How do you use strategic planning tools like the Balanced Scorecard?

1 What is the Balanced Scorecard?

The BSC was developed by Robert Kaplan and David Norton in the 1990s as a way to overcome the limitations of traditional financial measures of organizational success. They argued that non-financial aspects such as customer satisfaction, employee engagement, innovation, and social responsibility were equally important for long-term sustainability and growth. The BSC consists of four perspectives: financial, customer, internal process, and learning and growth. Each perspective has a set of objectives, indicators, targets, and initiatives that link to your overall strategy and mission.

2 How to create a Balanced Scorecard for your non-profit?

The first step to create a BSC for your non-profit is to clarify your strategy and mission, which includes defining your purpose, values, vision, and strategic goals. Tools like the SWOT analysis, stakeholder analysis, and logic model can help with this process. After that, you can start developing your BSC by identifying the key objectives for each perspective. For example, the financial perspective may include increasing revenue, reducing costs, and diversifying funding sources. The customer perspective may include improving service quality, reaching more beneficiaries, and enhancing reputation. Then you need to select indicators that will measure progress towards objectives. For instance, the financial perspective may use income, expenses, and return on investment; while the customer perspective may use satisfaction, retention, and referrals. Afterward, you need to set targets that will define desired performance for each indicator. For example, the financial perspective may include increasing income by 10%, reducing expenses by 5%, and securing 3 new grants; while the customer perspective may include achieving 90% satisfaction, 80% retention, and 50% referrals. Finally, define initiatives that will help you achieve your targets and objectives. The financial perspective may involve launching a fundraising campaign, optimizing budgeting, or applying for new grants; while the customer perspective may involve improving service delivery, expanding outreach, or strengthening partnerships.

3 How to use the Balanced Scorecard to manage your non-profit?

The BSC is not only a planning tool, but also a management tool that helps you monitor, evaluate, and communicate your performance and impact. To manage your non-profit effectively, you should review your BSC regularly and update it as needed. Track indicators and compare them with targets at least quarterly, and adjust objectives, targets, and initiatives if required. Additionally, review strategy and mission annually to make sure they are still relevant and aligned with environment and stakeholders. Moreover, use data and insights from your BSC to guide decisions and actions; identify gaps, risks, or challenges that might affect performance and impact; showcase achievements and challenges; demonstrate accountability and transparency; inspire supporters and partners; solicit feedback from stakeholders; and foster collaboration and learning.

4 What are the benefits of using the Balanced Scorecard for your non-profit?

Using the BSC for your non-profit can bring many advantages, such as enhancing strategic alignment and focus, improving performance and impact, increasing stakeholder engagement and satisfaction, and fostering innovation and learning. The BSC helps you clarify and communicate your strategy and mission, measure progress and results, understand the needs of customers, donors, staff, and other stakeholders, identify strengths and opportunities, make data-driven decisions and actions, share value and impact with stakeholders, experiment, and learn from failures and successes.

5 What are the challenges of using the Balanced Scorecard for your non-profit?

Using the BSC for your non-profit can also pose some challenges. Finding the right balance between financial and non-financial measures can be difficult as the BSC requires you to consider both aspects of your organization. Collecting and analyzing reliable and relevant data is also challenging, as you must find or create valid and reliable sources of data and interpret and use them effectively. Additionally, managing the complexity and change of the BSC can be overwhelming as it is a dynamic and comprehensive tool. Finally, getting buy-in and support from stakeholders can be difficult if they are not familiar with or comfortable with the BSC approach.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?