Literature Review by G26JqXFe


									Performance Measurement: The Balanced Scorecard

                    in Non-Profit Organisations

Paul Young

Yvonne Shanahan

Beverley Lord

Department of Accountancy, Finance & Information Systems

University of Canterbury

Private Bag 4800

Christchurch 8140

New Zealand

The Balanced Scorecard is a performance measurement system that overcomes some

of the limitations of using financial performance measures alone (Kaplan, 2001).

Although the Balanced Scorecard was developed for the private sector, Kaplan (2001)

argues that this system can be applied to the third sector. This paper provides

evidence of the adoption and usage of the Balanced Scorecard in non-profit

organisations (NPOs). A low usage of the scorecard was found, yet many

organisations have performance measurement systems containing both financial and

non-financial measures which could be grouped across a range of perspectives,

similar to the Balanced Scorecard. A small number of respondents were critical of

performance measurement in NPOs. However most organisations do measure their

performance and make use of both non-financial and financial measures.

Keywords: Balanced Scorecard; Performance measurement systems; Non-profit


1. Introduction

"'Non-Profit Organisations' (NPOs) are those where "any profit is not for the benefit

of owners or members, but rather for the beneficial objectives for which the

organisations exist" (Perrin, 1985, p. 24). A Ministry of Social Development report

(2005) estimates that over $1.6 billion was invested in the non-profit sector in New

Zealand in 2002.

Kaplan (2001, p. 353) argues that "the topic of performance measurement has become

urgent for non-profit organizations as they encounter increasing competition from a

proliferating number of agencies, all competing for scarce donor funding".

Performance measurement can show donors whether the mission is being met. For

example, in New Zealand, the Government recently cancelled a funding contract with

the Royal New Zealand Plunket Society for a phone based health service due to the

Society not meeting performance targets (NZ Herald, 2006).

The Balanced Scorecard, which is a performance measurement system developed in

the private sector to overcome the limitations of using financial measures alone

(Kaplan, 2001), has four perspectives: financial, customer, internal processes, and

learning and growth. Kaplan (2001) argues that this system is also applicable to the

non-profit sector.

The remainder of the paper is organised as follows. Section two reviews the relevant

literature, including benefits and criticisms of the Balanced Scorecard in for-profit

organisations and the applicability to the non-profit sector. The third section outlines

the research method and design, whilst the fourth describes the results of the survey.

The fifth section discusses the results and implications of this research, followed by a


2. Literature Review

The Balanced Scorecard in the Private Sector

Many commentators have recognised the problems of financial performance

measures. Kaplan and Norton (1992, p. 71) argue that traditional financial measures

are out of step with the "skills and competencies that companies are trying to master

today". Kaplan (2001) adds that financial measures describe past performance but not

long-term value creation. Bourne et al. (2005) claim that financial measures can be

manipulated, although they do not question whether non-financial measures also can

be manipulated. Ittner and Larcker (1998) discuss how financial measures provide

little information on root causes of problems. These factors have led to the

development of performance measurement frameworks such as the Balanced

Scorecard (Kaplan and Norton, 1992).

The Balanced Scorecard is a performance measurement system which retains

traditional financial performance measures. The system includes a perspective for

learning and growth, where objectives relate to employee motivation, capabilities and

innovation. The internal process perspective includes measures of operating

performance and the critical processes needed to achieve customer and shareholder

objectives (Kaplan and Norton, 1996). The Balanced Scorecard also includes a

perspective for customer satisfaction: "the operational measures that are the drivers of

future financial performance" (Kaplan and Norton, 1992, p. 71).

Kaplan (2001) argues that the Balanced Scorecard reduces information overload by

limiting the number of measures used, brings together a wide range of organisational

elements into one report and allows managers to see the effects that their actions in

one area of the organisation have on other areas. Lyons et al. (2003, p. 34) describe

the Balanced Scorecard as a "powerful tool in translating strategy into action". It helps

managers develop and communicate strategy more effectively. Kaplan and Norton

(2001) claim that organisations should be organised around strategy, rather than

functional departments. Strategy should be translated into operational terms and the

Balanced Scorecard can enable this communication with employees (Kaplan and

Norton, 2001). The overall results of the Balanced Scorecard will then help

organisations evaluate the effectiveness of their strategy (Frigo, 2002).

Criticisms of the Balanced Scorecard

There have been criticisms of the Balanced Scorecard. One of these focuses on the

small number of perspectives (Yeniyurt, 2003; Voelpel et al., 2006; Bontis et al.,

1999). The Balanced Scorecard does not contain perspectives for many important

stakeholders in the firm, such as suppliers, unions , competitors (Voelpel et al., 2006),

alliance partners (Bontis et al., 1999) and employees (Bontis et al., 1999). However,

Kaplan and Norton (1996, p. 34) argue that the Balanced Scorecard should not be a

"straight jacket" and organisations should add perspectives depending on their

circumstances. Kaplan and Norton (1996) also claim that an employee perspective is

included within the learning and growth perspective for most organisations. Marr's

(2005) research into private sector organisations found that 52% of the firms surveyed

included an employee perspective in their Balanced Scorecard, and 10% of firms

included a perspective for other stakeholders.

Voelpel et al. (2006, p. 50) claim that the Balanced Scorecard tends to "force"

performance measures into the four perspectives, without considering measures that

cross perspectives and have an effect on multiple areas of the business. For example,

in today's business environment the learning and growth perspective needs to be

incorporated into all the perspectives; Innovation cannot be separated from other parts

of an organisation. Voelpel et al. (2006) and Nørreklit (2000) also criticise the static

nature of the Balanced Scorecard, where strategy is translated into goals. This

increases the focus on the goal but limits efforts to achieve beyond the original


Ittner and Larcker (1998) claim that the Balanced Scorecard could result in

information overload due to using a large number of performance measures, which

may result in focusing on tasks that are easily measured to the detriment of more

important tasks. This is in contrast to claims by Kaplan (2001) that the scorecard

reduces information overload.

Papalexandris et al. (2005, p. 215) criticise the Balanced Scorecard for paying little

attention to "factors such as change management, project management, [information

technology] IT infrastructure… that are critical for the successful implementation of

the Balanced Scorecard". Similarly, Frigo (2002) gives an example of improved

execution of strategy not improving.

Kaplan and Norton (2004) explain how the four perspectives are linked by cause-and-

effect relationships. Financial outcomes can only be achieved if customer needs are

met; which is ensured by good internal processes. Organisational learning and growth

contribute to success in the other three perspectives. Thus measurements in non-

financial areas can be used to predict future financial performance. Nørreklit (2000),

however, questions this claim, stating that if it really was a cause and effect

relationship is should be able to be empirically proven, which is not so. Customers

that are not loyal may be expensive, but the reverse is not necessarily true. Also, "if a

cause-and-effect relationship requires a time lag… then it is problematic that the time

dimension is not part of the scorecard" (Nørreklit, 2000, p. 71). Despite Kaplan &

Norton's (1996) claim that the cause-and-effect relationship is a major part of the

Balanced Scorecard, Marr's (2005) survey found half of the companies that had a

formal Balanced Scorecard did not consider causal links.

Ittner and Larcker (1998) question the role of consultants in the adoption of the

Balanced Scorecard, and whether it solves problems or is a "fad that consultants have

packaged into products that can be easily sold" (p. 234). Nørreklit (2003) states that

little discussion of the concepts and logic of the Balanced Scorecard has taken place,

claiming that the metaphors and rhetoric surrounding the Balanced Scorecard are

propaganda and that the Balanced Scorecard belongs to the "genre of the management

guru text" (p. 611).

Despite the criticisms, the Balanced Scorecard has been implemented by 35% of the

5,000 largest companies in the United States (Marr, 2005) and 26% of the largest

firms in Germany (Speckbacher et al., 2003). Two New Zealand studies found that

61% of the Top 40 listed firms in New Zealand (Blundell et al., 2003) said they used

the balanced scorecard, but only 11% of all listed companies (Lord et al., 2005).

The Balanced Scorecard in Non-Profit Organisations

By definition, NPOs have a mission other than earning a financial return for

shareholders, such as educating the community, staging cultural events, caring for the

sick or saving lives (Statistics New Zealand, 2005). Forbes (1998) notes that NPOs

lack the simplicity of a financial measure as such a measure will not necessarily

measure the success of their missions. Sawhill and Williamson (2001) provide an

example of The Nature Conservancy, whose traditional performance measures centred

around funds raised and area of land under protection. Under these measures the

Conservancy was highly successful with a growth rate of 18% per annum. However,

their mission of halting species extinction was not being captured by these measures.

Kaplan (2001) argues that the Balanced Scorecard is applicable in the non-profit

sector, because "success for nonprofits should be measured by how effectively and

efficiently they meet the needs of their constituents" (p. 353). The Balanced Scorecard

can be used to link performance measures to mission. Kaplan (2001) describes three

non-profit organisations that successfully implemented a Balanced Scorecard. New

Profit Inc. found that the Balanced Scorecard helped overcome the conflicts between

multiple stakeholders by including an extra perspective regarding its portfolio

organisations. United Way of South-eastern New England found that the Balanced

Scorecard was successful in communicating strategy to employees. At Duke

Children's Hospital 'cost per case' dropped 25% soon after implementing a Balanced

Scorecard (Kaplan, 2001). Other cases of the scorecard being successfully used in

hospitals are reported in Stewart and Bestor (2000) and Urrutia and Eriksen (2005).

Changes to the Balanced Scorecard in NPOs

Changes may need to be made when implementing the Balanced Scorecard in the

non-profit sector. Because the Balanced Scorecard assumes a cause-and-effect

relationship between perspectives which leads to financial success, but NPOs have a

non-financial, beneficial mission to achieve, Kaplan (2001, p. 360) suggests that

NPOs place an "overarching mission objective at the top of their scorecard". The

objectives in the scorecard can then be focused on achieving this mission. For

example, United Way of America places their customer perspective at the top of the

scorecard, and the financial perspective at the bottom. Funding from donors leads to

innovation, improved business processes, satisfying customer needs and finally

achieving the overall objective of the organisation (Kaplan, 2001).

Kaplan (2001) claims that NPOs need to "expand the definition of who their customer

is" (p. 360). In for-profit organisations, the customer both pays for and receives the

benefits from the goods and services the organisation provides. However, in NPOs,

donors provide financial resources and another group receives the service. Kaplan

(2001) suggests that NPOs place "the donor perspective and recipient perspective in

parallel" (p. 361).

Yeniyurt (2003) and Voelpel et al. (2006) criticise the Balanced Scorecard in for-

profit organisations for not including perspectives for some of the stakeholders. This

is also an issue in NPOs. In addition to paid employees, NPOs have a large number of

volunteers. A perspective on the Balanced Scorecard for volunteers could be included

and volunteers' performance could be measured. However, United Way of

Southeastern New England decided against incorporating a perspective for volunteers,

claiming that volunteer-related measures could be included in other perspectives

(Kaplan, 2001).

Research Motivation

There have been some case studies on the Balanced Scorecard in NPOs, yet there is

scant quantitative research on the adoption and use of the Balanced Scorecard in

NPOs. This is in contrast to research into the usage of Balanced Scorecards in for-

profit organisations (Marr, 2005; Speckbacher et al., 2003; Lyons et al., 2003).

This research surveyed NPOs in New Zealand in order to find out whether these

organisations measure their performance using financial and non-financial

information; the number, range and type of performance measures used; and whether

measures are linked to strategy.

3. Research Method

A questionnaire was developed (see Appendix), based on previous literature, and sent

to 300 NPOs in New Zealand. Some questions were in a yes/no format; others were

answered using a five-point Likert scale. Respondents were able to give written

comments to some questions, which were classified using content analysis.

The sample of 300 NPOs was randomly chosen from the Inland Revenue

Department's list of Donee Organisations (IRD, 2006). Surveys were sent to the chief

financial officer or equivalent at the head office of each organisation. A follow-up

mailing was sent out two weeks after the first mailing.

One hundred and eight responses were received. However some were not usable as

they were returned unopened, the respondents considered the survey irrelevant to their

organisations, the organisation no longer exists, or the organisation is not an NPO. In

total there were 87 usable responses, a response rate of 29%.

A test for non-response bias was undertaken between the first and second mailing.

There was no evidence of such a bias as the differences in means for each question

were not significant (p > 0.05 for all).

4. Results

Descriptive Statistics

Table 1 and Table 2 show the size of the respondent organisations, as measured by the

number of employees and income respectively. Eighteen percent of organisations had

zero employees, and the majority of respondents had less than 10 employees. There

was a wide range of income levels.

[insert Table 1 and Table 2 about here]

The main source of income is donations, followed by community grants and then the

Government (see Table 3)

[insert Table 3 about here]

The main type of organisation service provided by respondent NPOs is welfare/social

services (40% of respondents – see Table 4). Almost 75% of respondents provide

services in the three largest categories:   welfare/social services, healthcare and


[insert table 4 about here]

Why Organisations Measure Performance

Respondents were asked why they measure performance, using a five-point Likert

scale ranging from '1', 'to a great extent' to '5', 'not at all.'. The most important reason

was to see whether the mission is being achieved (mean 1.60), to measure the

effectiveness of the organisation (mean 1.79) and it is required for funding (mean

2.13). Differences between means were tested using the Wilcoxon Signed Ranks

Test1. There is a statistical difference between 'seeing whether the mission is being

achieved' and 'measuring effectiveness' (p=0.068) and between 'measuring

effectiveness' and being 'required for funding' (p=.001).

There was a significant correlation (ρ=0.533, p=0.00) between having Government

funding as a source of income and being required to measure performance for

funding. This is not surprising as it is likely that the Government requires

performance measurement for some funding contracts.

Respondents were also asked to what extent they used financial or non-financial

performance measures on the same five-point Likert scale. NPOs were more likely to

use non-financial measures (mean 1.89) than financial performance measures (mean

2.55, p=0.00). There was also a significant correlation between organisations being

required to measure performance for funding purposes and the use of non-financial

measures (ρ=0.260, p=0.026), suggesting that those organisations who fund NPOs

may require the use of these non-financial measures.

    Results were not normally distributed; thus unless otherwise stated, Wilcoxon Signed Ranks, Mann-

Whitney U and Spearman's Correlation were used to test for statistically significant results.

Strategy and Performance

One of the aims of the Balanced Scorecard is to link performance measures with the

strategy of the organisation (Kaplan, 2001). Respondents were asked whether

financial and non-financial measures are linked to strategy, on a five-point Likert

scale, where '1' is 'extensively' linked and '5' is 'not at all' linked. Non-financial

measures (mean 2.01) are more extensively linked to strategy than financial measures

(mean= 2.71, p=0.00). As NPOs have a mission other than earning a financial return,

non-financial measures may be easier to link to strategy than financial measures

(Kaplan, 2001). Non-financial measures being linked to strategy is significantly

correlated with being required to measure performance for funding purposes

(ρ=0.437, p=0.00).

Respondents considered that including non-financial measures would enable their

organisation to measure success more so than using solely financial performance

(mean 1.54 on a scale from '1' = 'definitely' and '5'= 'not at all'). Respondents were

then asked, on the same scale, whether measuring the performance of the organisation

has led to increased performance, with a mean response of 2.26. Organisations that

are required to measure their performance are more likely to think that doing so will

lead to increased performance than those organisations who are not required to

measure performance (U = 348.50, p=0.022).

The mission and strategy of the organisation is communicated to employees using

performance reviews (26 responses), newsletters/reports (17), meetings (14), the

strategic planning process (7), training (6) and manuals/policies (4).           Five

organisations felt there was no such communication and 25 respondents did not

answer the question.

Performance Measures

Only five respondents indicated that they use a Balanced Scorecard 2 and only 37% of

respondents had heard of the Balanced Scorecard. Despite this low usage, many

organisations have performance measurement systems that share common elements

with the Balanced Scorecard, as evidenced by the previous results.

The mean number of performance measures used was 7.41. Although most

respondents were not Balanced Scorecard users, they were able to categorise

measures used into various perspectives (see Table 5). There was a difference in the

mean number of total measures used between Balanced Scorecard users and non-users

with a mean of 19.20 compared with 6.70 respectively.

[insert Table 5 about here]

In addition to the number of measures used, respondents were then asked to note the

importance of eight NPO-relevant performance measures, found in the literature, to

their organisations, on a Likert scale from '1', 'very important' to '5', 'not at all'

important. The mean responses are outline in Table 6. The most important measure to

NPOs is client satisfaction, that is, the satisfaction of the recipient of the

organisation's services. This is more important than donor satisfaction (p=0.015) and

the other measures. Donor satisfaction is more important than time donated by

    Although differences in means between Balanced Scorecard users and non-users are reported in

several places, due to the low sample size it is not possible to test whether these differences are

statistically significant and caution must be applied when interpreting these results.

volunteers (p=0.035) and the other measures. Employee turnover is the least

important measure, possibly due to the low level of employees that NPOs employ, as

level of employees and importance of employee turnover are correlated (ρ =0.460,


[insert table 6 about here]

There are significant correlations between organisations that are required to measure

performance for funding purposes and budget variances (ρ=0.328, p=0.005), client

satisfaction (ρ=0.258, p=.034) and time donated by volunteers (ρ=0.304, p=0.01). It

is likely that the organisations' funding is dependent on performing well on these


There are significant correlations between the size of the organisation, in terms of

income, and the importance of budget variances (ρ=0.430, p=0.00), employee

turnover (ρ=0.482, p=0.00), and growth in revenue (ρ=0.348, p=0.003). These

measures may be less important to smaller NPOs.

Cause-and-Effect Relationships

Kaplan (2001) argues that there is a cause-and-effect relationship between various

perspectives on the Balanced Scorecard and that NPOs should have the donor and

client perspectives parallel at the top of the Balanced Scorecard. Even though there

were only five users of the balanced scorecard, 53 respondents (72%) believe that

there is a cause-and-effect relationship in their performance measurement system.

This belief was significantly correlated with believing that financial and non-financial

measures are linked to strategy (ρ=0.398, 0.464; p=0.00), that including non-financial

measures will enable better performance measurement (ρ=0.303, p=0.01) and that

measuring performance has led to increased performance (ρ=0.324, p=0.01).

Respondents were asked, on a five-point Likert scale, the main perspective their

organisation may want to influence, with '1' being the 'main focus' and '5' being 'least

focus.' The results are reported in Table 7. The Client perspective was the most

important, and significantly different from the other means (p=0.00). Wanting to

influence the employee perspective is correlated with the number of employees

(ρ=0.343, p=0.002), indicating that organisations with more employees are more

likely to focus on performance measures relating to employees.

[insert table 7 about here]

The "other" perspective was generally organisation-relevant; for example the

perspective may be research related for a research organisation. Another category

mentioned in 'other' related to influencing the Government. This may be an alternative

to the 'Donor' perspective.

5. Discussion

The Balanced Scorecard is a multidimensional performance measurement system.

This survey provides evidence that NPOs do measure their performance on multiple

perspectives even though they do not necessarily name the perspectives or use a

balanced scorecard. Client and donor perspectives are most important. NPOs that

responded to this survey group the measures they use into the four perspectives as

discussed by Kaplan (2001), as well as employees and volunteers. Organisations use,

on average, between 7.41 measures overall, which is lower than Kaplan and Norton's

(1996) suggestion of between 16 and 24 measures. The low number of measures

for non-users may hamper efforts to measure performance, although they will not face

information overload (Ittner and Larcker, 1998; Kaplan, 2001). The latter may be a

problem for Balanced Scorecard users.

Kaplan (2001) states that performance measures should be linked to the strategy of

the organisation and this survey provides evidence that NPOs do link measures to

strategy, with non-financial measures being linked to strategy more so than financial

measures. This may be due to the non-financial mission of NPOs. Respondents also

believe that including non-financial measures will enable their organisations to

measure success more so than just using financial measures.

The basis of the Balanced Scorecard is the cause-and-effect relationship between

perspectives; Kaplan (2001) claims that this relationship exists in NPOs. Although

Nørreklit (2000) criticises the equivalent cause-and-effect relationship in for-profit

organisations, research into this relationship in NPOs has not been undertaken. This

study found that more than 70% of respondents believe in such a relationship. This

contrasts with Marr (2005), who found that only half of private sector Balanced

Scorecard users considered causal links.

This survey set out to assess the usage and adoption rates of the Balanced Scorecard

in NPOs as there has been little quantitative research on the use of the Balanced

Scorecard in such organisations. Only 5.7% of respondents used the Balanced

Scorecard, compared with higher adoption rates in studies of the private sector

(Blundell et al., 2003; Lord et al., 2005; Marr, 2005). Despite claims that in the

private sector, the Balanced Scorecard has been well marketed by consultants (Ittner

and Larcker, 1998; Nørreklit, 2003), only 37% of respondents had heard of the

Balanced Scorecard. This poses an interesting research question: why has the "fad"

not spread so widely in the third sector?

In addition to the low usage rate of the Balanced Scorecard, there were at least 13

respondents (either through email or through returning the survey) who claimed that

performance measurement is irrelevant to their organisations. Some respondents

considered that their organisations were too small to measure performance, whilst one

claimed that "our members are self motivated because they are interested in language

and other cultures." Other reasons included: "we don't deliver social services

directly," "there is no science involved," and "our performance is obvious." One

respondent claimed that "we are not structured in the manner you assume" and

another wondered "whether you understand how non-profit organisations work,

especially umbrella organisations.". Whilst some of these organisations might be

"special cases" where performance measurement is unnecessary, these comments

indicate that a certain number of people involved with NPOs consider performance

measurement to be too difficult or unnecessary. One respondent was "highly critical

of performance measurement in non-profit organisations." These respondents are

questioning whether performance measurement systems developed for the private

sector are necessary or applicable in the third sector. More research could focus on the

benefits of performance measurement in NPOs and the communication of this

research to users in this sector.

Despite the apparent reluctance by some respondents to measure performance, only

four of the 87 respondents did not measure performance in some way. Although 57%

of respondents were required to measure performance for funding purposes, a large

number of respondents measured performance to see whether the mission was being

achieved, which is a more important reason. Thus, a large number of NPOs realise the

benefits of measuring performance. NPOs are also more likely to use non-financial

measures than financial measures; this is understandable given their non-financial

mission (Kaplan, 2001).

Kaplan (2001) argues that the use of a Balanced Scorecard will increase performance

and help communicate strategy to employees. This survey provides evidence that

measuring performance is perceived to increase performance of NPOs, and a majority

of respondents (66%) thought that their performance measurement system did

communicate strategy to employees and volunteers. However, 30 respondents (34%)

either said that their system did not translate strategy or provided no answer. This may

be a potential area of improvement if NPOs were to implement a Balanced Scorecard.

One important issue in this survey was the significant correlation between having

Government funding as a source of income and being required to measure

performance for funding. Those NPOs that are required to measure performance for

funding are more likely to use non-financial measures (ρ=0.260, p=0.026). These

NPOs are also likely to consider the employee and learning and growth perspectives

more important than other NPOs. Funding may be dependent on these measures in

some way. This may mean that funding agencies, in particular the Government, may

play a role in increasing the use of performance measurement in NPOs. Future

research could be conducted in this area.

6. Conclusion

Overall, the objective of this research was to provide evidence of the usage and

adoption of the Balanced Scorecard in NPOs. Although only a small proportion of

respondents use a Balanced Scorecard, many NPOs have a performance measurement

system that features some of the elements of a Balanced Scorecard, including the use

of multiple perspectives and non-financial measures, a link between measures and

strategy, communication of strategy to employees and the importance of the donor

and client perspectives. In particular, a majority of respondents use a variety of

measures and were able to group them into four or more perspectives. Many are using

systems that resemble the Balanced Scorecard without mentioning this term. It may

simply be that few have heard of the Balanced Scorecard or equivalent systems, yet

recognise the underlying benefits from multidimensional performance measurement

systems that use non-financial measures. There may be few consultants promoting

systems in the non-profit sector. A small number of respondents are critical of

performance measurement in NPOs, perhaps as they do not want to appear to be

adopting performance measurement systems developed, used and promoted in the

private sector. This could be examined in future research.


Blundell, B., Sayers, H. and Shanahan, Y., 2003. The adoption and use of the

       balanced scorecard in New Zealand: a survey of the top 40 companies, Pacific

       Accounting Review, 15(1), 49-74.

Bontis, N., Dragonetti, N., Jacobsen, K. and Roos, G., 1999. The knowledge toolbox:

       a review of the tools available to measure and manage intangible resources,

       European Management Journal, 17(4), 291-402.

Bourne, M., Franco-Santos, M., Kennerley, M. and Martinez, V., 2005, Measuring

       Business Excellence, 9(3), 36-40.

Brooks, A., 2002. Can nonprofit management help answer public management's "big

       questions"?, Public Administration Review, 62(3), 259-266.

Charities Commission, 2006. Our role,

       (accessed August 28, 2006).

Dalsimer, J., 1989. Volunteers: what are they worth?, Management Accounting,

       70(11), 40-45.

Fitzgerald, L., Brignall, T., Johnston, R. and Silvestro, R., 1991. Performance

       measurement in service businesses, Management Accounting, 69(10), 34-36.

Forbes, D., 1998. Measuring the unmeasurable: empirical studies of nonprofit

       organisation effectiveness from 1977 to 1997, Nonprofit & Voluntary Sector

       Quarterly, 27, p. 183-202.

Frigo, M., 2002. Strategy and the balanced scorecard, Strategic Finance, 84(5), 6-9.

Halachmi, A., 2005. Performance measurement is only one way of managing

       performance, International Journal of Productivity and Performance

       Management, 54(7), 502-516.

Hansen, F. and Smith, M., 2003. Crisis in corporate America: the role of strategy,

       Business Horizons, January-February, 7-18.

Inland Revenue Department, 2002. Charitable Organisations IR255,

       organisations.html?id=righttabs (accessed June 19, 2006).

Inland Revenue Department, 2006. Donee Organisations,

                                                                                       21 (accessed June 19, 2006).

Ittner, C. and Larcker, D., 1998. Innovations in performance measurement: trends and

       research implications, Journal of Management Accounting Research, 10, 205-


Kaplan, R., 2001. Strategic performance measurement and management in nonprofit

       organizations, Nonprofit Management & Leadership, 11(3), 353-370.

Kaplan, R. and Norton, D., 1992. The balanced scorecard – measures that drive

       performance, Harvard Business Review, 70(1), 71-79.

Kaplan, R. and Norton, D., 1996. The Balanced Scorecard: Translating Strategy Into

       Action, Boston, Harvard Business School Press.

Kaplan, R. and Norton, D., 2001. The strategy-focused organisation, Strategy &

       Leadership, 29(3), 41-42.

Kaplan, R. and Norton, D., 2004. Plotting success with 'strategy maps', Optimize,

       February, 61-65.

Kushner, R. and Poole, P., 1996. Exploring structure-effectiveness relationships in

       nonprofit arts organisations, Nonprofit Management and Leadership, 7(2),


Lord, B., Shanahan, Y. and Gage, M., 2005. The balanced scorecard: a New Zealand

       perspective, Pacific Accounting Review, 17(1), 49-77.

Lyons, B., Gumbus, A. and Bellhouse, D., 2003. Aligning capital investment

       decisions with the balanced scorecard, Cost Management, 17(2), 34-38.

Macpherson, M., 2001. Performance measurement in not-for-profit and public-sector

       organisations, Measuring Business Excellence, 5(2), 13-17.

Macstravic, S., 1999. A really balanced scorecard, Health Forum Journal, 42(3), 63-


Marr, B., 2005. Business performance measurement: an overview of the current state

       of use in the USA, Measuring Business Excellence, 9(3), 56-62.

Ministry of Social Development, 2005. Briefing to the incoming minister: supporting

       the community and voluntary sector for the wellbeing of all New Zealanders,

       voluntary.pdf (accessed 27 October 2006).

Nørreklit, H., 2000. The balance on the balanced scorecard – a critical analysis of

       some of its assumptions, Management Accounting Research, 11, 65-88.

Nørreklit, H., 2003. The balanced scorecard. What is the score? A rhetorical analysis

       of the balanced scorecard, Accounting, Organisations and Society, 28, 591-


NZ Herald, 2006. Plunket loses government helpline contract,

       6607 (accessed 27 October 2006).

Papalexandris, A., Ioannou, G., Prastacos, G. and Soderquist, K., 2005. An integrated

       methodology for putting the balanced scorecard into action, European

       Management Journal, 23(2), 214-227.

Perrin, J., 1985. Differentiating financial accountability and management in

       governments, public services and charities, Financial Accountability &

       Management, 1, 11-32.

Sawhill, J. and Williamson, D., 2001. Mission Impossible? Measuring success in

       nonprofits organisations, Nonprofit Management & Leadership, 11(3), 371-


Smith, P., 2000. Defining profits, New Zealand Management, 47(8), 22-24.

Speckbacher, G., Bischof, J. and Pfeiffer, T., 2003. A descriptive analysis on the

       implementation of the balanced scorecard in German-speaking countries,

       Management Accounting Research, 14, 361-387.

Statistics New Zealand, 2005. Identifying non-profit organisations in New Zealand,

       16639380C610/0/IdentifyingtheNonProfitInstitutionsApril2006.pdf (accessed

       27 October 2006).

Stewart, L. and Bestor, W., 2000. Applying a balanced scorecard to healthcare

       organisations, The Journal of Corporate Accounting & Finance, 11(3), 75-82.

Urrutia, I. and Eriksen, S., 2005. Application of the balanced scorecard in Spanish

       private health-care management, Measuring Business Excellence, 9(4), 16-26.

Voelpel, S., Leibold, M., Eckhoff, R. and Davenport, T., 2006. The tyranny of the

       balanced scorecard in the innovation economy, Journal of Intellectual Capital,

       7(1), 43-60.

Yeniyurt, S., 2003. A literature review and integrative performance measurement

       framework for multinational companies, Marketing Intelligence & Planning,

       21(3), 134-142.

Appendix: Questionnaire

Performance Measurement in Non-Profit Organisations
When completing this survey, please tick boxes where they are provided and circle the appropriate
number where a scale from 1-5 is given. Lines are provided for written answers.

Section 1 Introduction
1) How many paid employees does your organisation employ? ………………………
2) What was your organisation income (revenue) from all sources in the previous year?
3) Which of the following categories would you place your organisation in? Please tick the most
appropriate category.
        □   Healthcare                           □   Cultural
        □   Education                            □   Religion
        □ Welfare                                □
4) Where does your organisation funding come from? Please tick all appropriate categories.
        □   Government funding                   □   Donations
        □   Community grants                     □   Income from sales of goods or services
        □   Investments                          □   Other……………………….

Section 2 Performance Measurement
5) What are the reasons your organisation measures performance?

Required for funding                  To a great extent                                 Not at all
□ Yes       □ No                             1            2          3           4            5

To measure effectiveness
of the organisation                   To a great extent                                 Not at all
□ Yes       □ No                             1            2          3           4            5

To see whether the mission
is being achieved                     To a great extent                                 Not at all
□ Yes       □ No                             1            2          3           4            5

Other ……………………..                      To a great extent                                 Not at all
                                              1           2          3           4         5

6) How does your organisation measure performance?

By using financial measures           To a great extent                                 Not at all
                                              1           2          3           4         5

By using non-financial measures       To a great extent                                 Not at all
                                              1           2          3           4         5
7) If your organisation does not use non-financial measures, how much of a barrier to using non-
financial performance measures are the following?

Lack of resources                      A great barrier                                    Not at all
                                             1            2          3           4           5

Not much use                           A great barrier                                    Not at all
                                             1            2          3           4           5

Don't have the expertise               A great barrier                                    Not at all
                                             1            2          3           4           5

Other…………………                           A great barrier                                    Not at all
                                             1            2          3           4           5

If your organisation does not use financial measures, how much of a barrier to using financial
performance measures are the following?

Lack of resources                      A great barrier                                    Not at all
                                             1            2          3           4           5

Not much use                           A great barrier                                    Not at all
                                             1            2          3           4           5

Don't have the expertise               A great barrier                                    Not at all
                                             1            2          3           4           5

Other…………………                           A great barrier                                    Not at all
                                             1            2          3           4           5

8) Are the financial performance measures linked to the strategy and mission of the organisation?

                                         Extensively                                      Not at all
                                              1           2          3           4           5

9) Are the non-financial performance measures linked to the strategy and mission of the

                                         Extensively                                      Not at all
                                              1           2          3           4           5

10) Do you believe that including non-financial performance measures will enable your
organisation to measure success more so than just using financial performance measures?

                                          Definitely                                      Not at all
                                              1           2          3           4           5

11) How does your performance measurement system communicate the mission and strategy of the
organisation to employees and volunteers?
12) Has measuring the performance of your organisation led to increased performance?
                                                    Definitely                                              Not at all
                                                        1              2            3           4              5

Section 3 Measures of Performance
13) How many performance measures does your organisation use overall? ……………………
14) How many performance measures does your organisation use in the following categories?
                            Number of Measures                                          Number of Measures
Donor                                                          Financial
                            ................................                            ................................
Client (recipient of your                                      Internal Processes
organisation's services)    ................................                            ................................
                                                               Learning & Growth
Employees                   ................................   of employees             ................................

Volunteers                  ................................   Other                    ................................

15) How important in your organisation are the following measures?

Net surplus                                     Very important                                              Not at all
                                                      1                2            3           4              5

Growth in revenue                               Very important                                              Not at all
                                                      1                2            3           4              5

Percentage of revenue
spent on admin costs                            Very important                                              Not at all
                                                      1                2            3           4              5

Budget variances                                Very important                                              Not at all
                                                      1                2            3           4              5

Donor satisfaction                              Very important                                              Not at all
                                                      1                2            3           4              5

Client satisfaction                             Very important                                              Not at all
                                                      1                2            3           4              5

Employee Turnover                               Very important                                              Not at all
                                                      1                2            3           4              5

Time donated by
volunteers                                      Very important                                              Not at all
                                                      1                2            3           4              5

16) In some performance measurement systems, measures in different perspectives are assumed to
be linked together in a cause-and-effect relationship. For example, in a profit-driven company,
measures relating to customers may influence performance in the financial perspective. Do you
believe that there is a cause-and-effect relationship in your organisation's performance measurement
        □    Yes                                 □     No

17) What is the main perspective that your organisation wants to influence?

Donor                                     Main focus                                     Least focus
                                              1             2          3           4          5

Client (recipient of your
organisation's services)                  Main focus                                     Least focus
                                              1             2          3           4          5

Employees                                 Main focus                                     Least focus
                                              1             2          3           4          5

Volunteers                                Main focus                                     Least focus
                                              1             2          3           4          5

Financial                                 Main focus                                     Least focus
                                              1             2          3           4          5

Internal processes                        Main focus                                     Least focus
                                              1             2          3           4          5

Learning and growth
of employees                              Main focus                                     Least focus
                                              1             2          3           4          5

Other……………………                             Main focus                                     Least focus
                                              1             2          3           4          5

Section 4 Final Questions
18) Have you heard of the Balanced Scorecard framework?
        □    Yes                                 □     No

19) Does your organisation use a Balanced Scorecard?
        □    Yes                                 □     No

20) Would your organisation be willing to participate in further research?
        □    Yes                                 □     No

Thank you for completing this questionnaire. If you would like to make any further comments,
please do so below. If you would like a copy of the results of this research, please write down your
contact details here.

Table 1: Number of Employees

Employees          Frequency             Percent
      0                       16              18%
     1-4                      23              26%
     5-9                      11              13%
    10-19                     11              13%
    20-49                     13              15%
     50+                      13              15%
    Total                     87             100%

Table 2: Income

    Income           Frequency              Percent
    < $100k                    17              23%
  $100k-499k                   16              22%
   $500k-1m                     9              12%
    $1m-5m                     15              20%
     $5m+                      17              23%
     Total                     74             100%

Table 3: Source of Income

 Source                      Frequency           Percent*
 Donations                             67             79%
 Community grants                      44             52%
 Government                            40             47%
 Investments                           40             47%
 Income from sale of
 goods and services                                   41%
 Other                                 20             24%
* Percentage of 85 respondents; as respondents could select
  more than one source, these percentages do not sum to 100%.
Table 4: Service Provided by Organisation

Service                      Frequency      Percent
Welfare/Social Services             33         38%
Healthcare                          20         23%
Education                           10         12%
Cultural                              7         8%
Religion                              6         7%
Environment                           5         6%
Research                              2         2%
Other                                 4         5%
Total                               87        100%

Table 5: Number of Measures per Perspective

                            Mean no. of
Perspective                                      n
Internal processes                 2.93         30
Financial                          2.79         53
Employees                          2.69         32
Volunteers                         2.65         26
Donor                              2.30         33
Client                             2.26         38
Learning & growth of
                                   2.25         28
Other                              2.23         13

Table 6: Importance of Various Measures

Measure                             Mean              n
Client satisfaction                  1.67         78
Donor satisfaction                   2.05         79
Budget variances                     2.11         82
Growth in revenue                    2.17         83
Importance of net surplus            2.32         82
Time donated by
                                     2.38         81
Percentage of revenue
                                     2.47         83
spent on admin costs
Employee Turnover                    2.76         78

Table 7: Main Perspective Organisations Want to Influence

Perspective                  Mean            n
Client                         1.50         80
Donor                          2.20         71
Financial                      2.28         79
Learning and growth            2.38         72
Volunteers                     2.53         73
Internal processes             2.60         75
Employees                      2.63         73
Other                          1.11          9


To top