Performance

Measurement
for Non-Profit
Organizations
THE BALANCED SCORECARD
AS AN APPROACH
Cam Scholey
Kurt Schobel

What is the issue? What can be done?

Even with a well-articulated mission statement, Following a balanced scorecard approach
many non-profit organizations struggle with to performance measurement that is designed
performance measurement. for non-profit organizations will turn strategy
into action and enable the attainment of
Why is it important? strategic outcomes.
Non-profit organizations that fail to link
performance to strategy will have difficulties
maximizing the effectiveness of their operations.

GUIDANCE
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 Performance Measurement for Non-Profit Organizations: GUIDANCE 1

Introduction

The Non-profit sector in Canada plays an important

role in the Canadian economy, employing over two
million people and contributing an average of 8.1%
to GDP.

Non-profit organizations (NPOs) focus on achiev-

ing a social mission and balancing cost efficiency
with program effectiveness to help realize the best
possible social returns. Many NPOs realize that they
must use the tools and nomenclature that for-profit
organizations use if they wish to be successful. While
for-profits have customers, NPOs, which typically
address a community need, have users, clients or government funders, regulators, and volunteers. These
beneficiaries. Without traditional forms of profit stakeholders have differing perspectives and report-
generating activities to help run their organizations, ing frameworks. NPOs are therefore faced with the
NPOs are left to compete for funding dollars, volun- challenge of managing multiple priorities, often times
teers and government grants to ensure they have the with limited staff and organizational capacity. NPOs
resources to serve their community. with strategies linked to performance measures are
better equipped to address the conflicting needs of
While for-profits have owners (and often sharehold- stakeholders.
ers), NPOs have multiple stakeholders to consider in
their governance matrix, including individual and
2 Performance Measurement for Non-Profit Organizations: GUIDANCE

Most NPOs have well-defined procedures for planning

strategy, but many struggle executing these strategies.
This guidance document, aimed at senior management
of NPOs, outlines one possible approach to strategy
execution — a four-step framework called performance
measurement for non-profits (PM4NPO) which utilizes
a balanced scorecard methodology developed by
Dr. Kaplan and Dr. Norton from Harvard University.
 Performance Measurement for Non-Profit Organizations: GUIDANCE 3

NPO Performance Measurement

What Does It Mean? those resources effectively. PM4NPO helps NPOs

PM4NPO refers to a process NPOs can use to develop with this responsibility as well as their responsibility
performance measures, report on performance and to ensure they meet the needs of their volunteers.
discover changes the organization needs to make to
improve overall performance. The reliance on external funding puts pressure on
NPOs to examine all expenditures and ensure funds
All organizations strive to achieve their missions are used to support their missions. Accordingly,
effectively. For-profit enterprises typically focus PM4NPO must be directly tied to the organization’s
on creating wealth for their shareholders while mission to assess how efficiently and effectively it
NPOs focus on achieving their social mission and is using its limited resources. Figure 1 illustrates a
meeting the needs of their stakeholders, many of four-stage process for developing a NPO performance
whom (e.g., individuals or government agencies) may measurement system. It is important to remember that
have made financial contributions or have personal performance measurement is an iterative process and
interests (e.g., volunteers) in the organization and its should be reviewed annually as part of the organiza-
work. Because NPOs rely primarily on the financial tion’s strategic review.
resources of government agencies and private funders
they have a significant fiduciary responsibility to manage
4 Performance Measurement for Non-Profit Organizations: GUIDANCE

FIG U R E 1   The Four-Stage NPO Performance Measurement Process

PM4NPO PROCESS

STAG E 1: STAG E 2: STAG E 3: STAG E 4:

PL AN STR ATEGY MAP BAL ANCED RE VIE W
SCOREC ARD AN D ASSESS

• Review mission, • Start with mission • Identify measures • Manage with

vision and strategy balanced scorecard
• Choose (or confirm) • Assign weights
• Identify user value value proposition • Evaluate results
• Balance measures
proposition versus targets
• Choose the look of
• Set specific targets
• Balance efficiency the map • Examine results and
versus effectiveness outcomes
• Choose
key stakeholder • Adjust as necessary
strategies
• Choose key financial
strategies
• Choose key internal
process strategies
• Choose key learning
and growth strategies

STRATEGIC REVIEW
 Performance Measurement for Non-Profit Organizations: GUIDANCE 5

STAGE 1
Plan

While many NPOs already have strategic plans in place, 1. How are we dealing with the problem(s) our NPO
reviewing these during the PM4NPO planning phase is faced with?
can be useful. The following steps are essential for 2. What is our unique role?
effective PM4NPO planning:
The answers to these questions will frame the mission
1
STE P 1 and vision statements of the NPO.

Review Mission, Vision and Strategy

An organization’s vision describes the social outcomes
The first step in the performance measurement pro-
it hopes to achieve. Its mission, on the other hand, out-
cess requires that the Board of Directors and manage-
lines the organization’s purpose and should include:
ment have a good understanding of the NPO’s mission
• an explanation of the organization’s social service
and vision. When the time comes for NPOs to make
or product
resource choices based on actual results, a complete
• the users or stakeholder groups the organization
understanding of their mission, vision and strategy
aims to serve
will help guide decisions. The board will provide the
• the organization’s NPO sector
NPO’s high-level strategy to management. Manage-
• the key areas where the NPO differentiates itself
ment will be required to execute that strategy and
from other NPOs
report on performance. When reviewing its current
• the community the organization aims to serve
mission, an NPO’s board and management should
reflect on the organization’s past and ask two impor-
tant questions: 1 Rangnan, K., “Lofty Missions, Down to Earth Plan,” Harvard Busi-
ness Review website (accessed June 27, 2012): http://hbr.org/2004/03/
lofty-missions-down-to-earth-plans/ar/1
6 Performance Measurement for Non-Profit Organizations: GUIDANCE

With an understanding of the organization’s mission STE P 3

and vision, the management team can work with the
Balance Efficiency and Effectiveness
board to develop strategies for success using a strat-
Efficiency and effectiveness are critical to mission
egy map and balanced scorecard. While the ultimate
driven NPOs and go hand in hand with an organiza-
responsibility for strategy rests with the board, senior
tion’s choice of value proposition(s). Generally speak-
NPO management will play a critical role in the strat-
ing, efficiency is about “doing things right” while effec-
egy’s execution and should therefore be involved in
tiveness is concerned with “doing the right things.”
the process.

Efficiency is a measure of how well an NPO turns its

STE P 2
inputs (e.g., financial resources and human resources)
Identify User Value Proposition into outputs. With many NPOs vying for limited
The concept of value proposition, the promise of value donation dollars it is important for the NPO to focus
to be delivered, is based on a private sector model from on achieving the best output result using the fewest
the mid-1990s, adjusted to suit the NPO landscape. inputs, and therefore an efficient input/output ratio.
It is important to remember that choosing one value
proposition does not entirely dismiss other value propo- Another way to look at efficiency could be the accom-
sitions. The intent is for an NPO to focus on one value plishment of a given set of tasks with the least amount
proposition, while still achieving acceptable (albeit of input resources necessary (with no sacrifice to
lower) threshold levels in the others. The three NPO quality). For example, NPOs can arrange to share
2
adapted primary value propositions are: a service (and the cost of it) with the aim of promot-
• Operational excellence — the low-cost provider of ing efficiency. The arrangement might be small and
a good or service (e.g., a food bank focusing on temporary, such as a shared booth at a trade show.
moving products at the lowest cost) Or it might be a shared office space situation. Each
• Product/service leadership — the innovator in an promotes efficiency to different degrees.
industry (e.g., a university addressing a previously
unmet need by designing a business program Effectiveness relates to the degree to which an organi-
specifically for entrepreneurs) zation achieves its mission. Effectiveness is a measure
• Stakeholder intimacy — providing stakeholders of the achievement of the most possible outcomes
with a unique and/or memorable experience (e.g., the organization’s mission and objectives) given
(e.g., a youth swim club’s efforts to develop its a finite amount of resource inputs. An NPO that is
members both inside and outside the pool) able to realize more of its mission critical objectives
(i.e., creating a larger impact) can be considered more
An NPO must decide which value proposition (or effective than an organization that realizes fewer of its
combination of value propositions) is most suitable mission critical objectives. While this can be challeng-
to its mission while simultaneously maximizing its ing to measure, the Stage 3: Balanced Scorecard section
social impact. of this document will demonstrate how it can be done.

Effective planning sets the stage for the NPO to begin

preparing its strategy map.

2 Treacy, M., and F. Weirsema, The Discipline of Market Leaders: Choose Your
Stakeholders, Narrow Your Focus, Dominate Your Market (Cambridge: Perseus
Books, 1995).
 Performance Measurement for Non-Profit Organizations: GUIDANCE 7

STAGE 2
Strategy Map

A strategy map is an illustrative depiction of an organi-

zation’s strategy. The seven steps shown in Figure 2 are
considered best practice for NPO strategy mapping.

FIG U R E 2   A Seven-Step Approach to Strategy Mapping

1 Start with the critical mission

2 Choose (or confirm) the value proposition

STAKEHOLDER 3 Choose the look of the map
4 Choose the key stakeholder strategies

FINANCIAL 5 Choose the key financial strategies

INTERNAL 6 Choose the key internal process strategies

LE ARNING
AN D G ROW TH
7 Choose the key learning and growth strategies
8 Performance Measurement for Non-Profit Organizations: GUIDANCE

NPOs should adjust and customize these steps to suit 2. At the base of the strategy map, common for NPOs
their specific situation(s). The financial perspective in that have virtually all of their funding guaranteed.
Figure 2 is positioned beneath the stakeholder perspec- As a result, the NPO’s primary focus is how best to
tive — this is merely one of several possibilities for an spend its funding (e.g., a government agency).
NPO strategy map (discussed more in Step 3: Choose 3. At the top, beside the stakeholder perspective, com-
the look of the map). Steps 2 and 3 are illustrated in mon for NPOs that operate in a landscape similar
broken-line format to indicate that these steps are not to the private sector (e.g., a swim club that cannot
explicitly stated on the strategy map. A sample com- exist without members and membership fees).
pleted strategy map follows this section.
NPOs should choose a strategy map look that best
STE P 1 reflects the organization, its strategy and its value
proposition(s).
Start with the Critical Mission
The organization’s mission should ideally appear at
STE P 4
the top of the strategy map as a reminder that all of
the strategic activities are in support of the mission. Choose the Key Stakeholder Strategies
Formalizing strategies with stakeholders in mind,
STE P 2 such as funders, volunteers, and users involves a two-
pronged approach:
Choose (or Confirm) the Value
• Provide as much value as possible to stakeholders
Proposition
with the resources available.
Determining the best value proposition(s) is an integral
• Exploit the stakeholder value that has the poten-
part of the strategy process. There should be a consen-
tial to garner the greatest potential support from
sus amongst management as to the most appropriate
funders and volunteers in the future.
option, because the organization’s choice will dictate
the direction of subsequent strategy map steps. If the
An NPO’s stakeholders can be a very diverse group,
organization did not identify the value proposition
ranging from local individuals and agencies to pro-
during the planning stage, it must identify it now.
vincial, federal, and even international partners.
The challenge for every NPO will be fulfilling the
STE P 3
expectations of each stakeholder. Ultimately NPOs
Choose the Look of the Map will partner with certain stakeholders out of a need
The appearance of the strategy map (i.e., the ordering for resources and thus, stakeholder strategies can be
of perspectives) should reflect the cause-and-effect translated and categorized into two key areas:
logic of the strategy as closely as possible. The strategy • Adding and retaining funders and volunteers.
map is usually read from top to bottom. • Maximizing the value provided to users.

The financial perspective, an integral part of any strat- The funders and volunteers are key inputs to an NPOs
egy map, is commonly placed in one of three positions: success and must be considered very carefully. By focus-
1. In the second position on the map, below the ing on the outcome of the NPO through value to its
stakeholder perspective, a common option for users, the NPO will be able to address the expectations
NPOs that have users who pay for a service, requir- of its many stakeholders.
ing the NPO to generate demand (e.g., a symphony
orchestra).
 Performance Measurement for Non-Profit Organizations: GUIDANCE 9

Add and Retaining Funders and Volunteers A well-designed strategy for attracting and retaining
To add, retain and maximize support from funders funders and volunteers is critical to the long-term suc-
and volunteers, NPOs must tailor their strategies to cess of an NPO.
stakeholder needs and demonstrate that their unique
offerings meet needs that are otherwise left unsatis- Maximize Value Provided to Users
fied. This can be particularly challenging given the A key stakeholder strategy is to maximize value to
possible conflict between various stakeholders, so users by making offerings cost efficient. In order to
NPOs must carefully weigh the pros and cons of each attract and retain funders and volunteers, NPO initia-
stakeholder objective. tives should also be cost effective, regardless of the
NPO’s guiding value proposition. Tightening process
For funders, fundraising campaigns and the need management and eliminating unnecessary costs,
to demonstrate effective use of donations are critical. which inextricably link stakeholder and financial
NPOs compete for scarce donation dollars so in order objectives, assist ongoing efforts to solicit donations.
to attract funders, NPOs must demonstrate financial
competence and well-articulated visions. Today’s STE P 5
funders want to know how their donations are being
Choose the Key Financial Strategies
spent. Because funding dollars are limited, it is very
NPO financial strategies can be categorized into
important that the NPO maintain an ongoing relation-
two key areas:
ship with its funders with the aim of demonstrating
• revenue and donation growth
the value of the donation to the funders. In so doing,
• cost efficiency
the likelihood of on-going funding will increase.

All NPOs must pay attention to both of these strate-

Volunteer management is also extremely important
3 gies to manage the challenge between pursuing their
to the NPO. The skills, experience and savings that
missions and preserving organizational and finan-
volunteers present are often keys to the organization’s
cial viability. Fortunately, the organization’s value
success. It is incumbent upon the NPO to understand
proposition can help it determine where it should
and meet the schedules, objectives and needs of vol-
spend the bulk of its effort and activity with respect
unteers. Volunteer Canada, a nationally funded voice
to financial strategies.
for volunteerism in Canada, found that NPOs can
improve the volunteer experience by:
Revenue Growth Strategies
• building meaningful relationships with volunteers
NPOs grow operational revenues by increasing fees,
• developing HR policies that include volunteer
offering additional fee-based services, soliciting more
management
donations from current or new funders, and fundrais-
• being flexible and accommodating
ing. Some social enterprises may even consider selling
• being sensitive to gender, culture, language
goods and/or services to their users.
and age
• providing greater online engagement through
Fee changes are risky because users always have
its web presence, social media and other internet
a limit as to how much they are willing to pay. As
based capabilities.
such, NPOs must have an understanding of their users’
limitations. Similarly, organizations must carefully
3 “Bridging the gap: enriching the volunteer experience to build a better future
examine the decision to add new services for their
for our communities,” Volunteer Canada website (accessed February 4, 2016):
https://volunteer.ca/content/bridging-gap-summary-report
10 Performance Measurement for Non-Profit Organizations: GUIDANCE

users. The NPO needs to ensure that the fee structure • internal operations excellence
is able to cover any additional costs related to the new • compliance (including transparency)
service being offered. • innovation
• stakeholder management
For many NPOs, revenue growth typically comes from
fundraising (i.e., making a compelling case to funders The amount of time and energy the NPO dedicates to
that their offerings add. The type of funder(s) the NPO each key area depends on its value proposition(s). For
deals with (e.g., individuals, corporations, government example, an NPO pursuing an operational excellence
agencies) strongly influences the NPO’s revenue- value proposition will have a different emphasis than
growth approaches. an NPO pursuing stakeholder intimacy.

For smaller NPOs, local fundraising is a critical com- In order to achieve its mission on a long-term basis,
ponent of financial success. When selecting potential an NPO must comply with all regulatory guidelines.
fundraising strategies, the NPO must ensure that There is also a need for processes that motivate, iden-
the fundraising activities are in line with the NPO’s tify, develop and launch innovative programs that
values—there are many ways to raise money but not bring cutting-edge ideas, designs or services to serve
all align with an NPO’s values. unmet community needs.

Cost Efficiency Strategies STE P 7

To be effective, NPOs must be transparent and demon-
Choose the Key Learning and
strate that they provide the benefit to users. By focus-
Growth Strategies
ing on cost efficiency, organizations should be able to
The learning and growth perspective is about seeking
minimize administrative costs and ultimately increase
out and bridging any knowledge, skill or ability gaps
the amount of funding dollars they receive.
that could potentially impede the NPO’s execution of
key internal processes. Learning and growth can be
NPOs must spend wisely to achieve their mandate.
classified in terms of:
Most harness the generosity of volunteers to be more
• human capital
cost effective. Cost-efficient organizations keep both
• information capital
their operating and fundraising costs to the lowest 4
• organization capital
reasonable amounts to maximize the funding going to
support users (NPOs will often draw attention to such
Human capital is the economic value an organiza-
efficiency in their marketing materials).
tion derives from the knowledge and collaboration
of engaged individuals. Information capital refers to
STE P 6
how organizations utilize their information systems,
Choose the Key Internal Process networks, manuals, databases, files and infrastructure
Strategies to carry out their internal processes. Organizational
At this point, NPOs establish internal processes critical capital is the asset that describes an organization’s
to achieving the stakeholder and financial strategies ability to connect employee objectives to organiza-
the organization believes will fulfill its mission. Four tional objectives.
key areas in considering the internal perspective are:

4 Kaplan, R.S., and D.P. Norton, “Measuring the Strategic Readiness of Intan-
gible Assets,” Harvard Business Review, Vol. 82(2), pp. 52-63.
 Performance Measurement for Non-Profit Organizations: GUIDANCE 11

An organization’s approaches to learning and growth perspective at the top of the map. Also noteworthy is
will depend on its specific circumstances, the expec- that HSSC used its vision statement (as opposed to a
tations of stakeholders and funders, and its internal mission) as the platform for Step 1. As mentioned
business requirements. In short, the NPO’s human, previously, all NPOs must adapt the seven-step process
informational and organizational capital policies to varying degrees so some measure categories may
must align to deliver its internal processes, which in need to be reworded for relevance.
turn must align with the organization’s mission and
financial strategies. Individual strategic objectives cater to the specific
NPO. For example, the HSSC financial objective, “run
revenue generating swim meets,” may be reworded
A Look at a Completed Strategy Map for a different NPO based on its own activities. HSSC
The sample strategy map in Figure 3 demonstrates would want to target organizations that can help it
how an organization called Habuela Springs Swim achieve its critical objective (i.e., its vision statement),
Club (HSSC) adapted the seven steps outlined in such as local city facilities, other swim clubs and
Figure 2. In the HSSC strategy map, it is important alumni swimmers. In terms of cause and effect, each
to note that the organization chose the option of box on the map should be linked directly back up to
placing its Financial perspective beside its Stakeholder the critical mission.

FIG U R E 3   Habuela Springs Swim Club Strategy Map

HAB U E L A SPRINGS SWIM CLU B VISION :

To ensure that every youth in the community has the opportunity to achieve excellence
in swimming and all areas of their life.

STAKE HOLDE R FINANCIAL

Foster a holistic differentiated approach that

promotes success in countless areas Achieve goals with resources available

Offer unique, Offer unique, Demonstrate Set Run profit- Maximize fi nancial
customized customized excellence to realistic generating and moral support
development development donors, partners member swim meets from volunteers,
in the pool out of the pool and volunteers fees donor groups
and government
agencies
INTE RNAL

Recruit and Be an advocate Attract and Promote and Achieve

retain quality for competitive retain dedicated evaluate overall operational
coaches swimming volunteers excellence excellence
E NAB LE RS

Coaching Communication Volunteers Partnerships

Attract and develop Communicate at Attract and reward Seek out and foster
world-class coaches all levels of club volunteers for success strategic partnerships
12 Performance Measurement for Non-Profit Organizations: GUIDANCE

STAGE 3
Balanced Scorecard

Balanced scorecards, like strategy maps, are relevant In many cases, the most appropriate measures are
within the NPO sector. Much of the terminology asso- fairly straightforward. In other cases, it may be
ciated with balanced scorecards is adapted from the necessary to identify multiple measures to determine
for-profit world based on an individual NPO’s unique the achievement of an objective. Generally, the fewer
characteristics. After completing a strategy map, an strategic objectives on a balanced scorecard the better.
NPO can create a balanced scorecard using the follow- NPOs that try to measure everything will get bogged
ing four steps: down in analysis. That said, the NPO must ensure that
• identify the measures its balanced scorecard is comprehensive and represents
• assign weights all essential elements of the organization. The recom-
• balance the measures mended range is four to five strategic objectives per
• set specific targets perspective with the understanding that some objec-
tives may require two or more. Balanced scorecard
STE P 1 measures tend to fall into the following categories:
• leading vs. lagging (a leading measure predicts
Identify Measures
future performance while a lag measure reports
Working from the strategic objectives outlined in
on past performance)
its strategy map, an NPO should determine which
• efficiency vs. effectiveness (efficiency demonstrates
measure(s) will most appropriately facilitate the actual
good use of available resources and effectiveness
scoring of the balanced scorecard. The best way to
shows whether the use of available resources
identify these measures is to ask, “At the end of the
achieves desired results)
fiscal period, what information will best indicate
• cross-sectional (an appropriate mix of measures
whether the objective was achieved?”
from across the entire NPO)
 Performance Measurement for Non-Profit Organizations: GUIDANCE 13

Balanced measures should be a blend of all three cat- Table 1 provides a concise cross-section of frequently
egories (discussed further in Step 3). While there are used objectives and corresponding measures in the
many guidelines for selecting the best measures, one NPO sector. It has become common for NPOs to adopt
proven method for NPOs is SMART: a private-sector mindset with regard to strategic objec-
• specific tive and measure terminology, but NPOs are expected
• measurable and encouraged to customize table measures modeled
• attainable after the private sector to suit their unique needs.
• realistic
• timely

TAB LE 1   NPO Objectives/Measures

PERSPEC TIVE STR ATEG IC OB J EC TIVE M E ASU RE

Stakeholder Understand funders • Number of funding sources profiled

• Number of meetings with funding bodies/government sources
Utilize volunteers • Total number of volunteers actively engaged
effectively
• Average volunteer tenure
• Volunteer engagement survey results
• Amount of voluntary savings
Internal Work efficiently • Number of key customer process improvements
delivering programs
• Actual process cycle time reduction (key customer processes)
• Service delivery time improvements
• Program output index (actual units of program outputs divided
by program costs)
• Productivity rate (outputs divided by inputs)
• Operating costs per employee
• Program expense as percentage of total expenses
Efficient administration • Number of key administration process improvements
• Actual process cycle time reduction (key administration
processes)
• Administration costs per employee
• Percentage of revenues spent on administration
• Administration expense as percentage of total expenses
Learning and Attract and retain best • Employee satisfaction
growth (employees/volunteers)
• Employee turnover
• Volunteer satisfaction
• Volunteer turnover
Enhance internal skills • Average skills improvement level
as necessary
• Number of critical unmet skills
Financial Raise funds efficiently • Grant proposal success rate
and effectively
• Percentage of revenues spend on fundraising activities
• Fundraising expense as percentage of total expenses
14 Performance Measurement for Non-Profit Organizations: GUIDANCE

STE P 2
The completed balanced scorecard in Figure 4 takes
Assign Weights the work completed to this point (including the
Perspective weighting is crucial because it sends a strategy map from Figure 3) and demonstrates what
message to employees about each perspective’s relative the HSSC’s balanced scorecard might look like at a
importance. While weighting is not absolutely man- summary level (i.e., without targets and weights within
datory, NPOs must understand that without defined the perspectives). Often, the wording for each objective
weights, the assumption will be that perspectives are in the balanced scorecard can be taken directly from
equal. For example, if there are four perspectives and the strategy map. For example, “grow and diversify
one is twice as important as each of the other three, revenue base” is brought over from the strategy map.
that perspective should receive a 40 per cent weight
and the others should receive 20 per cent each. Attach- The weightings of the perspectives clearly demonstrate
ing 40 per cent to a perspective clearly communicates that the stakeholder perspective is slightly more impor-
its importance. tant than the other three. Even though the financial
perspective carries slightly less weight than the other
Few rules exist for allocating weightings. Good judg- perspectives, its presence on the balanced scorecard
ment is paramount in deriving a weighting plan that demonstrates its importance to HSSC.
makes the most sense to the organization and is as
unbiased as possible. Generally speaking, NPOs STE P 4
should indicate that the stakeholder perspective carries
Set Specific Targets
more weight than the other three perspectives given its
NPOs use targets and stretch targets to specify what
importance and linkage to the organization’s mission.
it intends to achieve. Loosely defined, a target is a
result that, if achieved, will make the NPO successful.
STE P 3
A stretch target is one that, if achieved, will make the
Balance the Measures NPO extremely pleased because it’s often difficult to
In the first iteration of the performance measurement achieve. Targets and stretch targets should follow the
process, a review of the organization’s objectives SMART guidelines spelled out in Step 1.
provides a “big picture” view and confirms that the
balanced scorecard is balanced enough to achieve the
organization’s mission. Organizations should ask the A Look at a Completed Stakeholder
following questions: Perspective
• Do we have the right number of objectives/mea- Table 2 drills down further into the balanced score-
sures in each perspective? The standard objective card shown in Figure 4. Table 2 strategic objectives
range is four to seven. and measures for HSSC’s stakeholder perspective.
• In terms of measures, do we have the right balance The completion of Steps 1–3 of the balanced scorecard
of leading and lagging, efficiency and effectiveness, development, prepare the organization for the final
and cross-section? and most important stage in the performance measure-
• Do the weightings still seem appropriate? ment process: review and assess.

Managers should continue to revise the balanced

scorecard measures until each question brings about
a positive answer.
 Performance Measurement for Non-Profit Organizations: GUIDANCE 15

FIG U R E 4   Completed HSSC Balanced Scorecard (Summary Level)

STAKE HOLDE R PE RSPEC TIVE 30% FINANCIAL PE RSPEC TIVE 20%

OB J EC TIVES M E ASU RES OB J EC TIVES M E ASU RES

Maximize member value Swim meet results (gold/ Grow operating revenues Annual revenue ($000’s)
in the pool silver/bronze points system) to add and sustain programs
Maximize member value Members’ class average Realize modest Actual realized earned
out of the pool and member satisfaction earned income level to income ($000’s)
survey demonstrate value and
plan for growth
Utilize volunteers efficiently Volunteer programs Run swim meets Swim meet profits ($000’s)
and effectively quality and satisfaction profitably
Expand and enhance Number of donor Increase donor & Actual dollars rasied
donor relationships agreements and number fundraising dollars
of donor meetings
Forge new donor Number of potential donors Efficient use of financial Overhead costs as a %
relationships profiled and contacted resources of total revenue
INTE RNAL PROCESS PE RSPEC TIVE 25% E NAB LE RS PE RSPEC TIVE 25%

OB J EC TIVES M E ASU RES OB J EC TIVES M E ASU RES

Offer world-class Member feedback score Attract and develop Coaching score and
coaching programs world-class coaches wait list
Swimmer attendance

Achieve excellent Swimmer performance Communicate at all levels Percentage of HSSC

competitive results (local, provincial, national of the club members aware of weekly
meets — out of 10) updates

Attract and retain Volunteer turnover ratio Attract and reward Percentage of volunteers
dedicated volunteers (new/departing) volunteers for efforts affirming intrinsic reward
at success of efforts
Promote and evaluate Average member Seek out and foster Number of partners and
overall excellence comprehensive score strategic partnerships potential partners profiled
and number of partner
meetings
Achieve operational Coach/swimmer
excellence time ratio
Available pool time
capacity usage
(practices and meets)
16 Performance Measurement for Non-Profit Organizations: GUIDANCE

TAB LE 2   Completed Stakeholder Perspective

GOAL S WEIG HT M E ASU RES TARG E T STRE TCH

Maximize member value in the pool 25% Swim meet results (gold/silver/ 75 90
bronze point system)
Maximize member value 20% Members' class average and member 82% 87%
out of the pool satisfaction survey
Utilize volunteers efficiently 20% Volunteer programs quality and 80% 90%
and effectively satisfaction
Expand and enhance donor 20% Number of donor agreements and 7 10
relationships number of donor meetings
Forge new donor relationships 15% Number of potential donors profiled 10 15
and contacted
Total Weight (must=100%) 100%
 Performance Measurement for Non-Profit Organizations: GUIDANCE 17

STAGE 4
Review and Assess

This final stage is where management takes the infor- balanced scorecard are useful tools for ensuring
mation from the balanced scorecard, evaluates the initiatives fit with current strategy and for allocating
results, draws conclusions and takes action. The four resources to those initiatives.
steps include:
• manage with the balanced scorecard One means of using a balanced scorecard to manage
• evaluate results versus targets an NPO is to link current and future initiatives to the
• examine results and outcomes strategic objectives in the strategy map. A Strategic
• adjust as necessary Initiative Template, a useful tool to assess initiatives
against the NPOs strategy map, accompanies this
STE P 1 publication in a separate attachment. Table 3 below
is a partial chart summarizing how some initiatives
Manage with the Balanced Scorecard
fit with an organization’s objectives.
The Balanced Scorecard, with its measures and targets
can be extremely helpful in guiding and managing
initiatives within the NPO. The strategy map and
18 Performance Measurement for Non-Profit Organizations: GUIDANCE

TAB LE 3   Objective-Initiatives Fit Chart

INITIATIVE 1 INITIATIVE 2 INITIATIVE 3
AN N UAL CRE ATE LOC AL AN N UAL VOLU NTEER
DONOR EDUC ATION LOB BY APPRECIATION
PERSPEC TIVE STR ATEG IC OB J EC TIVE B LITZ G ROU P BARB EQ U E

Campaign to new and

Stakeholder X
existing donors
Grow and diversify
Financial X
revenue base

Internal Influence public policy X

Learning and Attract and retain

X
growth caring individuals

The purpose here is to identify which current initia- STE P 2

tives support the various strategic objectives outlined
Evaluate Results Versus Targets
in the strategy map. During this review it is possible to
Throughout the reporting period, management
find that many initiatives support a common strategic
must incorporate scorecard results with monthly
objective while other strategic objectives have no initia-
or quarterly performance meetings. NPOs benefit
tive support. NPOs should strive to ensure they have
from monitoring the entire perspective as well as
an appropriate number of initiatives supporting all of
individual line items for trends.
their objectives.

Table 4 is an excerpt of the full Balanced Scorecard

Once an NPO has mapped all its initiatives to strategic
and depicts the targets, stretch targets and actual
objectives, it must prioritize the initiatives and allocate
results of the HSSC stakeholder perspective.
resources to them. NPOs then roll strategic initiatives
into their budgetary process.

TAB LE 4   Stakeholder Financial Perspective with Actual Results

GOAL S WEIG HT M E ASU RES TARG E T STRE TCH AC TUAL TREN D

Maximize member value 25% Swim meet results (gold/ 75 90 76

in the pool silver/bronze points system)

Maximize member value 20% Members' class average and 82% 87% 82%
out of the pool member satisfaction survey

Utilize volunteers 20% Volunteer programs quality 80% 90% 80%

efficiently and effectively and satisfaction

Expand and enhance 20% Number of donor 7 10 4

donor relationships agreements and number of
donor meetings
Forge new donor 15% Number of potential donors 10 15 14
relationships profiled and contacted

Total Weight 100%

(must=100%)
 Performance Measurement for Non-Profit Organizations: GUIDANCE 19

It is important to remember that the Balanced • We did extremely well forging new donor relation-
Scorecard is not the final level of analysis; in fact, the ships. This is a great signal for the future. Still, we
development of the Balanced Scorecard is the begin- need to balance this with attention to donor meet-
ning of the self-evaluation process. To be effective, ings and agreements — all are important.
managers of NPOs need to examine why results from
the Balanced Scorecard deviated from targets. The Bal- STE P 4
anced Scorecard should never be used to assign blame
Adjust as Necessary
when results are different than expectations.
Tactical changes (e.g., new initiatives or possibly a
revised strategy) are usually the next order of busi-
STE P 3
ness. The scorecard above indicates that HSSC should
Examine Results and Outcomes consider changing the way it forges donor relation-
Based on the results in Table 4, here are some discus- ships — for example, the results indicate that not
sion points that might arise at HSSC: enough attention was paid to arranging donor meet-
ings and agreements.
• Overall, we are meeting most of our targets but
there is definitely room for improvement.

• Our swim meet results helped us achieve our target

measures, but to get better we still have some work
to do. What sorts of things can we do to improve
our results at the provincial and national levels?

• Our swimmers achieved our target level for

academic performance. They also seem satisfied
overall, but are we putting too many demands on
the swimmers? How do we balance performance
outside the pool with performance in the pool?

• We have done a good job recognizing our volun-

teers, but we want to do an excellent job. We should
continue to improve efficiency and effectiveness
with respect to our volunteers, and make their
satisfaction level a high priority.

• We planned to have three unique coach/swim-

mer meetings but only had two. Why? Were there
scheduling issues? Could a shortage of meetings
impact performance?

• We had planned to have several more donor meet-

ings and agreements than we actually had. Why is
this? What happened? We need to take corrective
action here.
20 Performance Measurement for Non-Profit Organizations: GUIDANCE

Strategic Review

Performance measurement never truly stops: The balanced scorecard, which is linked directly to the
it is cyclical. strategy map, provides clear performance indicators
in relation to the NPO’s strategic objectives. It high-
During its strategic review, management should lights what the NPO is doing well and what it needs to
look at every initiative linked to the strategy map and improve, tactically and strategically.
determine whether or not each is achieving its desired
strategic outcome. A strategic review also examines Tactically, performance measurement must be
the cause-and-effect relationships in the strategy map. incorporated into regular operational meetings.
Strategically, ongoing strategy map reviews ensure
For example, HSSC would refer to its balanced score- the NPO’s strategic objectives achieve desired outcomes.
card during its annual general meeting to report back
to club members on the club’s overall performance. The PM4NPO framework can help any NPO become
When a new initiative does not achieve its intended a high-performing, mission focused organization.
outcome, the organization must evaluate causes and
effects and make adjustments as necessary.

An NPO may encounter more opportunities and good

ideas than it can realistically implement. Using its strat-
egy map to remain focused on the critical mission will
help the NPO pursue the most relevant opportunities
and ideas.
 Performance Measurement for Non-Profit Organizations: GUIDANCE 21

Additional Sources of Information

Armitage, H.M., and C. Scholey, “Strategy Mapping: Kaplan, Robert S., and David P. Norton, Alignment:
Avoiding Costly (and Unnecessary) Strategic Failures,” Using the Balanced Scorecard to Create Corporate Syn-
Chapter 7 in the Handbook of Cost Management (New ergies (Boston: Harvard Business School Press, 2006).
York: Warren, Gorham & Lamont, 2004).
Kaplan, Robert S., and David P. Norton, “Having
Armitage, H.M., and C. Scholey, “Hands-on Score- Trouble With Your Strategy? Then Map It,” Harvard
carding: How Strategy Mapping has Helped One Business Review (January/February, 2001).
Organization See Better its Successes and Future
Challenges,” CMA Management (October 2004). Kaplan, Robert S., and David P. Norton, Strategy Maps:
Converting Intangible Assets Into Tangible Outcomes
Armitage, H.M., and C. Scholey, “Mapping Mavens: (Boston: Harvard Business School Press, 2004).
How Private and Public Companies Gain From Strat-
egy Mapping,” CMA Management (May 2003). Kaplan, R.S., and D.P. Norton, “The Balanced Score-
card: Measures That Drive Performance,” Harvard
Bossidy, Larry, Ram Charan and Charles Burck, Business Review (Jan–Feb 1992), pp. 71–79.
Execution: The Discipline of Getting Things Done
(New York: Crown Business, 2002). Kaplan, R.S., and D.P. Norton, The Balanced Scorecard:
Translating Strategy into Action (Boston: Harvard
Epstein, Mark, Performance Measurement of Not Business School Press, 1996).
for Profit Organizations, Management Accounting
Guideline (Mississauga: The Society of Management
Accountants, 2009).
22 Performance Measurement for Non-Profit Organizations: GUIDANCE

Kaplan, R.S., and D.P. Norton, The Strategy-Focused Web Sources

Organization: How Balanced Scorecard Companies
Thrive in the New Business Environment (Boston: Har- “What is the impact of the charitable and non-
vard Business School Publishing Corporation, 2001). profit sector?” Imagine Canada website (last
accessed February 4, 2016): http://sectorsource.ca/
Lindsay, R.M., and L.M. Lindsay, “Developing a research-and-impact/sector-impact
Sustainable Competitive Advantage Through Strategic
Positioning,” CMA online library (2004). “Bridging the gap: enriching the volunteer
experience to build a better future for our com-
Niven, P.R., Balanced Scorecard Diagnostics — Main- munities,” Volunteer Canada website (accessed
taining Maximum Performance (Hoboken, NJ: John February 4, 2016): https://volunteer.ca/content/
Wiley and Sons Inc., 2005). bridging-gap-summary-report

Niven, P.R., Balanced Scorecard Step by Step for Gov-

ernment and Nonprofit Agencies (Hoboken, NJ: John
Wiley and Sons Inc., 2008).

Olve, Nils-Goran, Jan Roy and Magnus Wetter, Perfor-

mance Drivers: A Practical Guide to Using the Balanced
Scorecard (New York: J. Wiley & Sons, 1999).

Rangan V.K., “Lofty Missions — Down to Earth Goals,”

Harvard Business Review, Vol. 82(3) (Mar 2004),
pp. 112–119.

Schobel, K.B., C. Scholey “Balanced Scorecards in Edu-

cation — Focusing on Financial Strategies,” Measuring
Business Excellence, Vol. 16(3) (2012).

Scholey, C., “Capturing the Value of Strategy Maps,

Step-By-Step,” Journal of Business Strategy
(May/June 2005).

Scholey, C., A Practical Guide to the Balanced Score-

card (Toronto: CCH Canadian Limited, 2002).

Wisener, R., “Attaching Economic Value to Volunteer

Contribution,” Discussion Paper, Volunteer Canada
(2009).
This publication is one in a series on Performance Measurement for Non-Profits. A Strategic
Initiative Template is also available on our website. For additional information please contact
Carol Raven, Principal, Strategic Management Accounting & Finance at 416-204-3489 or email
craven@cpacanada.ca.

About the Author

Cam Scholey is an acknowledged expert in the field of strategy formulation and execution. For the past
15 years, he has been a speaker, author and consultant, focusing primarily on strategy mapping and the bal-
anced scorecard. A university instructor for 15 years, he was also a moderator in the CMA Strategic Leader-
ship Program.

Kurt Schobel is an associate professor of accounting at the Royal Military College of Canada. He teaches
financial and managerial accounting at the undergraduate and graduate studies levels. His research interests
include: performance measurement in the public sector and governance in the public sector. Kurt was also
a moderator in the CMA Strategic Leadership Program.

Both Cam and Kurt are fellows of the Chartered Professional Accountants of Canada.
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