Dashboards and Scorecards

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1 Measuring Organizational Performance Reid A. Zimmerman, PhD, CFRE Dashboards and Scorecards The Best and Worst

2 Dashboards or Scorecards What should they do? Why are they useful? Reid A. Zimmerman, PhD, CFRE 2

3 Measuring Nonprofit Performance Nonprofit is an IRS Tax status, not a management style!! Reid A. Zimmerman, PhD, CFRE 3

4 What does your Nonprofit Measure? Financials Services provided Reid A. Zimmerman, PhD, CFRE 4

5 We need to Measure the Important Stuff I know how much just not what of! Bullwinkle J. Moose Reid A. Zimmerman, PhD, CFRE 5

6 In the absence of measurement, Management will assume the problem is People and People will assume the problem is Management!! Zimmerman Reid A. Zimmerman, PhD, CFRE 6

7 What measures do you need to fly a plane? Altitude ROLL Degree heel Compass direction PITCH YAW Position Engine performance/rpm Reid A. Zimmerman, PhD, CFRE 7

8 And it depends on WHAT you are flying. A Cessna. Reid A. Zimmerman, PhD, CFRE 8

9 r an F-16! Reid A. Zimmerman, PhD, CFRE 9

10 Process is Important But..the best flying ultimately has an even number of takeoffs and landings!!

11 Organizations Are a System Have myriad moving parts Are Stubborn Often Siloed Mission Ebullient v. Rational So let s look at a Nonprofit System Reid A. Zimmerman, PhD, CFRE 11

12 3 Requirements Customers Meet - Delight 1 2 Leadership Strategy 6 5 Motivated, Engaged People Effective Efficient Processes 7 Get Results Be Valued $ #s Measures and Dashboard to Monitor Progress 4 Optimum Performance Quantum Performance Group, Inc. Reid A. Zimmerman, PhD, CFRE 12 12

Valued $ #s Measures and Dashboard to Monitor Progress 4 Optimum

13 Dashboards and Scorecards Should Look at whole Organization Performance Not individual programs Provide Informative at a glance Discern Important Data v. Detail Data Easily read and understood by anyone Tied to Financials Tied to Strategy Reid A. Zimmerman, PhD, CFRE 13

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18 The Balanced Scorecard Development Definition Conceptual Framework Nonprofit Modification Potential for your use Reid A. Zimmerman, PhD, CFRE 18

19 Harvard Business Review The Balanced Scorecard- Measures that Drive Performance Putting the Balanced Scorecard to Work Using the Balanced Scorecard as a Strategic Management System Having Trouble With Your Strategy? Then Map It The Balanced Scorecard is translated into 18 languages Selected by HBR as one of the most important management practices of the past 75 years. Reid A. Zimmerman, PhD, CFRE 19

Trouble With Your Strategy? Then Map It.

20 The Balanced Scorecard (BSC) A business management concept that transforms both financial and non-financial data into a detailed roadmap that helps companies measure performance, develop long-term objectives and communicate them to the entire organization. Reid A. Zimmerman, PhD, CFRE 20

roadmap that helps companies measure performance, develop long-term

21 The Balanced Scorecard is a management system that enables organizations to clarify their vision and strategy and translate them into action....a comprehensive system that allows the monitoring of business performance in a way that complements financial measures. Reid A. Zimmerman, PhD, CFRE 21

22 4 Quadrants Business Perspective Financial Perspective Customer Perspective Internal Business Processes Growth, Innovation & Learning Perspective Reid A. Zimmerman, PhD, CFRE 22

23 Like a Table. all four legs need to be solid in order to hold up over the long-haul. Reid A. Zimmerman, PhD, CFRE 23

24 BSC Business Perspectives Financial To succeed financially, how should we appear to our stakeholders? Customer To achieve our vision, how should we appear to our customers? Strategy & Vision Internal Process To satisfy our customers, at what business processes must we excel? Innovation and Learning To achieve our vision, how will we sustain our ability to change & improve? Reid A. Zimmerman, PhD, CFRE 24

25 Business Financial Perspective How can the company position itself to be considered an attractive and exciting investment to its owners? Reid A. Zimmerman, PhD, CFRE 25

26 Business Customer Perspective How can the company s products and services be positioned in order to bring value (real or perceived) to its customers? Reid A. Zimmerman, PhD, CFRE 26

27 Internal Business Processes What processes will the company need to excel at in order to meet the customer objective of value? Reid A. Zimmerman, PhD, CFRE 27

28 Business Innovation and Learning What are the infrastructure and human capital needs required to excel at the internal processes? Reid A. Zimmerman, PhD, CFRE 28

29 The chain of cause and effect should pervade all four perspectives of the BSC. Cause & Effect Financial Increased Customer Revenue Customer Internal Process Quality Loyalty On Time Quality Delivery Cycle Time Innovation &Learning Employee Skills Reid A. Zimmerman, PhD, CFRE 29

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31 Social Sector Scorecard In reality, however, (nonprofit) performance is all about translating caring, believing, and compassion into results. Letts, Ryan and Grossman, High Performance Nonprofit Organizations, Wiley, 1999 Reid A. Zimmerman, PhD, CFRE 31

32 The chain of cause and effect should pervade all four perspectives of the BSC. Cause & Effect Mission Outcomes for Clients & Community Customer & Quality Satisfaction Efficient Process & Positive Outputs Future Innovation Learning Culture Stewardship Financial & Human Resources Reid A. Zimmerman, PhD, CFRE 32

33 INPUTS LEADERSHIP (Governance and Executive) STEWARDSHIP (Financial, HR, Space & Artistic) If we are to be successful, how will we lead and care for the resources we have? ACTIVITIES PROGRAM & OPERATIONAL PROCESSES To be successful, at what endeavors and business processes must we excel? MISSION & VISION OUTPUTS CUSTOMER SATISFACTION & PROGRAM QUALITY How will we know that what we have done is of value? OUTCOMES LEARNING ADAPTATION & INNOVATION COMMUNITY IMPACT If we are successful, what will we be like in the future? Reid A. Zimmerman, PhD, CFRE 33

34 Benefits to Scorecarding: Measure the Important Stuff Translate Strategy to Action Manage Intangible Assets Leverage Organizational Matrix Potential Create close-in management ability Reid A. Zimmerman, PhD, CFRE 34

35 Measure the Important Stuff Measure the critical few and meaningful aspects of your business Allow the many important measures to inform the few 20 measures is maximum capacity for most people Reid A. Zimmerman, PhD, CFRE 35

36 Translate Strategy to Action Define where you want to go and be, when Utilize measures that inform about progress toward strategic direction Point employees in the direction you need to go Reid A. Zimmerman, PhD, CFRE 36

37 Manage Intangible Assets Customer Retention or Loyalty Brand Identity Employee Capabilities Innovation Reid A. Zimmerman, PhD, CFRE 37

38 Leverage Organizational Matrix Potential Cross functionality opportunities enhanced Purposeful and directional utilization of inter departmental teams Reid A. Zimmerman, PhD, CFRE 38

39 Create Close-in Management Ability Monthly, daily or real-time measurement potential Assists with day-to-day business decisions Ties management practices to leadership direction Communicates direction to all employees Reid A. Zimmerman, PhD, CFRE 39

40 Software can be helpful Affords real-time measurement Drill down or roll up as management requires Available across the organization at individual stations Aids in day-to-day decision making Can create problems with staff understanding Reid A. Zimmerman, PhD, CFRE 40

41 Scorecards Fail Because They ARE NOT: Balanced Institutionalized Linked to Strategic Direction Leader Driven Use understandable and available measures Reid A. Zimmerman, PhD, CFRE 41

42 A Balanced Scorecard Customer 24% Internal Process 37% Learning & Growth 18% Financial 20% Reid A. Zimmerman, PhD, CFRE 42

43 An Institutionalized Scorecard A Communication Tool Easily understood by all employees Updated and Utilized frequently Tied to incentives Tied to employee performance reviews Reid A. Zimmerman, PhD, CFRE 43

44 A Scorecard Linked to Strategic Direction Only 5 % of the workforce understand the corporate strategy Only 15 % of executive leaders spend more than an hour a month discussing strategy Only 25 % of management have incentives linked to strategy Only 40 % of organizations link budgets to strategy HBR stats Reid A. Zimmerman, PhD, CFRE 44

45 Leader Driven Culture of accomplishment responsibility and learning Board Encouragement Middle management driven CEO / ED supported Reid A. Zimmerman, PhD, CFRE 45

46 Understandable and Available Data Not software driven Don t reinvent the data, but gather what is already there Get staff buy-in on the important measures Reid A. Zimmerman, PhD, CFRE 46

47 Suggestions Watch a variety of metrics Connect metrics to strategy Develop a Strategic budget Get everyone involved in tracking metrics Reid A. Zimmerman, PhD, CFRE 47

48 At a minimum, look at: Your Mission Your Margin Your Internal processes Your Future Reid A. Zimmerman, PhD, CFRE 48

49 What Strategy or Performance do you want to drive? Financial? Outcome for Clients? Growth? Innovation? Internal Processes? Stewardship? Reid A. Zimmerman, PhD, CFRE 49

50 KEEP IN MIND If it s worth doing it s worth measuring. you often get what you measure. No system is perfect. You need to start somewhere. Reid A. Zimmerman, PhD, CFRE 50

51 Resources Balanced Scorecard Institute Brown, M.G. (1996). Keeping Score Few, S. (2006) Information Dashboard Design: The Effective Visual Communication of Data Harvard Business Review on *Measuring Corporate Performance and *Implementing the BSC Kaplan, R.S., & Norton, D.P. (1992, 1996, 2001, 2004) Balanced Scorecard (& Strategy several titles, Harvard Business Review MAP resource library Zelazny, G. (2006) The Say It With Charts Complete Toolkit McGraw Hill Professional Zimmerman, R.A. (2006) Issues of development and implementation of a nonprofit balanced scorecard. Doctoral Dissertation Reid A. Zimmerman, PhD, CFRE 51

52 Reid A. Zimmerman, PhD, CFRE Pine City, MN O: C: Lecturer: Masters of Nonprofit Management Hamline University Reid A. Zimmerman, PhD, CFRE 52

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