Balanced Scorecard in a Nonprofit: CCRC Case Study

Introduction

The balanced scorecard approach is quite pervasively used by organizations of all stripes when it comes to strategic decision-making and long-term planning. It is especially associated with for-profit businesses in terms of what they will focus on, what they will not focus on, and what resources and people will be allocated to chosen initiatives. While the balanced scorecard and for-profit businesses are commonly discussed together, many — though not all — of the priorities associated with the practice can be used just as effectively with nonprofit organizations. The focus of this report is a nonprofit agency known as the Cattaraugus County Rehabilitation Center (CCRC). While some of the results of the CCRC's use of the balanced scorecard were mixed, the organization did a commendable job overall when it comes to applying the tool.

The Four Phases of Balanced Scorecard Planning

The case study by Martello, Watson, and Fischer explains that there are commonly four phases of planning associated with the balanced scorecard. Those four phases are basic financial planning, forecast-based planning, externally oriented planning, and strategic management. All four phases can be readily applied to nonprofits like the CCRC. Furthermore, the fact that the agency is extremely multi-faceted and complex in nature makes strategic planning all the more necessary and prudent.

The use of the balanced scorecard is not new for the CCRC. Martello and his colleagues note that the balanced scorecard had already been in use for a number of years at the time of their report, and a number of consultants had been brought in over the years to address a persistent challenge: a notable gap between the CCRC's strategic plans and its day-to-day operations (Martello, Watson & Fischer, 2008).

The balanced scorecard process actually began nearly a decade before the report when a new Director of Strategic Planning was hired. The creation and filling of a director-level position specifically for strategic planning suggests that the organization was serious about aligning strategy with operations, even if it encountered struggles along the way. The overarching goal was for each area and dimension of the CCRC to align with the organization's wider strategic plan. While some variation among sub-units was inevitable, all divisions of the CCRC were expected to follow the same strategic path and mode of daily operations. It is clear from the history of prior attempts that buy-in from staff was sorely lacking, and there was considerable skepticism about the staying power and soundness of the initiatives being implemented (Martello, Watson & Fischer, 2008).

Four Strategic Perspectives at CCRC

The linchpin of the change being attempted was the framework's four perspectives: consumer, financial, operational, and learning. For each perspective, the relevant concerns, goals, and associated objectives are identified. This approach is prescient, as the four perspectives relate to the four main areas the organization must embed into its daily operations and organizational culture. There must be a consumer focus, a focus on financial sustainability, a focus on how work gets done every day, and a focus on developing and improving the knowledge base and capabilities of the staff. Neglecting any one of the four will undermine results across all others (Martello, Watson & Fischer, 2008).

A significant outcome highlighted in the CCRC's story was that equal emphasis was given to the financial side of the operation and the people being served. In any medical center, such balance is critical: while keeping inflows and outflows of money in reasonable equilibrium is essential to survival, it is unconscionable to prioritize financial considerations over the health, success, and well-being of patients. This is one key reason why all four perspectives must be treated with equity rather than allowing one — such as the financial — to overshadow another — such as the consumer. It is also clear that the benefits instilled by the balanced scorecard were taking effect, as CCRC management had bought into the method and process. Such managerial buy-in is an absolute prerequisite for successful change management (Martello, Watson & Fischer, 2008; French-Bravo & Crow, 2015).

Conclusion

It would be unfair and inaccurate to say that the CCRC's implementation of the balanced scorecard was problem-free. However, anyone who expects such an outcome is quite literally deluding themselves and setting themselves up to fail or at least be disappointed. Instead, there must be a recognition that some things will go wrong, and that success — both short-term and long-term — depends on how those challenges are met and addressed.

Equally important is the need for buy-in at all levels of the organization, and managers represent the critical first domino. If managers are not sold on the change, convincing employees to embrace it will be difficult at best. Finally, any balanced scorecard approach must engage all four organizational perspectives — whether in a for-profit or nonprofit setting — or it will fall short. Not one of the four is less important than the other three, and treating them with equal seriousness is the foundation of effective strategic management.

References

Chad, P. (2015). Utilising a change management perspective to examine the implementation of corporate rebranding in a non-profit SME. Journal of Brand Management, 22(7), 569–587. doi:10.1057/bm.2015.33

French-Bravo, M., & Crow, G. (2015). Shared governance: The role of buy-in in bringing about change. Online Journal of Issues in Nursing, 20(2), 8. doi:10.3912/OJIN.Vol20No02PPT02

Martello, M., Watson, J., & Fischer, M. (2008). Implementing a balanced scorecard in a not-for-profit organization. Journal of Business & Economics Research, 6(9), 67–80. Retrieved from http://journals.cluteonline.com/index.php/JBER/article/view/2471/2517