Accountancy and Finance - Designing a Balanced Scorecard - Essay Example

Accountancy and Finance, Designing a Balanced Scorecard 0 Introduction Not for profit making organizations, popularly abbreviated as NFPOs play a very important role in every community. Their existence is mainly for purposes of providing benefits to members of the community in which they exist. Not for profit organizations vary in size, from the large ones and some being medium while others are just small. The operations of most NFPOs are mainly based on either receipts, donations, fundraising or receipts from members which serves as as the main source of income. It is worth noting that despite the fact that the organizations are not for profit making, it is important that appropriate good practices of financial management are maintained so as to ensure that there are adequate resources aimed at meeting the objectives of the organization and ensuring that they remain solvent while at the same time continuing to support the community. A scorecard is a combination of the four common measures (quadrants) that are directly associated with a company’s objective strategies (Pearson & Robinson, 2009). The Otago Museum in New Zealand was founded on the 15th day of September 1968, initially being located in the post office building in Denedin’s Exchange, a building which also accommodates the University of Otago. The 1877 saw the responsibility for managing the museum become vested with the University of Otago, an arrangement that lasted nearly 80 years and letter the transfer of the ownership to a trust board which was authorized to attract funding from various local authorities in the Otago region. Among the principle funders continue to be Dunedin City Council, Clutha District, Central Otago Districy Council and Waitaki District Council. This report will be designing a comprehensive balance scorecard (BSC) for the museum indicating clearly the strategic objectives of the museum, the strategic business themes supporting the objectives and the cause and effect relationship linking Balanced Scorecard (BSC)dimensions with strategic themes and the objectives. 2.0 The Needs of all Stakeholders Involved in Otago and each group of stakeholders will measure success More often than not, an organization’s mission statement guides on how an organization needs to maintain a balance of the needs and the various expectations as appertains to the various stakeholders (Harel, & Boaz, 2008). However, most non-profit organizations like Otago museum do not operate in extreme circumstances hence can do for both the donors and their employees/volunteers despite the fact of the existence another restricting factor which can be done for the different groups, that one which falls generally within the purview of good governance and which aims at avoiding waste and abuse. It is worth noting that lavish spending than necessary on the benefits for donors has a high possibility of reducing the resources that are available to the organization with which to achieve its mission. Additionally, awarding huge perks for the management and the various employees not only reduces the resources available with which to achieve the mission, but also might be taken intended to abuse the donors (Seidner, Zietlow, & Hankin, 2013). Consequently, the donors also, though not all donors expect benefits which if considerably awarded motivates them to give more while also in the case of volunteers awarding small perks that do not cost much could be a good motivating factor for extra hard work. From this aspect, it is the oversight role of the board to ensure that there exist an optimal balance just to ensure that while on one hand the stake holders get what they need, the organization also achieves its mission. It is worth noting that amongst the hardest jobs for any non-profit board member of any organization involves the determination of the art of balancing the various needs and expectations of the various stakeholders of any organization. The Otago Museum has three groups of stakeholders. Just like the other organizations, there exist the vendors, local communities and the other stakeholder group. However, for purposes of this study, we will categorize the principle stakeholders into three groups. These are; 2.1 The recipients of services of Otago Museum The main recipients who constitute primarily the main purpose for the existence of the Otago Museum its community. This is even evident from mission and vision of the museum. The mission of the museum is to provide services and development to its community with the museum priding itself in its ability to not only acquire and record, but also research, conserve, communicate and exhibit material evidence of people, knowledge and the environment not only for education purposes, but also for entertainment and inspiration of the local communities and visitors. On the other hand, according to the annual report of the company, the vision statement of the company is, “to be an inspirational museum of which the people of Otago and New Zealand are proud”. This supports the mission statements which as stated in the annual report of the museum are, “to inspire and enrich our communities, and enhance understanding of the world through our collection, our people and the stories we share”. To this end, the recipients of the services, who are tourists and the people of Otago community and New Zealand from this museum, are the major shareholders of the museum. Thus, there success will be measured through the effectiveness and efficiency of service delivery and the achievement of the development role of the organization in the community. 2.2 The New Zealand Government and the local authorities The fact that the Otago museum is a not for profit entity implies that the museum is dependent on donations from the government, the donors and the four contributing local authorities. The government, the donors and the contributing local authorities are also stakeholders of the business hence it is important that the board ensures that they are happy since financial resources that they provide play an important role in allowing the organizations pursue their missions. As long as the mission or the compliance with good governance is not compromised, the it is important that the management board ensure that the needs and the expectations of these stakeholders are met. 2.3 The management and workers Not for profit organizations in many cases lack enough resources with which to pay huge salaries and bonuses to their staff. However, the management and workers always tend to get to be devoted to attaining the mission of the organization while also ensuring that they provide labor, expertise or both without necessarily asking for payments or for remarkably little compensation. To this regard, it is evident that both the employees and volunteers all together form a significant part of the organization and should therefore be recognized as stakeholders of the organization hence need to be heard and also get rewarded though within the constraints of the organization’s mission in addition to governance. 3.0 Recommending an Appropriate Strategy for Otago for the Coming Year The Otago Museum which is the leading cultural institution on Otago has always been committed to strategic thinking, which has always been aimed at contributing to the Otago community to be a source of inspiration and pride for the community. The Museum had previously been operating under a dynamic environment and hence its success as regards adopting to change needs to be taken into perspective in a new strategic plan. The strategic plan for the next year needs to be anchored on culture and strategy. It is worth appreciating the fact that the Otago Museum stakeholders, especially the staff and the management are passionate people with commitment and come from a diverse background with unique skills set. Among other aspects that we will take into consideration for the next year’s strategy is the museum’s special organizational culture which has been carefully considered with the determination of essences to treasure and behaviors minimize and eliminate. We will set up a specific strategic initiative while developing and prioritizing tangible goals. The strategy will be as outlined: Strategic initiative on people and culture: developing people and culture positively and initiating useful, openly and effective team communications. Strategic initiative on collection care: initiating best practices collection care and enhancing collection development. Strategic initiative on Depth as opposed to extended breadth: the museum should aim at offering in depth research, content and community enhancing accessibility to all. Strategic initiative on Strategic capital development: the museum will aim at reinforcing its former Dunedin North Post Office and Museum reserve development while also initiating redevelopment planning. Strategy on demonstrating relevancy and responsible operations: the Museum will aim at communicating relevancy and leadership while also implementing optimal resource management and sustainability in operations. Lastly, the Museum will aim at embedding baldrige performance excellence principles throughout its operations. 4.0 The Requirements of an Effective Performance Measurement System for Otago as a Non-Profit Organization Performance measurement continues to become an increasingly important aspect in not only public sector organizations, but also the not for profit organizations like Otago Museum. Most studies on the subject have postulated Human resource metrics as being the most relevant in this perspective (Mccarthy, Shelmon, & Mattie, 2012). These include spanning function, operations and strategy. Among the function measures will include employee efficiency and effectiveness which would include various aspects like turnover, insurance and recruitment costs. The other operational measures includes aspects like the revenue generated per employee in addition to measures of effectiveness linking the performance of the management to performance and the ensuring returns on investments. Additionally, the future oriented strategic measures being matched with the capability against the anticipated need which is increasingly playing a key role in the planning activities. Consequently, the various barriers to effective measurements which may include other aspects like the fear of retribution, variation and the loss of control. 4.1 How the effective Performance Measurement System for Otago Different from a Private Sector Organization. Performance measurements in private sector majorly revolve around the concept of enhanced accountability. In the instances involving organizations in the private sector, it is the market system that forces the organizations to measure their performance and effectiveness. This is mainly informed by the fact that failure to measure performance amongst private organizations will result into the business making losses instead of profits. In the private sector, the competition for sales and profit creates real incentives that is in constant check for utility and attractiveness of a private sector good or service 5.0 A Balanced Scorecard for Otago Shareholder Value/Financial Perspective These strategic objectives are in terms of the company financial alignment. In order to support the ongoing program and the contracture operations, it is key that we understand the financial situation of the Museum and thus the first priority is to strengthen our financial circumstances. From the statement of the financial performance of the company, the revenues from sources like the café and the gift shop exceeded the organizations estimates thus the café and gift shop operations need to be next year’s focus. The fact that a majority of the funding of the organization are from the local sponsors mean s that government funding needs to be given much focus. Additionally, there is need to enlarge the local authorities support as this helps in the elimination of the ability of the company to compete with its competitors. Community Perspective Involves strategic objectives aimed at ensuring customers’ fulfillment in the Museum. The financial performance and both the learning and growth of the company in addition to the internal processes are strong indicators which not only influence, but also direct the community perspective of the company. The fact that the museum is mainly for recording history and the delivery of knowledge for education and the creation of a learning atmosphere for the visitors and the local authorities means that it is essential that the needs of the communities and the visitors and the satisfaction levels are fulfilled. The museum needs to give much focus to the achievement of community satisfaction. Setting up a customer profiling system that ensures the customer service is based on his/her transaction history with the Museum. It is worth noting that retention of customer plays a key role in ensuring that the museum achieves its goals. Process/Internal Operations Perspective This objectives aim at ensuring effectiveness in the process performance of the company. A fast and effective process performance based on new technologies- using new technologies would ensure the process performance is effective, fast, and accurate. This is one a recipe for success in any business. Higher productivity at lower operational costs- the profit from the production should be high despite lower operational costs. Advanced technology is a key to achieving this goal, besides increasing of hourly production volume. Learning and Growth (Employee) Perspective These objectives aim at ensuring a good relationship between the company employees and the management. Maintenance of employee satisfaction- Employee satisfaction is dependent on their treatment in both financial and environmental perspectives. Creating an environment that allows for open communication- this ensures that the employee feedback on their feelings and ideas reach the management. This information is crucial in determining better ways of dealing with employee-related issues. Technological innovations and employee training- Training can bring about an improvement in a person’s knowledge, skills, and attitude. With introduction of new technologies in operations, employees need training on how to handle the new changes in production techniques. The Balanced Scorecard 6.0 Whether the Balanced Scorecard is the most appropriate performance Measurement framework to Measure Otago’s Success The modern approaches for determining the appropriate measures have always been and continue to be benchmarking. To this regard, benchmarking has been a widely spread management tool and whose main process is focus on the technical and quantitative aspect of benchmarking. In instances where there is lack of integrated strategy, product or process benchmarking, limited result is yielded. Hence, the value of benchmarking can be most effectively utilized when appropriately integrated into organizational strategy and incorporation of all performance improvement efforts (Mckinney, 2004). The balanced scorecard provides a holistic view of the organization through simultaneous assessment of the financial, Customer, Internal Processes, Innovation and learning. The balanced score card has also gained reputation as strategic management system. However, despite the fact that Balanced Score Card failure to fully explain factors leading to superior performance and the different ways they relate to each other, it still remains the appropriate performance measurement framework. 7.0 Conclusion Overall, the Museum is doing well. However, a study of the balanced score card reveals that the company needs to give much focus to financial, learning and growth, internal process and community perspective. Additionally, the company needs to employ the use of another classification of benchmarking so as to ensure that the proposed methodology is more comprehensive. Amongst other factors that will need to be taken into consideration includes the internal, external, industry, competitive and generic benchmarking. This will lead the company into increasing competitive advantage while also inspiring and enriching the community. 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