By adopting strategic performance measures, nonprofits can bring focus and discipline to their mission and much-needed information to donors and supporting organizations. The result: a more efficient marketplace that rewards effectiveness, thereby bringing bigger benefits to society. And in the post-Enron era, the stewardship and accountability that the Balanced Scorecard can help nonprofits achieve is just as relevant to the private sector as it is to the public sector. [Excerpted from article]

Nonprofit organizations do not typically employ benchmarking measures, which can affect the resources that a nonprofit may obtain, as donors and foundations have no information to assess the efficiency and effectiveness of an organization they may choose to support. Financial measures do not appropriately assess a nonprofit, and where benchmarks have been used so far, they are typically operational and compliance measures, rather than strategic ones.

The Balanced Scorecard can be applied to nonprofits, where the idea of strategy shifts from “what the organization plans to do to what it intends to accomplish, especially outcomes that can be measured and for which the organization will be accountable.” In addition, “strategy is not what an organization intends to accomplish, but what it has decided not to accomplish.” According to the Balanced Scorecard, the mission of a nonprofit drives the organization’s strategy, rather than financial/shareholder objectives.

The Balanced Scorecard is now being used by nonprofits to make their organizations more strategy-focused, and these reports can function similar to financial statements in the profit sector. The clear communication of mission-specific performance can facilitate funding and volunteer support as the result of the Balanced Scorecard approach to ensure that nonprofits are delivering effective and efficient performance benefits.