Using the Balanced Scorecard to Align Your Nonprofit: What the For-Profit Sector Has Known for 20 Years
Posted by Guest Blogger at Apr 17, 2014 07:04 AM CDT
This article was written by guest author Heather McLean, Senior Integrated Fundraising Consultant, hjc.
“Balanced Scorecard” has been a corporate management buzzword for about 20 years. Like many management paradigms before it, a balanced scorecard is migrating from the corporate world into the offices of nonprofit managers, as the charitable sector professionalizes and Fortune 1000 managers take leadership roles in nonprofits.
Balanced Scorecards, when developed as strategic planning and management systems, can help align an organization behind a shared vision of success, and get people working on the right things and focusing on results. However, a scorecard is more than a way of measuring results. It is a system, and communication tool, consisting of people, strategy, processes, and technology.
Historically, organizations have been wholly preoccupied with measuring their performance based on financial data. For nonprofits, this means a focus on data points, such as revenue, response rate and average gift.
The History of the Balanced Scorecard
In the 1990s, a group of researchers from the Nolan Norton Institute, the research arm of the accounting firm KPMG, began to study commonly used performance measures. Their theory was that the fixation on purely financial metrics was actually stifling growth and innovation within organizations.
With this in mind, the researchers suggested that organizations should bring a “balance” to the way they assess their business by looking at more than financial performance, but also other perspectives, such as customer, internal process, and innovation and learning.
Further, these researchers prescribed tying performance measures closely to a strategic plan by creating a measurement process to gauge how well staff are executing against the new ‘balanced’ plan.
Simple as pie? No, not for many companies in the 1990s when this approach was developed, and certainly not now in the charitable or public sector. Nonprofits are just becoming familiar with, and trying to use, balanced scorecards.
The Balanced Scorecard at Nonprofits
Doing the right things the right way is a balancing act, and requires the development of good business strategies and efficient processes and operations to deliver the programs, products and services that make up the organization’s core business. For charities, that core business is delivering on mission – alleviating suffering, helping people get back to work, saving animals’ lives. While there are differences in development and implementation of a balanced scorecard for the corporate and nonprofit sector, a disciplined process of strategic discovery used to develop one has more similarities then differences.
According to Mark Lukowski, CEO of Christian Children’s Fund of Canada: “We have implemented a balanced scorecard approach within our organization to help us manage our progress in achieving our desired outcomes. This approach enables us to measure our results and make the necessary changes to our various marketing and operations programs to achieve our mission.”
For charities and nonprofits, I suggest looking at six different perspectives in your balanced approach:
The final two categories are always the most intriguing for integrated marketers – focusing on technology and infrastructure and the skills, culture, and structure required for integrating marketing. With a balanced scorecard approach, it is hard to ignore the business impact of integrated marketing.
Are You Ready to Try it at Your Own Organization?
Be patient -- this is a multi-step process that is not for the weak of heart or the short of patience. Developing a balanced scorecard takes a commitment to invest substantial time, energy, and talent up-front to make it work. However, the pay-off is sustainable charities with more efficient and effective practices, that are building value and innovating on their mission.
If you are up for the challenge, here are 5 basic steps:
For more information, watch a recording of a session about balanced scorecards that Mark Lukowski and I presented at the recent IMAB Integrated Marketing Virtual Conference for Nonprofits.