Balanced Scorecard:
Measuring performance of an organization involves studying its processes and outcomes to see if it is getting the results it intend to achieve. The best way to determine operational effectiveness is by measuring business performance. There are many methods of measuring performance but the goal is the same — to find out what is working well and what needs to change. Performance measurement can keep a firm on track towards its vision and help achieve its objectives. Balance Scorecard (BSC), an important measure of an organization’s performance is defined as “a document that translates an organization’s mission and strategy into a comprehensive set of performance measures that provides the framework for implementation of its strategy”.
A Balance Scorecard strikes a balance between financial and operating measures, links performance to rewards, and gives explicit recognition to diversity of organizational goals. In its simplest form The Balanced Scorecard breaks performance monitoring into four interconnected perspectives:
• Financial perspective: Highlights achievement of financially strategic goals, including continued maximization of shareholder value and reasonable return on invested capital for business enterprises.
• Customer Perspective: identifies the targeted market segments and measures the company’s success in those segments. It includes customer’s perception of the business, satisfaction, and other value added measures. A non-profit will look to its target population that it serves to see if it is meeting their expectations.
• Internal Business Process perspective: analyses how to improve internal operations, maximize efficiencies, Increase quality and productivity and cut down on inefficiencies How well does the business achieves such operational measures defines its internal market advantage.
• Innovation and learning perspective: focuses on the ability of the business to continue to improve and create value. This perspective also examines how an organization learns and grows its intellectual capital to maintain a sustained competitive advantage.
The Balanced Scorecard takes into account not only financial targets, but also targets based on social, legal, and environmental perspectives. The triple bottom line annual reports include financial, corporate social responsibility, and environmental sustainability reports. Investors recognize and reward companies that implement best practices in the achievement of their Balances Scorecard objectives.
The Ontario Hospital Association’s Balanced Scorecard: Many organizations adjust their scorecard either by including different number of perspectives to better reflect strategy and operations. This is especially true of not-for-profit organizations in which financial and non-financial performance contributes to the ultimate goal of providing services to their clients. The Ontario Hospital Association (OHA), represents over 150 hospitals in Ontario and advocates on their behalf for a sustainable yet effective health care system, supports integration of health care services, and safeguard patients. Hospital Reports, OHA’s version of balances scorecard, shares strategies and hospital performance with its members and the public. The four perspectives that appeared in the 2007 Hospital Report for acute care hospitals are described below:
• Financial Performance and Condition: This perspective defines how acute care hospital manage their financial and human resources through examination of nine measures of financial viability, efficiency, liquidity, capital and human resource use. One of the financial performance and condition measures is the total margin, the percentage by which a hospital’s total revenues exceeds its total expenses was 1.3 percent.
• Patient Satisfaction: Patient satisfaction corresponds to the customer perspective. It examines adult patients’ perceptions of their acute care hospital experience with a focus on overall impressions, communication, consideration, and responsiveness. All measures are based on survey data.
• Clinical Utilization and Outcomes: This is a version of the standard business process perspective. It describes the clinical performance of acute care hospital outcomes through examination of readmissions, adverse events, and appropriateness of care. Performance measures are based on hospital data regarding cases in specific categories of illnesses.
• System Integration and Change: This perspective resembles the conventional organizational learning perspective, although its focus is investment in information systems and their usage. Unlike conventional versions, it does not include measures of professional and staff education, training and development plans which are covered in its financial performance and training perspective.
Non-financial measures of performance are key features of all scorecards, especially in the not-for-profit sector where the stake holders are not the shareholders but the funding agencies, donors, populations and communities served by them. This is all the more important when the funding sources are finite and donors and contributors require accountability in the effective utilization of their resources.

Challenges that not-for profits would face to implement Balanced Scorecard:
Most not-for-profit organizations have difficulty implementing Balance Scorecard (and other management control systems in general). The main problem is that the output of non-profit organizations are harder to measure than for profit manufacturing and service organizations. As a result, it may be more difficult to know whether the service provided is, for example, of top quality until long after the service has already been delivered.
Not-for profit organizations also have additional problem designing and implementing an objective that is similar to the financial “bottom line” that so often serves as a powerful incentive in private industry. The key factor in the success of a BSC in an organization requires proper training and motivation of employees to achieve goal congruence and effort, followed by consistent monitoring of objectives set in accordance with critical processes and success factors. Such synergies may not be possible in not-for-profit settings. Furthermore, many people seek positions in not-for-profit organizations for other than monetary rewards. Thus monetary incentives are less than effective in NFP organizations.
Control systems for the achievement of Balanced Scorecard in not-for profit organizations will never be as highly developed as are those in profit-seeking firms because organizational goals might be conflicting, multiple, or not clear. The organizations might be run by volunteers, or practitioners of various professions who might be less receptive to installation or improvement of formal control systems. Moreover, measurement of the effectiveness of the BSC are difficult in NFP’s because there is no profit measure and there is less competitive pressure from other organizations or from “owners” to improve.
The role of budgeting is often more a matter of playing bargaining games with sources of funding to get the largest possible amount than it is rigorous planning. The funding might not be consistent or dependent on certain events or political pressures.
Benefits that not-for profit organizations would receive by implementing Balances Scorecard:

The Balanced Scorecard can help a NFP determine how it is adding value to the community it serves by measuring the impact between its stated objectives, activities offered and results achieved. When there is alignment between these 3 components, value is added. If the activities offered do not meet the stated objectives, or do not have the desired impact, the Balanced Scorecard will help point out discrepancies and will help the leaders readjust their focus and efforts. Not-for profits that adopt this inclusive approach find that the Balanced Scorecard can do much more than create a framework for measuring the performance of their organization. They can actually use the Scorecard to transform their organization’s strategy, set measurable goals and set a timetable for their execution. Through BSC they can focus on measuring and observing cause and effect relationships between their key objectives and have an accurate report on leading and lagging initiatives. For example, instead of guessing which fund raising campaigns, events and services are valuable to the group, they will have substantial evidence on which to base their decisions.

Having a schedule of tasks and assigning responsibility for implementation allows the
Non-profit organization to become more proactive, giving them the ability to react in a timely manner to measure the success of each activity without relying on a traditional approach that does not provide a current snapshot of what is working well and what isn’t. Getting the right performance information to the right people in the organization at the right time will greatly increase the ability of the organization