’s Board of Directors, executive director, upper management or leadership team, in hopes that their managerial savvy can translate to strategic HR decisions. Despite who must assume the responsibility of making critical HR decisions, it must be realized that HR is the ultimate catalyst towards progress and an organization’s ability to solidify its role in its industry and society (Mello, 65).

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Exhibiting Good Practice without Formalization

A Knowledgeable Approach Since nonprofits are devoted to human services, the human assets within the organization are vital to the strategic value and uniqueness of the organization (Mello, 162). This is of even greater importance in smaller nonprofits like PHA who have even less access to already scarce resources. In this case, the best way to capitalize on the human assets is to implement at ―knowledge-based employment‖ model (Mello, 163). The first thing that signifies this model is a devotion to and investment in ―training and development‖ (Mello, 2006). PHA— and the majority of nonprofits— have specialized roles (i.e. program manager, program directors, housing counselors, project managers, accountants). So it is imperative that individuals have the training and development to perform these roles and sharpen their acumen. These nonprofits cannot afford to waste financial resources [salary] on staff members who are not championing their roles (Anheier, 2005). The other two components of this employment model— those being applicable to nonprofits— are ―employee autonomy and participation‖ as well as ―employment security‖ (Mello, 2006). Autonomy and participation is even more important in smaller nonprofits because things are so densely organized that employees are susceptible to being micro-managed. It is also for employees to have input in various HR decisions and discretion in general decision-making so that the employee understands and feels their value towards the organization (Anheier, 2005). Opportunities for employee participation are especially abundant in smaller nonprofits like that of PHA.

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Exhibiting Good Practice without Formalization

Communicating Diversity Understanding the relationship between demographics and diversity within the organization is essential to HRM in non-profits. Diversity can simply be defined as representation of people with ―distinctive group affiliations‖ such as race, gender, religion, personality, and even ―political party affiliation‖ (Cox, 1994). Subsequently, managing this diversity involves ―facilitating‖ relationships amongst these diverse components in efforts to sustain organizational efficiency (Thomas, 1990). Many nonprofits like PHA are rewarded with extra program funding depending on the diversity of their staff. For instance, PHA advocates for eight protected classes under fair housing law: race, color, religion, national origin, familial status, gender, disability and elderliness. PHA is encouraged by HUD (U.S. Department of Housing and Urban Development) to hire and retain individuals who represent each protected class. As a result, PHA is rewarded with extra funding for its housing program. This is more of an externally instituted system orchestrated for incentives. But there are other things that can be done to communicate the role of diversity in the organization. Two good practices for facilitating diversity in small nonprofit organizations are creating cross-functional responsibilities and setting up volunteer activities and community projects that teach tolerance (Billing-Harris, 2007). In small organizations like PHA, management positions are minimal and thus require staff to collaborate with one another to take on various tasks. Hence, when cross-functional responsibilities are created, ideas are interchanged and individuals are exposed to one another’s perspective on various assignments. This benefits the overall effectiveness of the organization and encourages progressiveness. 3


Exhibiting Good Practice without Formalization

Setting up volunteer activities and community projects that teach tolerance also enhances the individual’s understanding and compassion for differences in personality and circumstances. This will teach patience and help staff to realize the effect that various backgrounds have on differences in the workplace (Greenberg, 2004). Having the whole staff participate in volunteer activities of this magnitude can only have positive implications for the workplace. Lastly, diversity should be made visible within the composition of the leadership team; both in practice and physical makeup (Greenberg, 2004). This will show staff the vitality and benefit of diversity in the workplace and it will facilitate an impartial attitude towards change. Pieces to a Puzzle The human resources planning in small nonprofits are often predetermined in the sense that the allocation of government funding requires certain systematic approaches in both aggregate and succession planning (Ayers-Williams, 1998). So, in both practices, it is really just a matter of identifying, placing, moving, and replacing pieces under an unchanging compensation structure. These small organizations inherently take on a top-down employee forecasting model. The government allocates the necessary money to the organization and members of leadership, along with the executive director, in turn allocate this money to each department for payroll expenditures (Mello, 2006). This system works specifically for small nonprofits because market demand does not play a factor in budget allocation or

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Exhibiting Good Practice without Formalization

the capacity for employees to perform their roles (Ayers-Williams, 1998). So forecasting for employees is first assessed on the availability of funding. The smaller nonprofits also need to have an up-to-date skills inventory. A skills inventory serves two purposes: 1) it provides an updated snapshot of employee KSA’s and 2) it provides a basis for searching for future employees who may need to exhibit these KSA’s in order fulfill a vacancy (Ayers-Williams, 1998). Skills inventories are imperative because it plays a vital role in understanding current employees and finding the right employee in the future. These organizations can also use very traditional succession planning practices due to their size. Using replacement charts in these smaller nonprofits serves its purpose in identifying possible successor for all key management positions. The Board of Directors and the Executive Director should get together to identify key successors by addressing three key issues: 1) the KSA’s and competencies of the successor, 2) time-readiness and 3) the degree to which the candidate needs management training and development (Price, 2005). The organization should make sure that the board of directors is composed of the right group of people to be able to make these decisions. A Product of Your Environment In his book, Managing the Nonprofit Organization, Peter F. Drucker made an important statement when he said that ―organizational performance is made by basic people decisions: who’s hired and fired, where people are placed, and who’s promoted‖ (Drucker, 1990). Thus, proper staffing practices are essential to all organizations— especially the small nonprofit ones. 5


Exhibiting Good Practice without Formalization

It is very important that job specifications are clearly communicated and written down. This will help to ensure that job expectations are understood and the right candidates apply for the position. Employees who receive the position because they were the best available candidate will have more positive and longer lasting implications for the organization (Mello, 193). Nonprofits often use local media sources and other nonprofit relationships (i.e. nonprofit bulletin boards) when searching for potential candidates. Using other nonprofit organizations can be beneficial because people who respond to the job posting have a general understanding of how nonprofit organizations are run and may have KSA’s that are ready to be integrated within the system. It is important that the screening process is uniform with respects to the position the individual applies for and that the employee is objectively assessed based on the job specifications. One way to add to this level of objectivity is to have one interviewer who is from the department with the vacant position and the other interviewer should be nonrelated to that department. Continuity through Improvement The government provides funding in the budget for nonprofits to be allocated to training and development which means the financial resources for such endeavors are readily available. It’s very important that nonprofit organizations formalize the needs assessment process of the training and development. The organization does not want to squander the financial resources it has for such T&D. Therefore it’s important to justify the need for employee participation in the T&D programs and how their involvement in such programs will benefit the organization. This process can easily be

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Exhibiting Good Practice without Formalization

facilitated by semi-annual employee evaluations to help identify opportunities for the employee to acquire another set of skills or gain additional knowledge in areas where management feels skill level and or knowledge need to be addressed. Subsequently, off-the-job training should ensue. The skills needed in nonprofit jobs are not easily acquired through tacit knowledge— a strong foundation of knowledge and certifications are normally required with the often specialized roles in nonprofits. The executive director and members of leadership should be required to complete a MTD (Management Training & Development) program each year. These programs emphasize the ―human, conceptual and coordination skill‖ needed to effectively and efficiently run an organization (Dalton, 1993). Making this an annual activity for upper management ensures that they are always up-to-date with the newest information and strategies on managing an organization. Cultivating Employee Growth Performance feedback is vital to establishing and sustaining a high a level of success. In smaller nonprofit organizations this is very manageable through a system of employee self-evaluation simultaneous with a manager’s evaluation— preferably on a behaviorally-anchored scale (Berman, 2006). This allows for employee participation in his or her assessment of the role and the employee is often more detailed and aware of how effective they are in performing task (Mello, 2006). If the manager also performs an evaluation, the scores and comments from both evaluations provide for a prudent process by which to gauge employee performance.

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Exhibiting Good Practice without Formalization

Management should then work with employees to find strategies by which they can improve performance or be more efficient with tasks and also create a timetable for when these improvements should be achieved (Berman, 2006). The problem with performance

appraisal

in

nonprofit

organizations—

especially

small

nonprofit

organizations— is being able to connect it with rewards. Compensation packages in nonprofits are not adaptable, and rewarding an employee financially for performance improvement or acquiring a certain skill set is often not an option. This is why it is imperative that nonprofit organizations create some sort of rewards system to be associated with performance management. Sustaining the Relationship For small nonprofit organizations, it is of utmost importance that employees experience a considerable level of job satisfaction. Nonprofits offer modest salaries for staff and, in a lot of cases, management positions too. The employee can often get a better salary somewhere else, so the organization must provide benefits to the employee that they cannot, or will not likely experience should they go somewhere else. So what nonfinancial measures can nonprofit organizations take to help retain their employees? The Executive Director for the Crossroad Retirement Community, a North Carolinabased nonprofit, said that the organization’s employment turnover rate dropped from ―past highs of 60% to a meager 20%‖ as they started to hire more experienced and educated staff (Jones, 2005). More experienced and better educated staff experience more satisfaction and less complacency in their roles because the role has a greater

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Exhibiting Good Practice without Formalization

sense of purpose for them. This is the ultimate catalyst to longevity and solidarity in the job. Other innovative benefits that for employees at nonprofit organizations include free employee counseling programs, 80 – 90% medical coverage, free tickets to sporting and other events, telecommuting, daily lunch, and childcare accommodations (Jones, 2005). Granted, perks depend on available resources and the size of the organization. However, it is important for employers to find every way necessary to show that it champions its employees. A Well-Rounded Organization PHA does a great job of incorporating a majority of the HR practices mentioned in this paper. In doing so, they have been able to sustain a high level of performance despite the variable economy. The organization really emphasizes employee autonomy and participation. Employees are asked for their input as to what they would like to be addressed during the monthly staff meetings. During these roundtable staff meeting, employees are encouraged to share what is going on in their personal and professional lives as well as any questions or issues they have. This keeps the atmosphere professional but very interactive and employees benefit from the chance to speak about their life and job. The fact that every employee— aside from the front desk manager— has their own office, speaks to the level of autonomy at PHA. This is a luxury that the Executive Director continuously refers to when speaking of how the employees are compensated non-financially. The staff really enjoys the privacy of individual offices and it gives 9


Exhibiting Good Practice without Formalization

everyone a sense of discretion that would not normally be felt if office space was shared. Personal office space is definitely a perk that attracts new employees because everyone enjoys a sense of privacy. PHA uses a performance appraisal system based on a self-evaluation. The employees rate themselves on a behaviorally-anchored scale based on their assessment of how they perform ten tasks. The manager also evaluates the employee and subsequently sets a meeting with the employee where they compare each evaluation. This really helps managers to understand the employee’s strengths and it helps the employee understand his or her weaknesses. Making Connections All in all, PHA exhibits exemplary HR practices. However, the organization does not make connections between certain practices that could improve the overall functionality of the system. For instance, the performance management system is not directly linked to performance feedback necessary to assess the need for training and development programs. Also, performance appraisals are not connected to a rewards system [nonfinancial] that incites employees to take the initiative to improve their occupational acumen and skills. When PHA starts to bring these things together, it will add another great dynamic to its HR strategy.

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Exhibiting Good Practice without Formalization

―Nonprofit Good Practice Guide‖. Retrieved November 10, 2007 from: Johnson Center at Grand Valley State University. http://www.npgoodpractice.org ―Sample policies for Human Resource Management Nonprofit‖. (2005) Retrieved March 20, 2007. Nonprofit Tips.com. http://www.nonprofittips.com/2005/11/07/sample policies-for-non-profit-human-resource-management/. Anheier, H. K. (2005). Nonprofit Organizations: Theory, Management, Policy. New York: Routledge. Ayres-Williams, Roz. "The Changing Face of Nonprofits." Black Enterprise. May 1998 Barbeito, C.L. (2006). Human Resource Policies and Procedures for Nonprofit Organizations. Hoboken, NJ: Wiley Publishers. Berman, E. M. (2006). Performance and Productivity in Public and Nonprofit Organizations. 2nd Edition. New York: Pocket Books Billing-Harris, L. (2007). ―Managing Diversity in the Workplace‖. The Side Road. Retrieved from Blue Boulder Internet Publishing database. Brown, W.A., & Yoshioka, C.F. (2003). Mission attachment and satisfaction as factors in employee retention. Nonprofit Management & Leadership, 14, 5-18. Cox, T. H. (1991). ―The multicultural organization‖. Academy of Management Executive, 5(2), 34-37 Dalton, D. R. (1993). ―Management Training and Development in a Nonprofit Organization‖. Public Personnel Management. Retrieved from All Business database. Drucker, Peter F. Managing the Non-profit Organization: Principles and Practices. Harper Business, 1990. Greenberg, J. (2004). ―Diversity in the Workplace: Benefits, Challenges and Solutions‖. Retrieved from Alpha Measure, Inc. database. Jones, J. (2005). ―Practical, Innovative Benefits: Nonprofits Attract and Retain Employees with Extras‖. The Nonprofit Times. Retrieved from the Free Library by Farlex. Meinhard, A & Sakinofsky (2006) ―Human Resource Management in Small Organizations‖.ARNOVA. http://www.arnova.omnibooksonline.com. Mello, J. A. (2006). Strategic Human Resource Management. 2nd Edition. Massachusetts: Stratford Publishing Service, Inc. 11


Exhibiting Good Practice without Formalization

Price, M. L. (2005). ―Succession Planning and Sustainability in Nonprofit Organizations‖. Retrieved from Executive Transition Initiative Database. Thomas, R. (1990). From affirmative action to affirming diversity. Harvard Business Review, 68(2), 107-120. Watson, M.R. & Abzug, R. (2005). ―Finding the ones you want, keeping the ones you find‖. Herman & Associates (Eds). The Jossey Bass Handbook of Nonprofit Leadership and Management. 2nd Edition. P. 623-659.

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Exhibiting Good Practice without Formalization specific to this human services industry: often no HR management training, scarce known about...

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