Strategic Thinking Articles

Balanced Scorecard for Associations


Many association executives are grappling with the need to involve their Boards in an ongoing strategic dialogue while at the same time providing them with proof that they’re actually getting somewhere.  This merger of strategy and measurement is becoming a new science and one brand name in a field of competitors is taking the lead.  Known as the “Balanced Scorecard” (BSC), associations are adopting this popular for-profit means of expressing strategy in measurable terms.

 

Measuring progress on goals has been a fairly common governance pursuit for some time now.  Many associations use a “dashboard” concept that puts gages in front of a Board like speedometers and odometers in a car.  They provide metrics like membership growth and revenue diversity to show how the organization is progressing. Some high performance models have special gages to track strategic activities that they hope will set them apart, like the extent to which the association’s certification credential is recognized in hiring practices.  Ideally, all of the goals adopted by the Board should have a gage to track progress and focus attention on activities that contribute to improved performance.

 

The concept of a “balanced scorecard” originated along these same lines. It first appeared as an article in the Harvard Business Review in the early 90’s where the authors, Robert Kaplan and David Norton, admonished corporate boards for their short-term style of oversight. To correct this, they proposed the use of performance measures in four categories that would give a more “balanced” perspective. This included measures of financial performance, customer satisfaction, process efficiency and, at the time, innovation.  (See “Scorecard Measures for Associations”)

 

Over time, these metrics experienced a metamorphosis that moved them into a more dynamic relationship.  Strategy, to Kaplan and Norton, is a set of cause-and-effect statements aimed at a certain outcome.  If you queue the four categories up like dominos and knock one of them over you get the idea. Reaching a financial objective is accomplished by offering customers an attractive value proposition, which must be produced by an efficient process that requires innovative people and systems.  Or, moving from the opposite end of the queue and posing it as a question, the BSC asks:  do you have the competencies to drive the processes needed to produce the value that will render your financial expectations. Imagine an environment where leaders must account for their ideas by answering that question. Conversely, think of how well a strategy would be expressed if they did.

 

The Project Management Institute started using the BSC a little over a year ago.  They consider it a work-in-progress effort that will take at least another year before they have a set of fully articulated strategies.  The priority in the first year was to establish something of a dashboard arrangement with measures that reflected the end-policies they operate under.  This initial effort produced their first valuable lesson. While the Board had been satisfied with the end policies that were in place, the pursuit of measures shed some sobering light on those that were noble enough to sound good but abstract enough to avoid detection.  With a sharper calibration, they are now translating their end policies into a more explicit format that will have about twenty strategic objectives, all of them measurable in a BSC context. (See Project Management Institute’s Objectives and Measures)

 

Another pioneer in this area is the Society of Actuaries.  In developing their new strategic plan they established the BSC as their conceptual framework, eliminating the need to convert established goals.  They now have twelve strategic priorities organized into three major themes, which include organizational effectiveness, knowledge management, and advancing the profession.

 

One of their strategic priorities is to expand their certification program to help the profession establish new fields of practice. The measurable cause-and-effect statements outlining this strategy include:

§         Develop the internal research skills necessary to quantify new areas of practice in terms of the knowledge, skills and abilities that practitioners will need to reach proficiency (Learning & Growth);

§         Develop curriculum and evaluations to support continuing education for these new areas of practice (Process)

§         Offer an expanded certification program to broaden and strengthen the profession (Customer value);

In the presentation of their scorecard, the Society of Actuaries is like many nonprofits in that they avoid putting the financial objective at the end of the string because it appears to put profit as the primary motive.  Others point out that nonprofits survive in a capitalist economy and that dues-subsidized programs face the same bottom line realities as the rest. Nevertheless, the BSC is flexible enough to accommodate this preference. Of the four measurement categories, customer satisfaction is one of the more difficult to measure accurately and efficiently. A number of associations make use of the measurement system developed by Proctor and Gamble many years ago, which is based on the identification and tracking of “satisfaction drivers”. One of the few associations to adopt this technique as a part of a larger strategic measurement system is the Architectural Woodwork Institute.  This tool involves a one-page annual survey of the members. Each program area is reduced to a single sentence statement that summarizes the value proposition.  Respondents are asked to evaluate the statements in two dimensions. The first addresses the importance of the function, regardless of the association’s performance in delivering on it. The second dimension asks about performance, but provides an “unaware” option for those who are not familiar with it.  This technique renders four measures from two response categories. For each program, there is a measure of importance, performance, gap between importance and performance, and level of awareness.

 

Typically, most associations will have from twenty to thirty programs when the entire line of products and services is reduced to core value propositions.  While there may be some generic statements common to many associations, it is important to craft the statements in a manner that are functional in nature, free of spin yet specific to any unique aspects.  Here are a few of the Institute’s twenty-two propositions:

§         Provide woodwork industry standards that establish guidelines for the construction team.

§         Provide learning opportunities that address the technical and professional needs of woodworkers and suppliers.

§         Publish a periodical that conveys useful industry information and portrays outstanding woodwork and design.

§         Compile and publish industry-specific financial data for use in business planning.

§         Provide an electronic gateway to locate AWI members, products and services.

 

The Institute’s staff adopted this tool as a part of BSC strategy to improve their overall effectiveness. It was important to them that they develop the internal staff competencies needed to calibrate satisfaction drivers and collect the data in a cost-effective manner.  The entire staff received training in the technique, which can be applied at two different levels. The macro level addresses satisfaction with all programs in a comparative manner. Though not addressed here, the micro level focuses in on the specific features of a product or service that drive satisfaction.  That macro level tells you the extent to which the programs need improvement. The micro level tells you where the weaknesses are that need improvement.  From a BSC standpoint, the Institutes strategy was to:

§         Develop staff competencies in the calibration and testing of customer satisfaction with overall program performance. (Learning)

§         Establish an in-house ability to conduct an annual membership survey that will target improvement opportunities and track satisfaction levels over time, for under $2,000 in costs. (Process)

§         Give members a direct opportunity to evaluate the Institute’s services and target the improvement opportunities. (Customer)

§         Improve the economic value members associate with the Institute to improve retention rates (Financial)

 

These three associations are still too early in the BSC adoption process to provide a storybook example of how the authors see it developing in the for-profit sector. A hypothetical example assembled from a composite view of the tactics several associations are pursuing may help to convey this picture. 

 

Imagine an educational association that represents teachers in a specialty area. The association is heavily dependent on income from dues and the annual meeting.  The leadership decides something must be done to diversify revenue, which is a purely financial objective in search of a commensurate customer value proposition. 

 

In looking through a recent membership survey the BSC proponents see a little-appreciated fact having to do with customer account share.  The members were asked how much they spend annually on educational materials. With this figure in mind, the membership database is mined to calculate how much the average member spends on educational materials that they buy from the association. They divide one figure into the other and they have their estimated account share, which is the association’s percent of total member spending in a given area. This information provides a financial objective and a measure: to diversify the association’s revenue diversity (objective) by increasing the account share of business they provide the members in targeted educational materials (measure).

 

The “Strategic Initiative” chart   provides a graphic view of their strategy in a format typically used in a BSC approach.  Three objectives are developed to account for the customer value proposition that will drive this strategy and achieve the financial goal.  The association will increase its offering of unique, proprietary materials that tend to have the greatest return on investment. They will also expand their retail offering of materials from other sources, to establish themselves as the most convenient one-stop-shopping source of specialty materials. Finally, they will create service distinction through a customer service sales force that provides the best-informed service on frequently asked questions.  These are easily measured in terms of annual expansions in product lines and survey responses on customer service.

 

This noble value proposition begs a few questions about how it will be done and what must be learned. The chart shows the process adaptations needed to achieve each of the value objectives.  The increase in the development of proprietary materials will be achieved through out-sourced relationships with vendors who are given a profit incentive.  This is further supported by an investment in the development of staff competencies in market research.

 

A best-informed customer service staff is achieved by providing market research training and by reassigning carefully selected functions that gives the customer service staff exposure to unique research opportunities.  In this case, the association’s web site has several functioning chat rooms and they offer listserves where teachers exchange information on classroom challenges.  The customer service staff is given the responsibility to monitor forums that offer insight opportunities to customer needs as they pertain to educational materials.  Their training teaches them to go beyond monitoring and to engage the customers in questioning that helps identify product development ideas. This same exposure enhances their ability to answer questions.  It taps into the networking services of the association and uses it as a research lab.

 

The ASAE Foundation’s Research Committee has picked up on the rising importance of measurement and the need to express strategy in terms that create alignment.  While the nonprofit sector is often criticized for lagging behind in the adoption of new management techniques, the flip side of that is to appreciate the value of learning from the investments made by early adopters.  The BSC bandwagon provides rich to improve the way strategy is made, measured and expressed. Associations should acquire the competencies to develop measurable strategies that increase member value in ways that secure a prosperous financial future, or so they say.

 

Scorecard Measures for Associations

Effective measurement applications use metrics that are tuned specifically to the unique features of an association’s programs and strategic priorities.  Here are some exams of metrics by Balanced Scorecard category)

Financial Measures

Membership market penetration in traditional segments

Growth in new member segments

Account share of member spending by key products

Frequency, dollar value of cross selling

Output per employee or value-added

Contributions per donor

Grants by size, sources, number

Satisfaction Drivers

Relevance of publications to business/professional interests

Fitness of codes & standards to market practices

Networking opportunities at meetings, online

Cooperation with related professions on significant issues

Impact on federal and state public policy decisions

Education opportunities that address verified needs

Process Measures

Time to:

Fulfill an order,

Process a new member application

Acknowledge a contribution,

Press releases picked up by publications that members read

Member response rates to legislative alerts

General ledger errors

Frequency with which deadlines are (not) met

Innovation, Learning and Growth

Alignment of competencies with process requirements

Alignment of information system capabilities with process requirements

Annual investment in employee development

Employee satisfaction with:

Involvement in decisions affecting their work

Recognition for good work

Access to sufficient information to do the job

Active encouragement to be creative and use initiative


 

Project Management Institute’s Objectives and Measures

Category

Strategic Objective

Measure

Financial

Ensure sufficient gross revenue to invest in added value to members and to fund adequate reserves

§         Excess revenue over expense;

§         Non-dues revenue as % of total

 

Expand the sources of new and existing revenue and the variety of revenue generating products offered

§         % of revenue generating products in each program area

 

Increase market share in the markets PMI serves

§         # of customers in each segment as % of total

 

Improve value to members to ensure renewal of membership

§         Retention rate

 

Optimize operations to ensure cost efficiencies

§         Net program revenue/ overhead

 

 

 

Customer

Ensure that customer inquiries are handled in an attentive, timely, effective manner

§         Customer Satisfaction – Responsiveness

 

Interactions with customers are personal and professional in nature

§         Customer satisfaction – contact

 

Products are conveniently accessible to customers

§         Customer satisfaction – convenience

§         % of total products offered online

 

Customer needs drive product development

§         Customer satisfaction – value

 

PMI advocates globally on behalf of the profession

§         # of official PMI speaking engagements

 

 

 

Internal

Create and expand products to meet customer segment needs

§         # of new products per customer segment

 

Improve understanding of customer segments

§         $ spent on customer market research

§         # of products targeted at distinct needs of customer segments

 

Provide effective communications to customers

§         # of communication vehicles provided and usage rates by customer segments

 

Improve processes to develop, deliver and retire products on time and within specifications

§         # of products with defined life cycles

§         Product Portfolio Management Calendar

 

 

 

Learning & Growth

Foster a culture that promotes organizational, professional and operational excellence

§         Employee retention rate

§         Employee satisfaction survey

 

Develop infrastructure to optimize resources to support global marketplace and expanded growth

§         Compliance with Technology Plan

§         Compliance with Staffing Plan

 

Align individual performance and professional development goals with PMI goals

§         # of program areas with a BSC

§         # of individuals with a Personal  BSC

 



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