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5.3 | Meaningful Measures: Balanced Scorecards & Dashboards
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Del curso dictado por University of Pennsylvania
Arts and Culture Strategy
calificaciones
De la lección
Building Support & Finding Legitimacy
Who determines value and how do you influence that determination? In this unit, we look at meaningful measures and meaningful communication. How do you test value? How do you make timely decisions? How do you communicate to the vast variety of stakeholders who support your organization or will support your organization?
Conoce a los instructores
Peter FrumkinProfessor
Nonprofit Leadership Program, School of Social Policy & Practice
Mrs. Russell Willis TaylorLecturer, School of Social Policy & Practice; Past President & CEO, National Arts Strategies
[MUSIC]
In today's session we want to explore together the question of how
do you measure performance.
This is a complicated but very important challenge in the broader nonprofit sector,
and in your world in particular.
Now in the arts and in the cultural sector we might think
performances very ambiguous, very hard to measure.
What is good art, what is bad art?
But I need you to push beyond that and not ask the question about artistic quality
but also think about performance as a question about programmatic quality,
programmatic effectiveness.
So I wanna focus on that part of performance measurement.
How good are your systems, how good is your operation?
And can we develop a tool that might help you on the operations side
get better at what you're doing.
On the arts and culture and a pure side of what is great art,
what is great culture, that I'm not going to broach today.
That's for you to decide.
But what I can help you with is this operational question about how do you know
if your organization Is functioning well and performing highly.
Now why would we care about performance measurement and
why would we wanna measure performance of an organization?
I think there are three powerful reasons.
The first is, how could you possibly get better at managing your organization and
managing your project if you didn't know how well it was doing?
If you didn't have data on its performance, you can't make adjustments
you can't get better at your work unless you know how well you're doing.
If the organizations going up down or sideways that's critical data for
you to have to process to know what to do next and how to get better.
Second reason for performance measurement is that both internally,
externally performance measurement is a way of communicating to the world
that you're accountable, that you were doing what you said you would do.
That you're using funds wisely and in a way that creates value.
So accountability is a critical function.
And a product of good performance measurement, but there's a third and
even higher, I think, reason to do performance measurement.
And that is, it's the moment where you define what you're going after,
you define the value that you're trying to pursue, and you drive people
inside the organization to agree on what it is that's worth going after.
What it is that's you're going to measure and
what it is that you're going to consider as success.
So in that moment when you define metrics or performance you're actually
agreeing and drawing people together into a conversation about what is the mission,
what is worth going after, what is the organization all about.
So for all three reasons, operational improvement, accountability and alignment.
Performance measurement, I think, is a very powerful and
important tool to have in your arsenal.
So, how do we start to think about measuring performance?
Extremely big topic, but I'm gonna propose one tool that I think is very powerful and
it could be useful to you.
It's a tool that came out of the corporate sector, but
it's since found wide acceptance in the non-profit sector.
And the idea is that performance,
at least on the corporate side, is not one dimensional.
Bob Kaplan's insight was that we could look at financial metrics all day long,
but they wouldn't tell us everything we need to know about how well a company is
performing.
He argued we need to add three more dimensions to performance measurement.
A customer perspective,
that would tell us what does the customer think about the company.
A learning and growth perspective that would ask what do the people
inside the organization feel and what do they think about the organization.
And finally a kind of business process or
quality set of indicators about operational excellence.
And his claim was that financial indicators
are actually lagging indicators.
They tell us after the fact how well the firm performed.
The other three indicators are potentially leading indicators,
that they'll tell us in advance which way the company is likely to head and
what its financials will likely look like six months, a year out.
If we know what customers think, if we know what our staff and
our people inside the organization are thinking and
feeling, and if we know how good our quality is, we're going to have a very
good sense about what the bottom line is going to look like.
At least that was Bob Caplan's insight in the corporate side of things.
That a scorecard, a balance scorecard, would be useful to managers than
one that simply had financial indicators of which there are endless numbers.
So as this idea in the corporate sector took hold, people started to say, well,
what about the nonprofit sector?
Can we have a scorecard for the nonprofit sector?
And Kaplan and Norton, his collaborator, developed a scorecard for
the nonprofit sector.
He made a couple of changes.
One is he substituted mission for the financial indicators and
he broke apart the customer into two parts.
donors and clients.
Because the people who pay for
services are not always the people who receive them.
He kept the process or quality indicators and the learning and
growth indicators, but he made some changes to the model.
Now there's some big challenges in making the translation
from corporate to non-profit performance measurement tool.
In Caplan Norton's non profit model they dropped out financial indicators and
they added omission indicators.
But they didn't say much about how we would measure omission and
they didn't really explain why financial metrics should be dropped.
Finally donors and clients are not the only stake holders, even though Kaplan and
Norton only includes them, I think we can enlarge that.
For a number of reasons I think there are ways we can improve on this idea of
a balanced score card, or dashboard of indicators, and
make it more useful to you in your work.
So let's start thinking about what we could do.
I would say we start with going back to the logic models that we
detailed earlier in this course, and
we pull out of the logic models, critical output, And outcome measures.
And we say that's gonna be our starting point for measuring mission.
We're going to identify the most important outputs and outcomes short term,
and we're going to integrate those into our score card.
We're going to chose a small number of financial indicators that are really
important and telling.
We're gonna take a small number of critical indicators related to
what the people inside the organization, and around it, think about the firm.
And we're gonna ask, what is governance, what does staff development look like,
what is volunteer engagement, how are these practices being done?
And finally in the fourth basket, we're gonna ask for
a small group of quality indicators.
If you do all four of those things,
we can start to construct, I think, a very simple and usable scorecard.
So four baskets.
Social impact measures, financial indicators,
stakeholder satisfaction indicators, and some quality indicators.
Those are the four I'd like to start with and detail what each one might look like.
Let's start with those social impact measures.
They don't have to be incredibly complicated and obscure.
We can take some critical measures of the units of activity that you engage in,
the number of people you serve, the number of hours of performances delivered,
the number of services that you have.
We can quantify some simple metrics of outputs and we can use those.
We can also take some simple outcome measures and
say what happened to the people in our programs.
How did they change, what did they learn, how did they grow?
We can use those two types of metrics to get a purchase on
this question of social impact.
It doesn't have to be wildly complicated it can be fairly straight forward.
When it comes to financial metrics, I propose six.
You could have more, you could have less, but
I think you wanna have something around profitability,
something about did the fund balance in the organization go up or down?
Did the firm's financial position get better or worse?
Second, I think you'd want to have something about growth, overall agency or
organizational growth.
Did the budget increase from one year to another?
Or did it shrink.
Third, I think you'd want to have some kind of measures of liquidity,
cash on hand.
There's a big difference between having three months, six months, nine months, or
a year of cash on hand.
So I'd like some measure of liquidity.
Also I think there should be some useful measure of vulnerability of
the organization.
Is it prone to big swings?
Ups and downs from year to year or
from quarter to quarter in terms of revenues and its financial position.
How much movement is there over time in
the financial position of the organization.
I think fifth we could have some efficiency measures.
Simple measures of overhead and of administrative expensed,
total program expense.
Nothing complicated, but some kind of measure that gives us a sense of
how efficient are we in terms of mixing program and administration.
And finally, I'd like to have some metric, I think, of research diversification.
Everything we know about what makes a nonprofit successful
financially has to do with diversification of revenue.
Organizations that have more diverse funding streams and
funders tend to survive longer than those that don't, so
I'd like to have a metric that says, what does our funding portfolio look like?
How diverse is it?
How much spread is there across the different streams
in terms of percentage of revenue coming from each of the different sources that
might fund the organization?
Next in the area of stakeholders,
we need some measures of their satisfaction and engagement.
We want some metrics related to your clients, customers and patrons.
We want some metrics also related to how private funders are viewing you.
Individual donors, foundations, corporations, federated funders,
the whole group of funders around you.
We want also maybe to get a sense of what partner organizations, critical partners
in co-production, what they think and what they're feeling about the organization.
And of course, we want staff, board,
and volunteer metrics to give us a sense about their level of engagement.
Their level of connection and belief in the organization.
If you collect a broad group of metrics around stake holders,
you'll have a pretty clear sense of what the world inside and
outside the organization actually thinks about it.
Finally, I'd like you to have some quality indicators.
Something about your operational systems.
How good are your systems in terms of meeting customers and
patrons where they really are.
What's the error rate how many times are phone calls dropped,
how many times does the website crash, metrics that tell
something about how good you are operationally at doing the work at hand.
Finally we need some metrics that will tell us something about what your
strong suits are, what you really do well.
Some sense about where you need to improve but
also where your strong points might be when it comes to operational excellence.
If you put all those together, you'll be able to mix and match your way to,
I think, a scorecard.
You'll choose the ones that are most useful to you.
You don't have to have all the metrics I proposed.
You can choose the ones that you think are most useful and most potentially helpful.
You can choose a limited number of baskets.
You can drop down to three, four, five, or six baskets, up to you.
Of metrics, and when in each of those baskets you can put how many you want
in each one of those baskets of metrics.
You can have one or two, or you can have six or seven.
But ultimately you wanna have a concise group of metrics that will tell you
what's working, what's not, so that you can get better operationally.
So let's tie this all up.
There's a lot of flexibility in the approach we're talking about here.
There's not one and only one dashboard that has to be implemented.
The idea is it should be multidimensional.
It should cover the critical things that matter most.
It should have the metrics in it that'll tell you the things that you need to know.
You can have a limited number of clusters.
I don't know what the exact right number would be for your organization.
For your program, it could be three, four, or five, it could be more.
You have to choose them wisely to focus on what matters most to you.
And finally, you need to adjust over time.
The first cut you make on a scorecard is not gonna be the last.
You're gonna need to see how it works, how it's doing at collecting information,
how that information helps, or doesn't help you make decisions better.
Finally you wanna use this scorecard or
dashboard internally to communicate within programs and
across programs about performance, and up to the board about what's going on.
But you can also use it, I think very effectively,
externally to explain to the world around you what it is you're doing and
what the results are that you're achieving.
[MUSIC]
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