The American Red Cross: Performance Measurement Then and Now, and Applying the Balanced Scorecard

By Bicky, Evgenii, Lavender, Natalie, and Sa

Overview

• Balanced Scorecard Method

• American Red Cross• Old Performance Measurement System

• Description & Evaluation

• New Performance Measurement System• Description & Evaluation

• Recommendations & Applying the Balanced Scorecard

Presentation’s Objectives

What is Balanced Scorecard?

1992 1996 2000

Measurement and

Reporting

Alignment and Communication

Enterprise-wide Strategic

Management

Articles in Harvard Business Review:

“The Balanced Scorecard — Measures that Drive Performance” January - February 1992

“Putting the Balanced Scorecard to Work” September - October 1993

“Using the Balanced Scorecard asa Strategic Management System” January - February 1996

1996 2000

Acceptance and Acclaim:

“The Balanced Scorecard” is translated into 18 languages

Selected by Harvard Business Review as one of the “most important management practices of the past 75 years.“

Balanced Scorecard History

Before the Balanced ScorecardBefore the Balanced Scorecard

MISSIONWhy we exist

VALUESWhat’s important to us

VISIONWhat we want to be

STRATEGYOur game plan

STRATEGIC OUTCOMES

SatisfiedSHAREHOLDERS

Delighted CUSTOMERS

Efficient & EffectivePROCESSES

Motivated & PreparedWORKFORCE

Strategy Is a Step In a Continuum

MISSIONWhy we exist

VALUESWhat’s important to us

VISIONWhat we want to be

STRATEGYOur game plan

BALANCED SCORECARDImplementation & Focus

STRATEGIC INITIATIVESWhat we need to do

STRATEGIC OUTCOMES

SatisfiedSHAREHOLDERS

Delighted CUSTOMERS

Efficient & EffectivePROCESSES

Motivated & PreparedWORKFORCE

PERSONAL OBJECTIVESWhat I need to do

With the Balanced ScorecardWith the Balanced Scorecard

Reasons to use BSC

Four Perspectives of the Balanced Scorecard

• An organization's ability to innovate, improve, and learn ties directly to its value as an organization.

• How can we continue to improve and create value for our services?

Learning and Growth Perspective

Business Process Perspective

• Must focus on critical internal operations that enable the organization to satisfy customer needs.

• To satisfy our shareholders, what business processes must we excel at?

Customer Perspective

• Must know if their organization is satisfying customer needs.

• To achieve our vision, how should we appear to our customers?

Financial Perspective

• In the private sector, measure typically focused on profit and market share.

• To succeed financially, how do we appear to our shareholders?

Financial Perspective

Perspectives & Performance Measurement

CUSTOMER

OBJECTIVE MEASURE WEIGHT %

FINANCIAL

OBJECTIVE MEASURE WEIGHT %

BUSINESS PROCESS

OBJECTIVE MEASURE WEIGHT %

LEARNING & GROWTH

OBJECTIVE MEASURE WEIGHT %

• Sets clear goals, objectives, and measures across four critical areas

• Creates interdependency and interrelationship of all four quadrants; balance is key

• Provides leadership with the ability to build organizational consensus around its priorities; creates organizational clarity

• Provides a vehicle that can hold staff and management accountable for their results in a clear and consistent manner

• Can complement any existing strategic planning effort by clearly identifying and prioritizing performance benchmarks and targets

The Balanced Scorecard: Benefits

American Red Cross (ARC)

• Nongovernmental, nonprofit organization whose purpose is to prevent and relieve human suffering

• Has a mission of providing relief to victims of disasters and helping people prevent, prepare for, and respond to emergencies

• Employees (13,000) and volunteers (875,000)

• 850 Chapters

Two Performance Systems in Old Plan

• Re-chartering: Chapters had to answer 33 yes/no questions.

• Standard of Excellence: Designed to improved the chapter performance in the reach of fundraising, revenue per population, service level, and community potential

American Red Cross Strategic Plan• Be America’s partner and a leader in mobilizing

communities to help people prevent, prepare for, and respond to disasters and other life-threatening emergencies.

• Inspire a new generation of volunteers and supporters to enrich our traditional base of support.

• Strengthen our financial base, infrastructure, and support systems to continuously improve our service delivery system.

Two Types of Chapter Performance Standards in the New System • Core Requirements: Chapters should meet these basic

requirements.

• Critical Performance Standards: Fifteen out of thirty standards are mandatory. The chapters are evaluated on:

- Chapters’ past year performance

- Comparison against the performance of its peers

Chapters Evaluation• Highly Performing Chapters: Meet all the core

requirements and exceed both chapter performance standards. Awarded with “Recognition”

• Successful Chapters: Meet all the core requirements and also meet and exceed the performance standards.

• Provisional Chapter: Meet all the core requirements but lag behind in the Critical Performance Standards.

• Charter Review Required: Chapters who fail one or more core requirements.

Evaluation of the New Plan• Ensures uniformity and meet minimum requirements.

• 17 core requirements do not directly support the strategic plan

• Critical Performance Standards good measure of evaluation.

ExampleMultiplier Performance Measurement

1 Percentage of fundraising expenses to related contribution

2 Percent of volunteers indicating ‘Excellent’ overall levels of satisfaction with their volunteer experience

3 Disaster readiness level

Measures that differ?

• Different scales

• What is considered ‘good’?

Measures that differ?

g

Actual Score Performance ScorePerformance Score × Multiplier = Weighted ScoreTotal Weighted Score ÷ Total Possible Weighted Score × 100 = Total Chapter Performance Score

Conclusions:•Hard to focus: too many measures; too many categories•Some measures don’t drive strategy•Just components, no alignment

Recommendations: Applying the Balanced Scorecard

• Objectives need to drive strategy, and be aligned

• Measures need to encourage objectives

Be America’s partner and a leader in mobilizing communities to help people prevent, prepare for, and respond to disasters and other life-threatening

emergencies.

Inspire a new generation of volunteers and supporters to enrich our traditional base of support

Strengthen our financial base, infrastructure, and support systems to continuously improve our service delivery system

Example

Be America’s partner and a leader in mobilizing communities to help people prevent, prepare for, and respond to disasters and other life-threatening

emergencies.

Inspire a new generation of volunteers and supporters to enrich our traditional base of support

Strengthen our financial base, infrastructure, and support systems to continuously improve our service delivery system

Example

Be America’s partner and a leader in mobilizing communities to help people prevent, prepare for, and respond to disasters and other life-threatening

emergencies.

Inspire a new generation of volunteers and supporters to enrich our traditional base of support

Strengthen our financial base, infrastructure, and support systems to continuously improve our service delivery system

Example

Be America’s partner and a leader in mobilizing communities to help people prevent, prepare for, and respond to disasters and other life-threatening

emergencies.

Inspire a new generation of volunteers and supporters to enrich our traditional base of support

Strengthen our financial base, infrastructure, and support systems to continuously improve our service delivery system

Example

Alignment of Objectives

Conclusion