Mastering the Balanced Scorecard

You can collect process measures indicating how many acquisition mailings you do and how many use the targeted prospecting lists. You can examine the resulting increase in the housefile as an outcome measure. These are excellent measures because they relate directly to what you intended to do and what you hoped to accomplish.

Your mail-list manager also might give you many statistics describing the demographics of your donors. What about using those data for a balanced scorecard? Sure, these measures are readily available, but do you need them? The question is not, “What statistics are available?” The questions are, “What have we planned to do this year and how have we planned to do it?” and then, “Does this statistic help us answer either of those questions?”

For a balanced scorecard, you only should use metrics that relate directly to your organization’s planned processes and targeted outcomes.

If you understand the ideas behind a balanced scorecard, you will be free to modify the classic formula so it becomes a better tool for your organization. In particular, I believe a nonprofit organization should make some fundamental changes to the four basic measurement perspectives. One approach, for example, is based on these six categories, which are clearly related to the four measurement categories in the original balanced scorecard formulation:

1. Revenue and funding. The goals and strategies around revenues are extremely important for any nonprofit organization. These are primarily external-facing, aimed at the question of how best to bring in monetary resources. For most organizations, this includes questions of fundraising and investment strategies, alternative funding sources, costs of fundraising, use of fundraising consultants, and so on.

2. Resource allocation. The second category relates to monetary and perhaps other nonfinancial resources from an internal perspective. An organization always starts the year with a spending plan (a budget), which should have been created in order to support its program plan, and reflect its policies and priorities for the upcoming year. Alas, every year brings with it unforeseen events, changes in priorities, emergency allocations and the like. Therefore, a complete budget plan also should include principles and practices for budgetary reviews and reallocations.