Developing organizational strategy through the Balanced Scorecard also minimizes participants' subjectivity as they take part in the strategy-setting process and enhance managers' ability to assess all programs for strategic impact without bias (Ronchetti, n.d.).
While financial and customer actions are defined and available in commercial organizations, the corresponding is less easily found in non-profits. A good measure is one that management can significantly control. Non-profit organizations goals are usually influenced by many influential factors and actors beyond its authority. Commercial Balanced Scorecards usually have a financial viewpoint at the peak of the strategic reason and mapping. For the non-profit, financial goals are not the end; they are part of the means. Customary practice is to push the finance viewpoint down to the bottom of the strategy map for non-profits, treating financials as input to the strategic representation. This is difficult because financially oriented goals are also sought after by non-profits. Consider value for money, cost reduction or funds raised, all are outcomes of some activity. From a process viewpoint, budget adherence, project funding spend, cash management and financial guideline observance may also be important to the non-profit, and may need to be reflected in a Balanced Scorecard (Can I apply Balanced Scorecard in a non-profit organization, 2008).
For-profit organizations are worried about the efficiencies of internal processes. They plan to function with a margin of profit which can simply slim down or disappear to cover the effects of less-than-optimal performance. In contrast,...
A year of poor performance competence can result in striking cutbacks in staffing or program, since many nonprofits have no safety buffers built into their budgets. While the category is the same for both types of organizations, it is probably a more critical management issue for nonprofits (Zimmerman, 2004).
The final category in the traditional balanced scorecard scheme is called innovation and learning. The first three measurement groups' focus on an organization as it is today, while the final category looks at the fact that organizations need to constantly grow, adjust, and improve. In most companies, future development is tied to the organization's staff. Within nonprofits, innovation is not usually the persuasive market force that it is in the world of competitive, for-profit enterprise. For most nonprofits, developing the organization resources, in a literal sense, developing its employees (Zimmerman, 2004).
References
Can I apply Balanced Scorecard in a non-profit organization? (2008). Retrieved August 9, 2010,
from Web site: http://www.2gc.co.uk/pdf/2GC-FAQ08-090216.pdf
Ronchetti, Jan L. (n.d.). An Integrated Balanced Scorecard Strategic Planning Model for Nonprofit Organizations. Retreived August 9, 2010, from Web site:
http://www.regent.edu/acad/global/publications/jpc/vol1iss1/ronchetti/ronchetti.pdf
Zimmerman, Joel. (2004). Using a Balanced Scorecard in a Nonprofit Organization. Retrieved August 9, 2010, from Web site:
http://www.npcdivision.com/downloads/BalancedScorecard.pdf
