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Balanced Scorecard step-by-step for Governance and Nonprofit Agencies

While researching this book, I had the pleasure to speak with many people working in, and involved with, both the nonprofit and government fields. Intent on supplementing my own knowledge of these organizations, I subjected those charitable enough to share their time with me to dozens of questions on every conceivable topic of even remote relevance to the Balanced Scorecard. One person, however, turned the tables on me. Dennis Feit, of the Minnesota Department of Transportation, began our interview by putting forth these questions to me: ?You?re trying to change something with this book. What is it??? And, second, ?Why is that important?? In many respects this entire book represents my answer to his challenging and valuable questions. However, in this short space I will provide a condensed response, and in so doing introduce you to what lies ahead. In the early 1990s, Robert Kaplan and David Norton sought to solve a measurement problem plaguing corporations around the globe. The dynamics of business were changing rapidly; globalization, customer knowledge, and the rise of intangible assets were all rapidly converging to forever change the way business was conducted. Strategy was considered a potent defense for succeeding in this changing landscape. However, the facts suggested that approximately 90 percent of organizations were unable to execute their strategies. Kaplan and Norton made the startling discovery that performance measurement systems utilized by most firms were not capable of providing the information needed to compete in this new knowledge economy. Most were remarkably unchanged from those developed by the early industrial giants at the turn of the twentieth century. Characterized by an almost exclusive reliance on financial measures of performance, these systems were ill prepared for the challenges faced by modern organizations. Kaplan and Norton believed that organizations should attempt the introduction of balance to their measurement systems. Specifically, the historical accuracy and integrity of financial measures must be balanced with the drivers of future financial performance in an attempt to view a wider spectrum of performance and execute strategy. Their radical, yet profoundly simple approach was labeled the Balanced Scorecard, and featured measurement in four distinct, yet related areas: customer, internal processes, employee learning and growth, and financial. ix Since its introduction in 1990, the Balanced Scorecard has been embraced by corporations around the world. Recent estimates suggest at least 50 percent of Fortune 1000 organizations use a Balanced Scorecard system. For-profit companies have used the system to generate improved financial results, align employees with strategy, base resource allocation decisions on company goals, and improve collaboration. Public and nonprofit agencies have been slower to accept the Balanced Scorecard system of performance measurement. Many possible explanations exist, including the reluctance to experiment with tools conceived with a for-profit audience in mind, and the notion that measurement efforts may obscure the true mission orientation of the organization. These justifications, and others like them, are what I am attempting to change with this book. In my work as a Scorecard practitioner and consultant, I have seen this remarkably adaptable tool successfully applied in organizations large and small, public, private, and nonprofit alike. Now, why is this important? Are nonprofit and government organizations so dissimilar to their private sector colleagues that a Balanced Scorecard approach to measurement is irrelevant? While you?re considering your response, review this quote: ?The issues are many and complex, but taken together they might be characterized by two superordinate and related challenges?sustainability and the ability to adapt to a rapidly changing world. Organizations must cope with increased competition, more diversity among constituents, higher expectations from the public, increasing costs, declining support, rapidly changing technology, and substantially different ways of conducting business. Surviving in such an environment (sustainability) depends upon the ability to adapt.?i If you believed this was written in reference to modern corporations, you?re wrong. This quote was specifically directed toward nonprofit organizations. Your challenges, as clearly articulated, are remarkably similar to those of private-sector firms. Modern corporations facing increased competition, increasing costs, and diverse constituents have embraced the Balanced Scorecard as a beacon to guide them through these dark woods of change all around us. There is no reason to believe nonprofits, facing virtually identical challenges, will not derive the same, if not greater, benefits. The lines separating public and private organizations are equally blurry. In an era when investor demands of greater disclosure and increased governance are pounding boardrooms across the nation, public-sector agencies face equally vexing challenges. Demands of accountability and transparency in public-sector performance are ringing ever louder. A consistent information and reporting framework for performance is widely viewed as inhibiting their ability to draw the curtain on performance and results. Forward-thinking public-sectors agencies, representing all levels, are beginning to see the benefits offered by a Balanced Scorecard system in this arena. The City of Charlotte, North Carolina, profiled in Chapter Thirteen, has been using the system for several years and credits it with focusing employees on strategy and improving overall city results. x Preface Making the transition to this new world of measurement is not without its share of potential pitfalls. This book has been written to help you navigate this sea of change and to capitalize on the many benefits of the Balanced Scorecard, while concurrently avoiding costly implementation errors. Here?s a look at what you?ll find in the chapters ahead. HOW THE BOOK IS ORGANIZED Our Balanced Scorecard journey together consists of 14 chapters separated into four distinct, yet related, parts. Part One serves as an introduction to the field of Performance Measurement and, more specifically, the Balanced Scorecard. Chapter One introduces the Scorecard tool, providing an historical perspective and discussing the many facets of this tool. Adapting the Balanced Scorecard to the public and nonprofit sectors is the subject of Chapter Two. You?ll learn that with only minor ?geographical? modifications, the Balanced Scorecard is well suited to meet your measurement challenges. Upon embarking on a Balanced Scorecard implementation, you?ll quickly discover it is more than a ?measurement? initiative. In fact, the Scorecard will touch many disparate elements of your organization. Part Two of the book, ?Pouring the Foundation for Balanced Scorecard Success,? outlines the many and varied elements that must be in place to ensure your Scorecard outcomes are successful. Chapter Three, entitled ?Before You Begin,? discusses a number of items that you must consider prior to building a Scorecard, including: your rationale for developing a Scorecard, gaining executive sponsorship for the initiative, and building an effective team. Many organizations rush into the Scorecard building process without the aid of training on the subject. Poorly designed Scorecards, and little if no alignment throughout the organization, frequently result from this decision. Chapter Four provides a training curriculum for your Balanced Scorecard initiative and discusses the importance of communication planning. Chapter Five begins the transition to the core elements of the Balanced Scorecard, specifically addressing mission, values, and vision. The Scorecard will ultimately act as a translation of these critical enablers of organizational success. In this chapter we?ll explore the nature of these critical enablers and I?ll offer tools for developing or refining your current statements. Strategy is at the core of every Balanced Scorecard, and Chapter Six examines this widely discussed, but often poorly understood subject. A straightforward approach for developing strategy is offered. Part Two ends with an examination of the Balanced Scorecard?s place within the larger context of your performance management framework. The Scorecard will not exist in a vacuum, so you must determine how it complements your current management framework. Preface xi In Part Three of the book, ?Developing Your Balanced Scorecard,? you?ll take a guided tour through the development of a strategy map and Balanced Scorecard. Chapter Eight outlines the strategy map concept, that of graphically displaying the key objectives that serve as the translation of your strategy. The critical concept of cause and effect is also explored. Chapter Nine fills in the remaining pieces of your Scorecard, with measures, targets, and initiatives. You?ll learn how to develop measures in each of the four perspectives, why targets are critical, and how initiatives can mean the difference between success and failure on performance. The final part of the book, Part Four, ?Maximizing the Effectiveness of the Balanced Scorecard,? is dedicated to helping you get the most out of your Balanced Scorecard system. We begin in Chapter Ten, which probes the concept of cascading the Balanced Scorecard. This term refers to the process of generating goal alignment throughout the organization through the development of Balanced Scorecards at each and every level of the agency. In an era of shrinking budgets, we?re constantly reminded of the importance of aligning spending with results. Chapter Eleven provides a method of linking the Balanced Scorecard to your budgeting process, and in so doing aligning spending with strategy. Chapter Twelve canvasses the many reporting options available to Scorecard-adopting organizations. Whether you choose to buy an automated software package or develop your own tool, in this chapter, you?ll find the information you need to make an informed decision. In Chapter Thirteen we?re treated to an insider?s view of the highly successful Balanced Scorecard implementation at the City of Charlotte, North Carolina. These pioneers of public sector Scorecard use share the secrets of their success, along with the challenges they?ve faced. The book concludes in Chapter Fourteen with a glimpse into what is necessary to sustain your Scorecard success. We?ll examine the dynamic nature of the Balanced Scorecard and consider key roles necessary to maintain your momentum. The book also includes a glossary of key Balanced Scorecard and Performance Management terms. It?s a pleasure to serve as your guide through the rewarding territory that is the Balanced Scorecard. My goal is to steer you through the terrain that follows by offering a text that is exhaustive in scope without being excessively complex or unduly simplistic. Let?s get started!.NULL.NULL

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