Process Of Developing A Balanced Scorecard For Nonprofit Corporation

Identifying Critical Success Factors

1.The issue that has been presented in the question is that Great Persons, Inc (GPI) is a nonprofit corporation essentially established for the purpose of serving the local community needs. The corporation now provides a varied range of services starting from health equipment, residential services for the people with disabilities and other associated services related to healthcare. Now, the problem presented in the question is that the Board of Directors of the corporation has decided to evaluate the performance carried out by the nonprofit corporation on the basis of non-financial measures. This made Deb Young propose the preparation of a balanced scorecard, which would effectively provide an effective overview into the performance of the corporation on the basis of the perspectives developed which in turn would be based upon the critical success factors (Coe and Letza 2014).

The process that was essentially followed by Deb Young for developing the scorecard was that Deb did form a Committee of Representatives. This committee consisted of representatives from each of the directorates. The next step that was incorporated by the committee was that they decided to develop the critical success factors by following a nominal group technique. The members of the committee wrote down the relevant CSFs. The next step involved revealing of the critical success factors and recording the same on flipchart. Further important ideas that were generated were added to the master list. Next, the CSFs were written on a post it note and placed randomly on the wall. The committee was divided into two teams namely Team A and Team B. Team A executed the task of grouping the CSFs which were further reviewed by Team B and the grouped CSFs were utilized for the purpose of developing the balanced scorecard perspectives. The Perspectives were then named based on the categorization of the CSFs. Deb also measured the significance of the developed CSFs on the basis of an example situation as to after a two week vacation would the director or manager consult the developed CSFs for measuring the performance of the  corporation (Hoque 2014).

After the identification of the perspectives, the committee developed certain performance measures for measuring the effectiveness of each CSF. Deb also assigned the task of monitoring and reporting the performance for each CSF to a particular member of the committee. This is precisely the process that was followed by Deb Young to develop a balanced scorecard for GPI. In order to understand the process more clearly a flow chart has been constructed as follows:

Developing Perspectives

2.A balanced scorecard is essentially a performance metric that is an important tool in the hands of the management of an organization that is effectively utilized for measuring the performance of the organization based on the non-financial standards or measures. A balanced scorecard is essentially a performance management report that the supervising body of an organization utilizes in order to monitor and regulate the operational activities executed by the employees and the effectiveness of such operations. The critical advantages provided by the balanced scorecard is that it lets the management of the organization to focus on the implementation of the elements of the strategy, developed in order to increase the effectiveness of the organization’s operational efficiency (Gibbons and Kaplan 2015). The balanced scorecard essentially depends on a number of critical success factors. These critical success factors let the foundations for the development of the balanced scorecard perspectives that fundamentally determine the dimensions around which the performance of the organization has to be measured. The detailed and defined structure of the report that the balanced scorecard provides, helps the management to understand and identify the loopholes in the operational proceedings of the company. The balanced scorecard also aims to link or align the objectives of the organization with the daily schedule of the employees or the workers. In general, a balanced scorecard is used for the purpose of evaluating the effectiveness of the projects or initiatives that are undertaken by the organization (Keyes 2016).

The balanced scorecard however also has a range of disadvantages. The maintenance of a balanced scorecard requires rigorous monitoring and regular update of the management tool, which at times becomes overwhelming for the organization. Different staff may interpret the corresponding perspectives developed on the balanced scorecard, differently. These are the general advantages and disadvantages, that a firm may face while implementing the balanced scorecard (Lin 2016).

In case of GPI, there are a few estimated advantages and disadvantages that the nonprofit corporation may face. The advantages are as follows:

• The nonprofit corporation though has the primary objective to measure the performance of the firm on the basis of non-financial measures, the implementation of the balanced scorecard will ensure a sustainable as well as long term financial health of the entity (Perkins, Grey and Remmers 2014)
• The second advantage provided by the management tool is that it will effectively aid in increasing the satisfaction of the client, which is the major goal of the organization. Being a nonprofit body, the primary aim of the organization is to ensure satisfaction of the clients with the service provided which will improve the reputation of the organization, attract more clients and retain its client base.
• The implementation of the balanced scorecard will effectively make all the stakeholders of business aware of the goals of the company and their individual roles or duties in achieving the same.
• The core competencies of GPI can also be effectively identified with the proper implementation and the utilization of the balanced scorecard system (Niven 2014).

The disadvantages that the organization may face can be listed down as follows:

• As it is evident from the case study, GPI provides a wide range of services, which indicates that the entity handles a huge workload throughout the day. Thus, given the current workload of the corporation the maintenance of a particular balanced scorecard may prove to be enough challenging for the organization (Sainaghi, Phillips and Corti 2013).
• The personnel of the corporation may feel insecure or the work environment may be hampered due to the implementation of the balanced scorecard. This is because the employees may feel that the management is constantly monitoring them (Lin 2014).
• The guidelines developed by the scorecard essentially in terms of employee training or technology implementation in the organization may be too costly to afford.

3.The issue presented in the question is that the respective critical success factors that have been developed for each perspective of the balanced scorecard has been asked to be listed down and explained accordingly. The respective perspectives that have been developed for the balanced scorecard are the client perception or the perspective in relation to the community; financial support perspective; internal process perspective and lastly, quality or workforce perspective.

Defining Performance Measures

The particular CSFs that can be developed for client perception/community are as follows:

• Community support – How community support has been achieved by the organization and the quality of the support provided by them should be a potential CSF. The way the services provided by the organization helps the community should be chalked out and evaluated.
• Community awareness – Awareness of the community in terms of the services that they deserve and the services they are presently receiving. Effective comparison between the estimation of the client and the current services should also be carried out.
• Community satisfaction – Whether the clients are satisfied with the services or should new services be developed, has to be determined.
• Community image – The image of the corporation in relation to other fellow competitors in the market to its clients should also be determined and if required improved.
• Percentage of dissatisfied clients – The percentage of dissatisfied clients should be strictly monitored and looked into (Rampersad and Hussain 2014).

The particular CSFs developed for financial support perspectives are as follows:

• Solvency – The financial solvency of the firm should be monitored. It is very important to maintain the liquidity of the firm. Being a nonprofit organization, the management of GPI should be more concerned with the maintenance of the liquidity of the corporation.
• Funding – The processes involved in raising the required funds for the proper running of the organization along with the techniques undertaken should be evaluated. This is because the firm may be able to raise more funds utilizing the technique of crowd funding in respect to any other traditional methods.
• Ratio of revenue against expenses – The ratio of the revenue to the expenses should be effectively measured in order to determine whether the firm expends more than it earns.
• Turnover generated by the newly purchased assets – The turnover generated by the newly purchased assets should be measured and improved accordingly (Martello, Watson and Fischer 2016).
• Controlling the expenses – The administration and the cost incurred related to the services provided should also be monitored and controlled effectively.

The particular CSFs developed for internal process perspectives are as follows:

• Operational guideline – The operational guideline should be developed in order to acquaint the staff and other members of the organization with the procedures adopted for the achievement of the organizational goals.
• Collection of donations – The particular way in which the donations are received and accounted for should also be monitored.
• Utilization of funds – The exact and accurate details as to how the donations or collections are utilized should also be recorded.
• Audit – Audit of the operational proceedings and the governance regulations implemented in the corporation should be carried out in regular periodic intervals and the desired results should be tested.
• Tracking system – A particular tracking system in relation to the potential clients should be developed and followed.

The particular CSFs developed for quality of workforce perspectives are as follows:

• Quality of training – The quality of the training provided to the respective workforce or labor should be monitored.
• Staff retention – The particular initiative taken in retaining the respective staff of the organization should be determined. For instance, the rewards or recognition granted on excellent performance by the employees should be regulated and monitored.
• Recruitment process – The recruitment or the hiring process adopted by the human resource department of the organization should be reviewed. The standards of recruitment, if fixed properly, then the need of incurring of cost on the training of the respective employees will be minimized.
• Employee attitudes to change – Employees are in general resistant to change. Therefore, it is the primary duty of the management to be vigilant towards such an attitude and take proper initiative so that they do not resist the implementation of the balanced scorecard (Bhattacharya 2015).
• Inclusion of the employee suggestions – The employees are the individuals who are directly in contact with the clients. Thus, the inclusion of the suggestion of the employees regarding the improvement of the services is very important.

Proposed Balance Scorecard of GPI

Perceptivities/ Objectives	Measures	Target	Evaluation period	Target Date	Responsible person	Actual result	Variance	Reason of variance	Corrective action
1. Community  / Client Perspectives
1.1 Satisfaction with type of services	Satisfaction Survey	70% Satisfaction	Monthly	Each of every month	Director of business	–	–	–	–
1.2 Responsive to client admission of Denial of services	Satisfaction Survey	90% Satisfaction	Quarterly	End of every Quarterly	Director of communication and development	–	–	–	–
1.3 Community awareness	Awareness survey	90% Satisfaction	Monthly	Each of every month	Director of communication and development	–	–	–	–
1.4 Community image	Satisfaction Survey	90% Satisfaction	Monthly	Each of every month	Director of communication and development	–	–	–	–
1.5 Community satisfaction	Satisfaction Survey	90% Satisfaction	Monthly	Each of every month	Director of communication and development	–	–	–	–
2. Financial Support Perspectives
2.1 Solvency	Financial Statements review	90% Satisfaction	Monthly	Each of every month	Chief financial officer	–	–	–	–
2.2 Funding	Evaluation of the costs incurred in the particular technique of funding	90% Satisfaction	Monthly	Each of every month	Marketing executive	–	–	–	–
2.3 Ratio of revenue against expenses	Financial Statements review	90% Satisfaction	Monthly	Each of every month	Chief financial officer	–	–	–	–
2.4 Turnover generated by the newly purchased assets	Financial Statements review	90% Satisfaction	Monthly	Each of every month	Chief financial officer	–	–	–	–
2.5 Controlling the expenses	Financial Statements review	90% Satisfaction	Monthly	Each of every month	Chief financial officer	–	–	–	–
3. Internal Process Perspectives
3.1 Operational guideline	Internal controls and review of the internal operations	90% Satisfaction	Monthly	Each of every month	Operations Manager	–	–	–	–
3.2 Collection of donations	Internal controls and review of the internal operations	90% Satisfaction	Monthly	Each of every month	Chief financial officer	–	–	–	–
3.3 Utilization of funds	Internal controls and review of the internal operations	90% Satisfaction	Monthly	Each of every month	Chief financial officer	–	–	–	–
3.4 Audit	Internal controls and review of the internal operations	90% Satisfaction	Monthly	Each of every month	External and internal auditor	–	–	–	–
3.5 Tracking system	Internal controls and review of the internal operations	90% Satisfaction	Monthly	Each of every month	Sales officer	–	–	–	–
4. Workforce perspectives
4.1 Quality of training	Employee survey	90% Satisfaction	Quarterly	End of every Quarterly	Human Resource officer	–	–	–	–
4.2 Staff retention	Employee survey	90% Satisfaction	Quarterly	End of every Quarterly	Human Resource officer	–	–	–	–
4.3 Recruitment process	Employee survey	90% Satisfaction	Quarterly	End of every Quarterly	Human Resource officer	–	–	–	–
4.4 Employee attitudes to change	Employee survey	90% Satisfaction	Quarterly	End of every Quarterly	Human Resource officer	–	–	–	–
4.5 Inclusion of the employee suggestions	Employee survey	90% Satisfaction	Quarterly	End of every Quarterly	Human Resource officer	–	–	–	–

4.The critical success factors are essentially the foundations upon which the success of a particular balanced scorecard depends. This means that it is the critical success factors, that analyze and evaluate the effectiveness of the implemented balanced scorecard. The issues that has been presented in the question is that the relationship between the different CSFs have been asked to explained and how one CSF can affect the other is required.

The different CSFs that have been prepared have been shown in the answer to the previous question. The CSFs developed for the client or community perception determine the success of the CSFs of the financial support perspectives. This is because the particular success related to community satisfaction and community awareness will positively affect the amount of funds collected, which will in turn the financial health, or the liquidity position of the company (Kang 2015). Moreover, if the clients appear to be satisfied with the current or existing quality of the services provided by the company then the cost incurred in implementing new technology or development of an entire new range of services can be mitigated. Thus, the critical success factor of controlling the expenses will be successfully met. Therefore, it can be observed that the success of a particular CSF depends on the success of another. Further examples can be cited from the CSFs of the internal process perspectives. The donations that are collected and spend for the purpose of business should be properly recorded. Now, in case the financial proceedings are not correctly recorded, then the financial statements prepared by the accountant of the organization will not truly reflect the financial condition of the company, which will in turn affect the solvency of the firm which is a potential CSF of the financial support perspective. Moreover, the audit that is another potential CSF of the internal process perspective of the balanced scorecard is directly linked with the quality of the financial statements that have been prepared. Therefore, it is very important to correctly record the financial proceedings in relation to the funds or donations that have been received and spent for business purpose. Lastly, the workforce perspectives that essentially deals in the employees of the organization is directly linked with all the other CSFs. This is because the quality of training that is imparted to the staff if does not prove to be efficient then the cost incurred in training will directly affect the financial support perspective. To be more precise the particular CSF of controlling the expenses will be affected. Moreover, the reward o recognition declared for the welfare of the staff will make them more efficient in their work which will again positively affect the CSFs of the client or community perspective. Thus, it can be evidently stated that the different perspectives of the balanced scorecard that have been developed after rigorous research do not only make it a success, but the interrelatedness between the various elements or the critical success factors of the scorecard, does (Hansen and Schaltegger 2016).

References

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