Mastering the Balanced Scorecard

In contrast, many nonprofits work on virtually no margin of error. A year of poor performance efficiency can result in dramatic cutbacks in staffing or programs, since many nonprofits have no safety buffers built into their budgets. While the category is the same for both types of organizations, it probably is a more critical management issue for nonprofits.

6. Staff development. The final category in the classical balancedscorecard scheme is innovation and learning. Where the preceeding measurement categories focus on an organization as it is today, the final category addresses the fact that organizations need to continuously grow, adapt and improve. For most companies, future development is tied to the organization’s staff. Within nonprofits, innovation is not usually the compelling market force that it is in the world of competitive, for-profit enterprise. For most nonprofits, developing the organization means, in a literal sense, developing its employees. In this spirit then, for nonprofits, it seems more straightforward to call this final category staff development.

Get ready, get set, implement!
Once you understand what a balanced scorecard is all about, you are ready to implement it. This is a multistep process that is not for the weak of heart or the short of patience. While it does, in theory and over time, lead an organization to more efficient and effective practices, the balanced scorecard requires substantial time, energy and talent up front to make it work well. Worse, if the balanced scorecard technique is not planned and implemented smartly, the result is likely to be a disappointing waste of that time, energy and talent.

If you are up for the challenge, here are your basic steps:

1. Get your board of directors and managers educated on the basics and committed to the effort.
2. Appoint someone on staff to be in charge of creating and maintaining the balanced scorecard.
3. Depending on your organization’s size and the knowledge of the person you have placed in charge, you may need to hire a consultant to assist in this effort.
4. Build your scorecard categories to match what is in your strategic plan. Or build your strategic plan around the categories you will use for the scorecard. Or modify your existing strategic plan so it matches the scorecard categories.
5. Derive the balanced-scorecard measures, metrics and analytical techniques, and implement them in test mode for two or three months.
6. Use the test experience to improve the balanced-scorecard measures and processes.
7. Begin to collect, analyze, report and archive scorecard measures on a regular (e.g., monthly or quarterly) basis.