A Performance Measurement System for Kaboom - Report Example

A Performance Measurement System for KaBOOM! Introduction The purpose of this report is to recommend a strategy for the coming year for KaBOOM!, and to suggest a performance measurement system which can be used to monitor the organisation’s progress towards achieving its strategic goals. In order to complete these tasks, the report will first present a SWOT analysis of KaBOOM! to explain important internal and external factors affecting our strategy, and define the objectives of the organisation’s various stakeholders. Part One: SWOT Analysis Strengths Excellent Corporate Reputation: KaBOOM! has been able to successfully match an appealing mission to support the growth and development of children by providing safe, healthy, and engaging play areas with visible results in communities. Positive local and national media coverage for KaBOOM! has translated to a good brand image with the public, and more importantly, with a wide array of corporate supporters who view our organisation as an appropriate beneficiary of their corporate social responsibility funds (Leonard, Epstein & Winig, 2005). Financial Stability: KaBOOM! continues to have stable financial performance. Total revenue increased by 7.33% year-on-year in 2011, outpacing the increase in expenses, which only grew by 6.44%. This resulted in a 51% increase in net assets, providing a significant financial cushion for unforeseen difficulties and resources for growth. Significantly, this strong financial performance and the accompanying increase in KaBOOM’s activities was achieved with virtually no increase in management and general expenses, which indicates our day-to-day operations are being handled efficiently (KaBOOM! Annual Report, 2011, pp. 27, 30-31). Community Support: KaBOOM! continues to enjoy strong and growing public support for its efforts. As of 2011, the organisation has partnered with nearly 40,000 individual volunteers and 151 Playful City communities. Our message is also reaching more people, helping to accomplish the key goal of completing the Map of Play; in 2011, nearly 12,000 people downloaded the Playgrounds! mobile app, contributing 89,000 new records to the map. KaBOOM’s reach is also growing through the social media, with the number of Facebook fans increasing by more than 200%, and the number of Twitter followers growing by 43% (KaBOOM! Annual Report, 2011, p. 13). Weaknesses Inherent Financial Risks in Being a Non-Profit Organisation: While KaBOOM’s core fee-for-service funding model assures reasonable stability in the flow of needed revenue (Leonard, et al., 2005, p. 2), there are two main risks the organization unavoidably must manage. First, a large amount of KaBOOM’s potential income is still pending; contribution receivables did decrease from 2010, but are still more than $250,000 after allowance is made for doubtful accounts. Furthermore, conditional contributions which depend on the satisfaction of various future requirements increased significantly, by more than $3 million, between 2010 and 2011 (KaBOOM! Inc. 2010/2011 Financial Statements, 2012, pp. 6-7). Much of the organisation’s budgeting and planning is inevitably based on these future revenue receipts, which introduces some uncertainty. Second and more generally, the very small change (less than $1,800) between 2010 and 2011 in management and general expenses, while a positive sign in some respects, indicates a possible hesitance to review and consider needed upgrades that would reflect in overhead costs, for example, in IT capabilities (Bedsworth, Gregory & Howard, 2008). Unwieldy Information Management Processes: The problem of “too much information” is of course the catalyst for the development of the performance management system (Leonard, et al., 2005, pp. 3-4). Until the performance management system is in place, however, the organisation will continue to be handicapped by the disorganised information-gathering and assessment process; and somewhat ironically, perhaps, this process will also pose an obstacle to developing the performance management system itself. Opportunities Crowdsourcing through the Map of Play: The reach of the Playgrounds! mobile app described above and the interaction of visitors with the Map of Play web page quickly provides “on the ground” research for playground location and build opportunities, with only minimal input needed from KaBOOM! This gives the organisation a clear advantage in being able to engage with communities where the playground development efforts will have the greatest effect, maximising the efficient use of resources. Recruiting Skilled Staff: One positive aspect of the otherwise-troubling persistent economic downturn is that the relative shortage of job opportunities might well encourage talented people who would not ordinarily consider a career with a non-profit organisation to join KaBOOM! (Chieffo, Israelow & Skillman, 2003) KaBOOM! can leverage its success as an organisation and the private-sector experience and credibility of its leadership to attract excellent talent in a challenging job market. Threats Economic Conditions: The most obvious threat to KaBOOM’s continued success is the ongoing economic downturn affecting the US and most of the rest of the world. KaBOOM! relies heavily on corporate financial support, and indications are that while corporate giving is slowly improving from the sharp decline in 2008, it is growing much more slowly now than it did before the economic crisis in that year (McCambridge, 2012). This might oblige the organisation to lower some targets, and reduce some activities. Another facet of the economic challenges is the impact on local communities, which contribute a significant amount of their own resources to playground projects, particularly in DIY builds which now represent the greater part of KaBOOM’s projects (KaBOOM! Annual Report, 2011, p. 27). Tough economic times may force some communities to seek even greater financial assistance than is optimal for KaBOOM!, or may choose to forego playground projects entirely, neither of which is a desirable outcome. Part Two: Stakeholder Analysis KaBOOM! stakeholders include children and their families, community partners, funding partners, employees and board members of KaBOOM!, and volunteers, all of whom have different, although related objectives. Community Partners and Funding Partners: The community and corporate contributors to KaBOOM’s projects have similar objectives, deriving value from the creation of play spaces from their contributions, but approach those objectives from different basic perspectives. Community partners have a largely social goal, while corporate partners, at least indirectly, have profit goals in mind (Austin, Stevenson & Wei-Skillern, 2006). Corporate partners, therefore, require sufficient information to allow them to describe for their stakeholders how their support for social projects positively impacts their business. Kaplan (2001) argues that non-profit organisations need to provide more depth than mere financial reports. Community partners need to know that they have invested wisely in their communities – after all, they could apply their resources to many other needs that benefit the whole community – and corporate funding partners need to know the social impact of their support in order to determine its value, which will reflect on their corporate reputation and ultimately on their commercial success. In order to provide measures which allow community and funding partners to accurately assess the impact of their contributions, KaBOOM! can provide a number of comparative metrics. Indicators such as cost per project and cost per child served can give contributors insights into what their contributions actually provide in quantitative terms. Volunteers: The volunteers spending their time and energy to work with KaBOOM! in providing safe and engaging play places for children in some respects have the same concerns as the organisation’s volunteer Board of Directors (Leonard, et al., 2005, p. 3). Making the commitment to a project gives the volunteer a sense of ownership and accountability for its success, which means the responsibility of KaBOOM! with respect to volunteers is to empower them so they do not feel they are facing obstacles beyond their abilities to overcome. Obviously, the most important measure for volunteer stakeholders is the successful completion of a playground project; this can be broken down for individual projects, however, on the basis of achieving project steps on an expected schedule. Because each project is slightly different, this kind of measurement system would have to allow for flexibility to suit local circumstances. To start working towards developing that, KaBOOM! should consider initiating a program to gather detailed feedback from project volunteers to investigate where problems and challenges occur and work towards methods of solving them. KaBOOM’s Internal Stakeholders (Board & Employees): In pursuit of the organisation’s greater goal to provide every child with a safe place to play, KaBOOM’s internal stakeholders have a number of supporting objectives: Organisational growth, efficient use of resources, job and organisational stability. The development of the performance management system is intended to effectively help the organisation meet these and other objectives. Children and Families: KaBOOM’s most important stakeholders are the children who benefit from our efforts, and their families. Children want fun and interesting places to play; their parents want to give their children opportunities for enjoyable play and physical activity in safe environments. The measure for these stakeholders is, of course, obtaining the playground they desire. If there is a challenge to achieving that from their perspective, it is perhaps a matter of trust; children and their families need to be assured that the KaBOOM! program is effective and will not let them down. While the organisation’s record and the accolades it has received speak for themselves, the same indicators of efficiency and reliability that are developed for community and funding partners and volunteers should also be shared with our most important stakeholders. Part Three: Recommended Strategy for the Coming Year The recommended strategy for KaBOOM! for the next 12 months has three essential elements: Continue to shift our efforts towards community-based rather than direct-build projects; seek partnerships with other social initiatives at the community level; and seek opportunities for our corporate funding partners to focus their contributions on specific communities in which they have key interests. Shift Towards Community-Based Projects: This strategy element is a continuation of KaBOOM’s successful trend since the DIY program was introduced in 2004 (KaBOOM! Annual Report, 2011, p. 28). Maintaining this direction presents a number of advantages for all KaBOOM’s stakeholders. Within the organisation, it will allow management and general expenses to be kept under control, and because it shifts some funding responsibility to communities, will potentially reduce the amount of conditional contributions KaBOOM! is now recording. Community and volunteer partners will have greater control and flexibility in developing play spaces that suit their local needs, which ultimately provides the best benefit to children and their families. Seek Partnerships with Local Community Initiatives: So far, the model for KaBOOM’s DIY community-based projects is initiative-specific – i.e., community groups come together for the specific purpose of developing a playground and then in most cases disband after the project is completed. These groups represent valuable community resources, however; they can be put to use for other beneficial projects, and alternately, the community organisations put together for other initiatives can be put to work for the goal of creating playgrounds. By partnering with other organisations within communities, particularly on complementary projects advocating children’s needs, both KaBOOM! and partner organisations can mutually support each others’ goals and share some resources, an advantage in stressful economic conditions that may help KaBOOM! extend its reach into more communities. Seek Opportunities for Local Focus for Corporate Partners: A critical concern for our corporate funding partners, as noted earlier, is the assurance of real value to their businesses from their support of KaBOOM! projects. Again, because economic conditions for many organisations are not ideal, we can expect that any potential CSR expenditures in favour of KaBOOM! will be examined critically by funding partners. A way in which they can be assured of maximising value from their participation while supporting our community-based focus is to present ways in which they can also focus on communities which are important to them, such as areas where they seek to expand their market reach. This will require a higher level of coordination between KaBOOM! and its funding partners; on the other hand, by demonstrating that we are focusing on their needs as stakeholders, funding partners may be willing to reduce other conditions of their contributions. Part Four: A Balanced Scorecard Performance Measurement System The balanced scorecard system is the most practical and effective system that can be implemented by KaBOOM! in view of its strategic goals and stakeholder needs. The system has a number of advantages: It combines both financial and non-financial indicators (Sinha, 2006, p. 72). Both the “vital signs” and operational data already considered critical for decision-making at KaBOOM! contain financial and non-financial factors (Leonard, et al., 2005, p. 10); the balanced scorecard provides a way to organise these effectively. It can be used both as a strategic planning and performance measurement tool, and once the enterprise-wide balanced scorecard is developed, it can be customised down to the level of departments and individuals for optimum performance monitoring and management (Kaplan & Norton, 1996, pp. 78-82). It has an internal perspective, thus meeting the founder’s requirement that performance measures be internally-driven and not funder-driven (Leonard, et al., 2005, p. 5). Ease of use: The balanced scorecard can be managed as an Excel template, as in the example below. The first step in using the balanced scorecard is to clarify the strategic perspectives in terms of Financial, Customer, Internal Process, and Learning and Growth goals: KaBOOM! Inc. Strategy Scorecard Perspectives Scorecard Perspective Key Question Answer Financial What financial objectives must be accomplished to achieve strategic success? Maintain a stable positive balance of net assets. Reduce the amount of conditional contributions. Customer This strategy targets what stakeholder objectives? Children & Families: Safe & fun play spaces. Community & Corporate Funding Partners: Efficient, value-added use of contributions. Volunteers: Support & assistance for successful project completion. Internal Stakeholders: Organisational efficiency & growth. Internal Process To meet these stakeholder objectives, what internal processes must be improved? Information-gathering & analysis. Learning and Growth To meet strategic goals, how will the organisation need to learn and innovate? Use of balanced scorecard. Analyse information from stakeholder objectives perspective. Engage with other community initiatives and funding partners to learn their needs & perspectives. Fig. 1: Strategic Perspectives The second step in using the balanced scorecard is to develop it for the overall strategy, which will include objectives, measures, targets, initiatives or action needed, sources of information, and the “data owners” or responsible parties for each objective. The example provided below contains one objective for each of the four perspectives; there can be as many as needed. KaBOOM! Inc. Strategy Scorecard Scorecard Perspective Objective Measure Target Initiative/Action Data Sources Data Owner Financial Increase Net Assets End of year comparison to previous year Increase of 25% Reduce direct-build projects in favour of DIY community-based projects Monthly/Quarterly/Annual financial reports CFO Customer Value Reporting of Partner Funding Use Number of reported indicators Full reporting Develop new indicators per partner requests & recommendations Monthly/Quarterly/Annual financial reports; feedback from funding partners CFO/Board of Directors Internal Process Efficient Information Management Time to complete end of month/quarter financial reports and operational data summaries 1 week or less Reassess 'vital signs' & operational data for relevance Financial reports; project reports; website tracking; media reports Board Task Force Learning and Growth Familiarisation with Balanced Scorecard Percentage of team members system-certified 75% or more Conduct training/informational seminar Business literature, performance management consultant Human Resources Fig. 2: Example Balanced Scorecard Limitations of the Balanced Scorecard The most significant limitation that must be addressed is the risk of mismatching objectives, measures, or actions; the measures must accurately define the desired outcomes of the objectives, and the actions must properly result in their corresponding measures (Kaplan & Norton, 1996; Kaplan, 2001). This is why familiarisation with the system for as much of the staff as possible has been recommended as a key objective. There is, of course, a risk in that it might encourage employees to prioritise the measurements in their work activities (Leonard, et al., 2005, p. 4); the only solution for that potential problem is to take due care that the objectives, measures, and actions are carefully considered and expressed in the balanced scorecard. Conclusion Although KaBOOM! has performed well throughout its history, implementation of the balanced scorecard system will help to align strategic goals with operational efficiency. The financial and non-financial perspective of the system allows KaBOOM! to meet all its stakeholders’ needs for value in both financial and human terms, and to do so efficiently, while maintaining the strategic planning initiative by characterising stakeholder needs in terms of internally-driven measures. References Austin, J., Stevenson, H., and Wei-Skillern, J. (2006) Social and Commercial Entrepreneurship: Same, Different, or Both? Entrepreneurship Theory & Practice, January 2006, pp. 1-22. Bedsworth, W., Gregory, A.G., and Howard, D. (2008) Nonprofit Overhead Costs: Breaking the Vicious Cycle of Misleading Reporting, Unrealistic Expectations, and Pressure to Conform. The Bridgspan Group, 1 April 2008. Retrieved 22 June 2012 from: http://www.bridgespan.org/LearningCenter/ResourceDetail.aspx?id=252. Chieffo, S., Israelow, J., and Skillman, D. (2003) What They Really Think: Conversations about Nonprofit Work with Pittsburgh’s Young Professionals. The Forbes Funds, May 2003. Retrieved 23 June 2012 from: http://forbesfunds.org/files/Look Here_What They Really Think Conversations about nonprofit work.pdf. KaBOOM! Annual Report 2011. (2012) Retrieved 22 June 2012 from: http://annualreport.kaboom.org/Kaboom2011.pdf. KaBOOM! Inc. 2010/2011 Financial Statements. (2012) 21 March 2012. Retrieved 22 June 2012 from: http://kaboom.org/docs/documents/pdf/FY2011-Consolidated-Financial-Statements.pdf. Kaplan, R.S., and Norton, D.P. (1996) Using the Balanced Scorecard as a Strategic Managment System. Harvard Business Review, January-February 1996, pp. 73-85. Kaplan, R.S. (2001) Strategic Performance Measurement and Management in Nonprofit Organizations. Nonprofit Management and Leadership, 11(3), pp.353-364. Leonard, H.B., Epstein, M., and Winig, L. (2005) Playgrounds and Performances: Results Management at KaBOOM! Harvard Business School case study 9-306-031, 3 November 2005. The Map of Play. (2012) KaBOOM! Inc., 2012. Retrieved 24 June 2012 from: http://playspacefinder.kaboom.org/. McCambridge, R. (2012) Giving USA 2012 Indicates Long, Slow, Uphill Slog…If We Are Lucky. Nonprofit Quarterly, 19 June 2012. Retrieved 24 June 2012 from: http://www.nonprofitquarterly.org/philanthropy/20523-giving-usa-2012-indicates-long-slow-uphill-slogif-we-are-lucky.html. Sinha, A. (2006) Balanced Scorecard: A Strategic Managment Tool. Vidyasagar University Journal of Commerce, 11, pp. 71-81. Read More