Adoption of the Balance Score Card as a Strategic Approach by Large International Non Governmental Organizations in Kenya

Abstract

The Balanced Score Card (BSC) was developed as a comprehensive performance measurement system encompassing a coherent set of financial and non-financial performance measures covering different perspectives of the organization. Later Kaplan and Norton transformed it in 2001 into a strategic management system describing management processes and principles to develop and implement a strategy-focused and aligned management system build on sound, formal accounting principles. BSC was designed to harness the multiple benefits of performance measurement in order to aid organizations in implementing their strategies. This study sought to establish how INGOs have adopted BSC in their strategic planning process. The objectives of this study were to; determine the process followed by the INGOs in adopting the BSC framework in their strategic management and to establish the benefits that accrue to International Non- Governmental Organizations that adopt the Balanced Score Card. This study was carried out using a cross-sectional survey approach. The population of this study was the 850 INGOs operating in Kenya as at 31st December 2012. The target population however, were the 34 large INGOs operating in Kenya where 28 responded. This study only utilized primary data. Primary data was collected using questionnaires to the top management of the INGOs. Descriptive statistics were applied on the closed questions while content analysis was used to analyze data from open questions. The results from the analysis were then presented using tables, pie charts and bar graphs for easier interpretation. Study results indicate that awareness of BSC among the study respondents was very good at 93%. However adoption of the BSC as a performance measurement or strategic management system was poor in the INGOs surveyed at 32%. Reasons provided for BSC application included need to evaluate finance management systems, need to review compliance of policies and procedures by the field offices and need to use a balanced set of metrics to measure the health of field offices supported or affiliated with the INGO. Other reasons included need to expand the INGOs’ view beyond the financial metrics and adding other metrics to balance out the equation and advice from management consultants. Challenges in BSC application included adapting the BSC to the organization and internalizing it, need for the process to be led by the highest level of authority, turning the vision into measurable metrics and getting the metrics right. Benefits from the BSC implementation included helping to monitor areas of control weaknesses, helping to determine training required by field projects and measuring extent to which the organization is exposed to risks. Recommendations made include sharing the strategy and action with every member of the organization for successful implementation, having a balanced scorecard with an appropriate mix of outcomes and performance drivers of the company’s strategy and reviewing metrics as needed.