3 Reasons To Use The Balanced Scorecard (BSC) For Nonprofit Organizations

For profit and nonprofit organizations are very different, but both need a well-executed strategy to succeed. Without a well-thought-out, organized plan of action and common goals to work toward, both for profit and nonprofit businesses would be in disarray.

Maybe you’re at a point right now where your nonprofit is in need of a new strategic framework. Or maybe you’re just looking to improve an already-successful strategy. Either way, I’d like to introduce you to a tool that can help: the Balanced Scorecard.

An Overview Of The Balanced Scorecard (BSC)

The Balanced Scorecard (BSC) was created in 1992 by Drs. Robert S. Kaplan and David P. Norton. It was considered a revolutionary new method for handling strategy management at the time, and is still one of the top 10 most-used strategy tools. Creating a BSC allows organizations to center their strategy around four perspectives: customer/constituent, internal processes, financial, and learning/growth. These distinct categories help organizations to:

• Organize their team around their organizational goals in a clear, concise way.
• Focus their vision on the areas of the organization that are important.
• Execute and track the successes of your strategies in a meaningful way.

Scorecarding began as a framework primarily for use in the private sector, but you’ll now see the Balanced Scorecard in nonprofits, government organizations, healthcare organizations, and a number of other mission driven and nonprofit associations.

For a nonprofit, the strategy map changes shape slightly. Mission replaces Finance at the top, and beneficiaries replace customers. The Boys and Girls Clubs of Puerto Rico (BGCPR) shows how far the framework can carry an organization. In 2004 it could hardly make payroll. Leaders adopted the Balanced Scorecard in 2006, added quarterly strategy reviews and a performance measurement program, and won the Balanced Scorecard Hall of Fame award in 2010. At the time of our case study, it served more than 16,000 kids at eleven club locations on a budget of $11.5 million.

Balanced Scorecard For Nonprofit: Challenges & Solutions

You may have already checked out the Balanced Scorecard as a possible organizational framework and then dismissed it because it didn’t seem like something you could implement. I’d like to help change your mind on that. Nonprofits are up against many challenges, but the Balanced Scorecard can address (and even help solve) many of those problems.

‍1. Challenge: Defining “success.”

‍Solution: Nonprofits are mission-centric. They focus on the purpose they set out to achieve rather than on the bottom line. Because of this, “success” is measured much differently. Despite being created with for profit enterprises in mind, the Balanced Scorecard accommodates these differences well. For example, an organization like the Cancer Society can define its success not as “curing cancer”, but as “reducing the deaths caused by cancer”. This allows them to focus less on research and more on early detection and other prevention techniques.

Rare, a global conservation organization, faced the same question. In the early stages of Balanced Scorecard adoption it is hard to avoid process measures, yet the measures at the top of the strategy map should be about outcomes. At the time of our case study, Rare had moved stewardship of its scorecard from the finance team to the program team in 2012. Some 80% of measures were programmatic, so the people who ran the programs were better placed to write them. Rare also documented every factor affecting biodiversity at a site, stating plainly that its role was contributing, not causal.

‍2. Challenge: Fundraising.

‍Solution: Nonprofits are focused solely on meeting their organizational goals and mission, rather than pleasing shareholders or beating financial expectations. Still, the organization can’t succeed without fundraising. The Balanced Scorecard allows for organizations to better identify goals, missions, and key performance indicators (KPIs). Having this clearly-defined mission and strategy is attractive to serious donors.

Rare’s numbers show the effect. At the time of our case study, its metrics had played an important part in engaging donors, and within five years Rare went from being a $9 million a year operation to a more than $20 million a year one. “People know that if they invest with Rare, we have solid processes in place to use their money wisely. The BSC says we are disciplined and serious,” said Daniel Hayden, Senior Director of Global Programs.

Smaller organizations see it too. Raphah Institute, which started as a five-employee team, moved the strategic plan that lived in its CEO’s head into ClearPoint and used it to improve reporting to its board of directors. The increased transparency into how the nonprofit is performing has allowed it to attract additional donors and take on more projects.

‍3. Challenge: Getting the word out.

‍Solution: Trying to get people to understand, appreciate, and support the cause of your nonprofit is a battle. By having a Balanced Scorecard, you can better map out what you’re trying to accomplish and how you’re going to do it through initiatives. Likely, these initiatives will include marketing campaigns to attract the right type of people to your cause.

The strategy map itself can carry the message. At the time of our case study, Rare had simplified its map and merged it with its business plan, which made the map a powerful communication tool, internally and externally. Rare also reported its results to all employees online in ClearPoint, so every department could see how the others were performing. With its scorecard in place, Rare could draw on its metrics to report biological impacts to constituents and the public.

Sample Strategy Maps For Nonprofit Organizations

The Balanced Scorecard has become a beloved strategic framework for nonprofits. We’ve seen how helpful it can be, and we’d like to help you get started with scorecarding today. In the white paper below, we’ve created sample scorecards with examples to illustrate specifically how nonprofit groups use the Balanced Scorecard.

Downloading this white paper will give you access to the following:

• Five sample Balanced Scorecard strategy maps, from a microfinance organization to a homeless shelter.
• How nonprofit organizations worldwide are experiencing success with strategy mapping.
• Why you should create a strategy map, and important conclusions you can draw about scorecarding.

Download it now, and get started on updating your strategic plan today.