It is tempting to assume that putting in place a strategy will guarantee positive results. A strong vision, clear objectives, a plan – there is no doubt that all of these elements are critical to successful implementation. However, developing the strategy is only a small part of the journey to realising a long-term, sustainable vision for change. Without a strong performance management approach in place, it is easy to lose sight of objectives, to overlook inefficiencies and ineffectiveness, and to miss critical mid-course corrections that can be the difference between success and failure.

The balanced scorecard helps improve performance by creating clarity and accountability, facilitating organisational change, and encouraging learning. The strength of the balanced scorecard is that it helps to link what one wants to achieve (e.g., social impact) to how different parts of the organisation need to work together to achieve this. This makes it an extremely effective tool to learn and continuously improve. Other sector specific approaches, such as the UN sponsored Results-based management used by many NGOs, closely resemble the balanced scorecard for this very reason. In both approaches, causal chains are created that hypothesise how results will be delivered. Specific milestones along the chain are monitored to understand not only whether results are achieved, but the root causes of underperformance.

What does the balanced scorecard look like?

Those unfamiliar with a scorecard approach may be intimidated by its seeming technicality, but the best scorecards are simple and clear. They always start with a strategy map that outlines ‘dimensions’ aligned to key performance areas that are vital to delivering the overall mission.

For charities, the most common arrangement of dimensions will be:

  • Customer value performance – e.g. reach, impact, customer satisfaction
  • Financial performance – e.g. income, return on investment, cash flow
  • Internal operational performance – e.g. productivity, service quality, efficiency
  • Employee performance – e.g. morale and engagement, knowledge, turnover

Innovation can be considered either as part of internal operational performance, employee performance or as a fifth dimension to highlight the importance of developing new services, products and ways of working. The dimensions should be tailored to the needs of the organisation; there is no ‘correct’ way to lay out the scorecard.

Example: Strategy map

Charity Strategy Map

For each of these dimensions, key performance indicators are selected and monitored at regular intervals through the Balanced Scorecard dashboard itself. Balanced scorecard KPIs should be kept to a minimum to maintain clarity and avoid overburdening staff. All KPIs should also be actionable, giving managers information that helps make decisions.

Example: Balanced Scorecard

Charity Balanced Scorecard

Case Study: Implementing a balanced scorecard for a charity

One UK charity wanted a way to assess both organisational and functional strategies, and to provide a framework and a common language for managing performance across the charity. The leadership team decided to implement a balanced scorecard.

The team understood that to successfully implement the scorecard, they would need an empowered leadership team who could drive the process, as well as deep staff engagement and training. Using the structured approach outlined below, they were able to successfully translate their strategy into a scorecard that could be used at quarterly management meetings to make crucial decisions about future actions.
Balanced scorecard approach

The first step that the team took was to translate their strategic vision, which had been laid out in their most recent strategic plan, to identify specific objectives. These objectives were mapped out with all of the preconditions necessary to achieve them successfully within the given timeframe. For example, one objective was to increase grant funding. In order to do this, the organisation knew they would need to also improve the efficiency of the bid development process and to provide training for staff. As the team developed the strategy map, they were also able to identify weaknesses and gaps in the original strategic plan, which they were able to improve.

The strategy map was organised around the four core dimensions – customer, finance, operations, and people – but customer impact was placed at the top and defined as both the funders who supplied resources and the beneficiaries who benefited from work.

Once the scorecard structure and the strategy map have been agreed, measures and targets were be attached to each objective. Keeping these specific and limited was a challenge for the charity, who chose a consultative process to identify the right KPIs. They needed to balance the quality and availability of data with the measures, but were able to reach a consensus on 19 KPIs.

After the targets are set, a clear process was put in place to gather and synthesize information. While the charity explored different software solutions, they decided to pilot an excel-based model that was easy to use and visually appealing for the initial stage.

The too often overlooked aspect of scorecard implementation is how data collected will be used to drive decision-making. To facilitate the use of the new scorecard, governance and decision-making processes were also evaluated and redesigned to incorporate the use of data and learning. Furthermore, by aligning reward and recognition system to scorecard measurements, senior managers can help to drive culture change.



What are some of the common pitfalls to avoid?

Process failures are the most common and often are caused by ineffective communication within an organisation. These include:

  • Lack of senior management commitment or expertise
  • Keeping the scorecard at the top levels
  • Too few individuals involved
  • Too long a development process
  • Using the Balanced Scorecard as a one-time only measurement
  • Treating the Balanced Scorecard as a systems project
  • Introducing the Balanced Scorecard only for compensation

Design failures are often the result of a poor process. Design failures can be driven by:

  • Selection of too few measures for each perspective
  • Selection of too many measures without identifying the key ones
  • Failure to find measures that accurately relate to the organisation’s strategy

Conclusion

Despite these pitfalls, scorecards remain a valuable resource for charities who are seeking a clear and coherent way of measuring and managing performance. Like any tool, they need to be implemented in a thorough and structured way that ensures a successful outcome and should not be seen as standalone projects, but should be well integrated into the culture of the organisation to be effective.

If you are interested in hearing more about the balanced scorecard, make sure you are subscribed to our blog. Future articles will include best practice in strategy mapping, how to identify the right indicators, and how to align governance and data.