After the success of the Balanced Scorecard in financial entities, Kaplan and Norton decided to transfer this tool to government and non-profit organizations.
In the application of this tool, most public institutions placed the financial perspective at the top of the hierarchy, this caused difficulties with the original structure, since achieving financial success is not the primary objective.
Hence, Kaplan and Norton raised the need to place customers at the top of the hierarchy.
In the book How to Use the Balanced Scorecard: To implement and manage their strategy, Kaplan and Norton argue that placing a very broad goal on a nonprofit's Balanced Scorecard clearly communicates the long-term mission of the organization, they show it in the following figure that is nothing more than the adaptation of the WCC to non-profit organizations:
Figure Nº 1 Structure of the generic balanced scorecard for non-profit organizations
This figure - for Kaplan and Norton - shows a modified framework in which a nonprofit has high-level prospects.
The cost perspective of providing the service highlights the importance of operational efficiency. The measured cost must include the entity's expenses and the social cost it imposes on individuals and other organizations through its operations.
The created value perspective identifies the benefits that the entity is generating for individuals, it is the most difficult to measure.
In the perspective of legitimizing support, an important client of any public organization is the donor who provides the funds. The Balanced Scorecard allows identifying the component elements, the results of their activities and measuring them.
A nonprofit - according to Kaplan and Norton - may have high-level goals that it needs to meet if it wants to fulfill its mission.
From this, the entity proceeds to identify the objectives of its internal processes and of learning and growth that will allow it to achieve its goal in the three high-level perspectives.
A North American author P. Niven also presents the financial and customer perspective for public sector entities.
As mission-focused companies, they must change the architecture of the Balanced Scorecard, elevating the role of the mission and customers and reducing the influence of financial indicators. ”
The Balanced Scorecard in Cuba
The Balanced Scorecard is expanding to Cuban companies, which have been adapting to changes that have occurred in the international context. Many of the Cuban organizations have appropriated the ISO 9000 quality standards and are applying it with satisfactory results.
An awakening in this sense has been reflected in Cuba. It has been declared in the Economic Resolution of the V Congress of the Communist Party of Cuba, which states the following:
"The use of modern business management techniques, adapted to our characteristics and based on the best and most advanced contemporary practices…"
This entire process demonstrates an open gap towards recognizing the need for a change in our business system towards a search for better performance.
The Business Improvement model has contributed to the development of organizations.
It is aimed at continuously enhancing the levels of efficiency, authority, and executivity of the Cuban state company as the fundamental link in the economy.
This process makes the Balanced Scorecard an important path in achieving organizational objectives because it presupposes a change in the conception of form and thinking that it can lead our organizations to a new stage.
In our society, the competitiveness of organizations is sought through the creation of goods and services for the ever increasing satisfaction of Cuban society.
The objective of both for-profit and non-profit organizations is to obtain profit, establishing an environment in which people can feel useful to society and contribute with their capacities to obtain goods and services that lead to social welfare.
A for-profit organization is a consciously coordinated system that aims to achieve more and more benefits on the basis of providing goods and services to society in order to satisfy the needs, desires of a group of people who make up the market. objective.
A non-profit organization is a consciously coordinated social system that aims to serve society more and more on the basis of providing goods or services in order to satisfy the needs, desires of a group of people who make up the target market.
The island's entities that show interest in the business management tool, released by Kaplan and Norton in 1992, are increasingly growing. An example of the aforementioned is the application of this strategic alignment methodology in the Study Center Accounting, Financial and Insurance.
The Center for Accounting, Financial and Insurance Studies is a budgeted educational institution that belongs to the Ministry of Finance and Prices and was created as a result of the need to modify the scope of action of the Cuban School of Insurance.
It is a non-profit entity, its mission is: "To guarantee postgraduate education of human resources linked to the Ministry of Finance and Prices and its subordinate entities as a complement to the basic training of graduates of higher education centers in the country, with high ethical, patriotic and professional values that contribute to professional and human improvement ”.
As a result of this collective process and shared by all the members of the entity, the following Vision was formulated:
"Institution of recognized national and international prestige in postgraduate education in financial activities due to the level of preparation of its faculty, its connection to Cuban practice and excellence in the development of educational modalities, particularly distance education."
As this mission is related to the training and development of skills of the personnel of the Ministry of Finance and Prices, its Business System and the Ministry of Audit and Control, since 1998 strategic exercises have been carried out with a view to establishing the direction of their work. and facing the challenges that this dynamic activity imposes in the current moments of Globalization and the knowledge economy, which reinforce the need for competitive cadres and specialists.
At CECOFIS, the Management By Objectives based on Values has been implemented as a management system, but due to the scope of the functions, it is necessary to establish a more advanced management system, which allows the control function to be perfected and, at the same time, a evaluation of the impact of institutional management.
The application of the Balanced Scorecard in CECOFIS is important because:
- It gives the possibility of using indicators to monitor the entity's strategy. It allows analyzing the environment and the strategy to build an organizational behavior model that reflects the interrelationships between the different components of the entity. It forces management not only to agree the strategy, but also to have a joint vision of how to reach it. It can be used as a tool to learn about the Institution. The comparison between the plans and the current results helps the management team to evaluate and adjust both the strategy and the action plans. It allows us to become an organization based on knowledge management, where human resources are the basic element in generating of values and their mobilization for the development of the organization.
The implementation of the CMI in CECOFIS will allow not only the improvement of internal control in the entity but also:
- This process will be favored in the control systems of the entities that receive the services, since CECOFIS is considered an agent for the professional improvement of human resources in general. and take corrective measures before possible deviations. It allows greater integration in the management system by taking into account the interactions between the key areas of the entity. It allows the achievement of higher objectives related to Total Quality in our processes and results, in Both make it easier for us to improve the deficiencies detected and improve the processes and procedures that are carried out within the organization. It allows us to identify more precisely the needs for material, financial and human resources.
The design of the Balanced Scorecard can be achieved through a systematic process that generates consensus and clarity on how to translate the mission and strategy of an entity into objectives, operational indicators and value proposition for the client.
The Balanced Scorecard concentrates its effort on determining what may be the critical factors that contribute to the creation of future or long-term economic value.
Among these critical factors, we can point out, among others: customers, organizational learning, internal business processes, innovative products, organizational growth, among others.
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Notes:
Paul Niven of Primerus Consulting Inc. consultant who developed his experience working as Project Leader at Nova Scotia Power. Author of the books The Balanced Scorecard step by step and Balanced Scorecard step by step in the Government and Non-profit Organizations.
Niven, Paul: The Balanced Scorecard step by step. 2002, p.380
