Balanced Scorecard for Nonprofits

Definition / Basic Concepts

The balanced scorecard is a measurement-based strategic management and learning system for all organizations that was developed by Robert Kaplan and David Norton in 1990.  It provides a method of aligning business activities to the strategy, and monitoring performance of strategic goals over time.   

 

According to The Balanced Scorecard Institute, it “enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.  When fully developed, the balanced scorecard transforms strategic planning from an academic exercise into the nerve center of an enterprise.”  

 

The organization should be viewed from four perspectives and metrics developed, data collected and analyzed as relative to each perspective:

The Learning and Growth Perspective: Includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. 

The Business Process Perspective: Refers to internal business processes

The Customer Perspective: Customers should be analyzed in terms of kinds of customers and the kinds of processes for which products or services are being provided to those customer groups.  Poor performance from this perspective is a leading indicator of future decline.

The Financial Perspective: Refers to the bottom line for most organizations as well as the mission for nonprofits.

(http://www.balancedscorecard.org/)

 

Implementation for Nonprofits

The basic concepts outlined above can be modified slightly to address the needs of nonprofit organizations. Nonprofits, by virtue of being committed to a mission, need to focus their limited resources effectively in order to achieve not only their mission but also to meet the expectations of recipients and sponsors.  

 

In "Balanced Scorecard Step by Step for Governments and Nonprofits", Paul R. Niven offers the following diagram of how the Balanced Scorecard can be utilized for the nonprofit world:

 

 

The Balanced Scorecard Model for public and nonprofit enterprises

 

 (http://www.businessintelligence.com/ex/asp/code.33/xe/article.htm)

 

 

The Balanced Scorecard Institute has developed a nine-step process for building and implementing the balanced scorecard in a typical organization.  These are as follows:

1)Organizational Assessment

2)Identify Strategic Themes

3)Define Perspectives and Strategic Objectives

4)Develop a Strategy Map

5)Derive Performance Metrics

6)Craft and Priority Strategic Initiatives

7)Automate and Communicate

8)Cascade the BSC through the Organization

9)Collect Data, Evaluate and Revise

 

An estimated 26 months is needed for full deployment of the balanced scorecard from the top down within any given organization.  More information about training seminars and workshops can be found at: http://balancedscorecard.localweb.com/courseschedulem.aspx

 

Examples

According to Bain & Company, a global business consulting firm, 57% of global corporations had partially implemented the balanced scorecard by 2004.  Included in these are various nonprofit, government and commercial organizations.  For more specific examples and strategy maps, check out: http://216.247.231.179/examples/index.html

  

Links

• http://www.balancedscorecard.biz/articles/adapting_BSC_Public_Sectors.html
• http://www.managementhelp.org/org_perf/bal_card.htm
• http://216.247.231.179/FAQs/index.html#q2