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Using the Balanced Scorecard in Nonprofit Organizations: Plan, People, and Process

Posted October 3, 2012 10:34 AM by Angie Mareino

Today's guest post comes from Evan Stisser, a MBA candidate at Cass Business School in London. Evan, who is working on his Master's thesis regarding Balanced Scorecard (BSC) implementation in nonprofit organizations, spoke with Ascendant's Managing Partner Dylan Miyake about Ascendant's nonprofit work and BSC best practices. Here's Evan:

CHALLENGES

Those of us who have worked with nonprofit organizations (NPOs) in the past few years will be well aware of the increasing pressure these groups face to provide better accountability and performance data to stakeholders. Between corporate governance scandals and tightening purse strings across the board, NPOs need not only to be more responsible to their audiences but also demonstrate that they are actively achieving progress towards their mission. In this environment, the Balanced Scorecard (BSC) is a tool to provide a more disciplined approach to linking organizational mission with strategy and value-creation, and is increasingly used among NPOs as a means of providing the metrics and accountability demanded by funders and customers alike.

Within this context, I conducted research supported by the Royal Society for the Protection of Birds (RSPB) in the U.K. to investigate challenges in the implementation process of a BSC and potential solutions to these issues. Working through both existing literature on the subject and interviewing experts at other NPOs as well as leading consultants (including Ascendant’s Dylan Miyake), I was able to identify key challenges related to the planning of the scorecard process, human resources necessary to accomplish the project, and the actual putting in place of the BSC itself.

But the most interesting issue I discovered in my research revolved around the use of the BSC as a change tool. The scorecard is often treated as mechanistic; a strict formula for better measurement that sometimes, though not often enough, reaches the level of improving management. But its scope and impact on the organization fundamentally changes the organization at all levels, including its operating context. Therefore, I approached my research with an eye toward how the BSC is used as a fluid tool that both stimulates and guides organizational change.

THE BALANCED SCORECARD AS A CHANGE TOOL

By looking at the BSC as a change tool, I found that its success is dependent upon its use as a continuous, iterative process that must evolve with the organization as it changes. With this in mind, I arrived at a set of recommendations that every NPO should consider carefully when embarking upon a BSC implementation project.

Planning

  • Understand your organization’s context – both internally and externally. Knowing yourself is the first step in ensuring the BSC works for you. This is an important step that many organizations short-shrift, or miss, altogether.

  • The BSC must be customized to fit the organization. There’s no such thing as generic when it comes to this tool, and no step-by-step how-to guide will get you all the way there.

People

  • Teams working on the scorecard development must be cross-functional and also encompass multiple levels of the organization to develop the right buy-in and use across the organization.

  • Staff who will be responsible for inputting data on performance towards objectives should be involved in the process of determining the most appropriate measures of that performance.

Process

  • Open and continuous communication to staff and stakeholders throughout the BSC implementation process is critical to staying the course and achieving desired results. Communication processes and exchange of dialogue must be tailored to differing audiences throughout the organization.

  • Your organization needs to embrace the true spirit of the BSC, understanding that effective use of this tool is a continuous, iterative process. This is not a one-time process but a continuous journey using the scorecard.

EVOLUTION AND PROGRESS

By treating the BSC as a living, breathing entity that evolves and changes with the organization, NPOs can better meet the demands of the current nonprofit environment, while having both structure for change and a method of pursuing continuous organizational improvement.

ABOUT EVAN

Evan Stisser has a background in government consulting and is a recent MBA graduate of Cass Business School in London, where he focused on business strategy, change management, and organizational development. If you'd like to contact Evan, he may be reached at estisser<at>gmail.com.