Mastering the Balanced Scorecard

3. Product and service recipients. In a for-profit company, the goal is to satisfy the needs of customers, since customers are the primary source of revenue. So a balanced scorecard can simply focus on customers. The situation is more complex for nonprofits.

In a drug treatment facility, for example, the customer (i.e., the addict) not only does not pay for the treatment, but arguably his or her personal satisfaction with the facility’s treatment may be irrelevant to the most important measures of organizational performance. Nonetheless, even in this type of case, the nonprofit most likely is concerned about how it interacts with its service recipients and will want to measure that somehow.

4. Donors and board members. For nonprofits, donors and board members more often are treated as though they were the customers, even though they are not usually recipients of the nonprofit’s services or products. These are the people who contribute with dollars, labor and advice to support the nonprofit. It is their satisfaction, often more than that of direct-service recipients, that is crucial to keeping a nonprofit operation going. This is the basis for creating a planning category for donors and board members.

An alternative scheme I have used takes a slightly different view. It considers donors as one of the revenue sources within the planning category of revenue and funding. It recognizes board members not as people to be treated as customers, but rather for their roles as leaders. In this case, the nonprofit uses a different fourth planning category called “leadership.”

Within this category, the nonprofit can set goals and measure progress relating to leadership activities and accomplishments of both senior managers and board members.

5. Internal operations. For-profit organizations are concerned, of course, about the efficiencies of internal operations. Yet, they plan to operate with a margin of profit, which, in poorly performing years, can simply slim down or disappear to cover the effects of less-than-optimal performance.