Effectiveness of the balanced scorecard on performance of non-governmental organizations in Kisumu county, Kenya

Abstract

Most Non-Governmental Organizations (NGOs) are organized around specific issues such as alleviation of poverty HIV IAIDS, education, health, human rights, natural resources management, agriculture, alternative trading, and the various kinds of vulnerability. Currently, the performance of NGOs is on focus especially for donors and other partners including the target community. Previously, the NGOs were operating with a target to impact on the livelihood of the poor. Majority of the NGOs focused more on social impact rather than the financial equivalent returns. The nature of performance measurement in the NGO sector did not include financial accountability, however, this has changed and many NGOs are now concerned with financial accountability of the projects to the stakeholders and more so to the donors. The purpose of this study was to establish the effectiveness of the Balanced Scorecard in measuring performance of Non-Governmental Organizations in Kisumu County. Specifically the study determined customer related factors, internal processes related factors, learning and growth related factors, and financial related factors as components of the Balanced Scorecard (BSC) perspectives in measuring performance of Non-Governmental Organizations in Kisumu County. Kisumu County was chosen because it hosts head offices of NGOs operating within the lake basin region and provided study participants. The study targeted 30 active NGOs within Kisumu County with a focus on livelihood. These NGOs were to provide 90 top managers to participate in the study. A saturated sample of all 90 top managers was included in the study. However, only 64 top managers were involved leading to a response rate of 71.1 %.Sampling procedure involved purposive selection of 3 top managers including an accountant, monitoring and evaluation officer and programme officer Imanager. All eligible participants were given equal chance of participation unless they declined to participate. Data was collected using semi-structured questionnaires. The questionnaires were structured into sections thematically organized to capture the Balanced Scorecard key performance measurement elements including customer perspectives, internal business processes perspectives, learning and growth perspectives and financial perspectives. Each element had a set of item measures on which measurements were based. Descriptive statistics were run to establish the accuracy of entry of scores by assessing range, mean, standard deviation and normality of data. Inferential statistics mainly hierarchical regression was used to assess the contribution of each of the perspectives as performance measurement concepts by objectives as outlined. The findings revealed that the customer perspective was effective in measuring performance on NGOs with eight (8) out of ten item measures accounting for a variance of 52.46% of the total variability of the customer perspective. The internal process perspective was effective in measuring performance with 10 out of 12 items emerging key areas of practice accounting for a variance of 42.19% of the total variance. It was also noted that out of the 11 item measures that were extracted, 8 were significant. The findings revealed that presence of well designed and working Standard Operating Procedures (SOPs) was significant in the internal processes perspective. Learning and growth related factors had all the item measures identified as key for measuring the perspective accounting for 55.08% of the total variance. Finally, the financial perspective had 14 item measures put to test for their effectiveness in the NGOs. 13 item measures registered a variance of 56.87% of the total variance of the financial perspective. The findings of this study suggest that the BSC is an effective performance measurement tool among the NGOs.