Performance Measurement
Using Balanced Scorecard for Non-Profit Organization: A Case Report
Muhammad Alif Maulanaa1, Faza Athalah2, Irischa
Pramesti Aninditoc3
School
of Business and Management, Institut Teknologi Bandun
alif_maulana@sbm-itb.ac.id,
faza_athalah@sbm-itb.ac.id,
irischa_pramesti@sbm-itb.ac.id
Abstract
Every organization has a goal,
and a performance management system is required to increase the probability of
the organization achieving its goals. As most organizations focus on bottom
line measurements and organizational growth, the case is different for nonprofit
organizations whose measurement focus is on stakeholder satisfaction and social
impact. Nonprofit organizations also have the luxury of not needing to retain
remaining unused funds for growth as the unused funds will be returned to
donors. The application of performance management systems in nonprofit organizations
is still at a minimum. The Balanced Scorecard (BSC) is one of the most well known performance management system tools for
corporations. Some perspectives in BSC such as customer may not be appropriate to
nonprofit organizations and further modification needs to be done to find the
best framework for performance management. This paper aims to develop and propose
a performance management system framework in the case study of Common Room Networks
Foundation. Common Room is a nonprofit organization based in Bandung,
Indonesia, who become agents that bridge the interests of the beneficiaries of
the local-based Internet development program. The study will begin with interviews
to collect existing organization performance measurements, map the strategic objectives
according to perspectives, and determine the Key Performance Indicator (KPI) that
best measures the success of the organization. It is hoped that this framework
can be applied to any nonprofit organization of any specialization.
Keywords: balanced
scorecard; nonprofit organization; performance management system; internet
development; rural communities.
INTRODUCTION
In the last two years, Indonesia has experienced rapid growth
in internet penetration caused by the COVID-19 pandemic, where most activities,
mobility and direct interactions between people are limited and communication has
been forced to switch to digital mode, so that the internet plays an increasingly
important role. Based on a survey conducted by Indonesia Internet Service Provider
Association or (APJII,
2022) between January and February 2022, there
was a significant increase in internet penetration from before the COVID-19 pandemic
in 2018, which was 64.80% to current, namely in 2021-2022, which was 77.02%. The
number of people connected to the internet is currently 210,026,769 people out of
Indonesia's total population of 272,682,600 people. In addition, (APJII,
2022) notes that there has been a structural
change in internet use in Indonesia.
90.21% of respondents explained their reason for using the
internet was to work or study from home.
Despite Indonesia's
entry into the G20 represents the country's good economic performance, the country's
progress is still uneven, especially in rapid internet growth or penetration.
There are still differences regarding access to digital information. Since
the start of his first term as president in 2014, President Joko Widodo
(Jokowi) has attempted to address this issue by announcing a policy of "building
from the periphery," which emphasizes development in the 3T region (tertinggal, terdepan, terluar), i.e. the country's least developed, frontier, and
remotest areas. Government initiatives to build digital technology
infrastructure include the completion of the Palapa Ring "sky highway"
project, which will give access to the internet and hopefully bridge the digital
divide between urban and rural areas.
Figure 1. Illustration of Palapa Ring
Internet Network (Image source: https://en.wikipedia.org/wiki/File:Palapa_Ring_Project.png)
However, after the Palapa Ring was completed, there were
problems with network distribution and internet connectivity to remote areas is
still a joint work that needs to be completed, especially for rural areas and remote
places (last mile users). In this case, although most parts of Indonesia can
already be reached by internet infrastructure through the Palapa Ring project,
the challenge of the digital divide is still a real problem experienced by some
Indonesian people. 43.37% of respondents explained the reason they don't use
the internet is because there is no internet connection in their area.
Statistics show that the highest internet penetration is still in the land of Java
(78.39%) and the lowest is in the land of Papua (68.03%). By province, Jakarta
has the highest internet penetration and West Sulawesi is the lowest with the
percentage of (57.58%) (APJII,
2022).
Figure 2. Network coverage
of the five largest telecommunications companies in Indonesia (Image source: https://www.nperf.com/en/map/ID/-/-/signal/)
The distribution of network coverage
hotspots for the 5 largest
telecommunications companies in Indonesia in the figure
above reflects the distribution of internet network
growth in Indonesia (Iwana,
Hidayat, Dinanti, & Onitsuka, 2022).
For the time being, most of
the areas for growth are concentrated in Java Island, although there is a significant gap between the northern and
southern regions of Java Island. In general, internet network access in Java is mostly available in the northern
region. Distribution of internet access is also available
in several areas
on the island of Sumatra,
Kalimantan Island and Sulawesi Island,
although the access density is much different from Java Island.
Meanwhile, internet access is also
available in several areas of Eastern Indonesia, although with very limited
distribution and capacity
and only in certain areas. This difference not only reflects
the digital divide
on the internet infrastructure side, but also includes bandwidth
costs. The cost of bandwidth on the island of Java,
meanwhile, is much cheaper
when compared to other areas outside Java.
To help the government to
address this gap, two elements
of society have also responded, namely non-profit
organizations (NPOs) and civil society movements or organizations (CSOs). NPOs, which frequently receive funds from
international donor organizations for initiatives to empower civil society, often become government development partners in carrying out its programs. In fact, it is not uncommon for them to create
their own alternative programs to narrow the existing gap. They work in this specialized sector to advance
rural communities' interests and connect them. In order to maximize
social returns, non-profit organizations (NPOs) concentrate on fulfilling a social objective and balancing cost-effectiveness with program efficacy.
Many NPOs know that if they want to succeed, they must adopt
the methods and terminology used by for-profit businesses. NPOs, which often fulfill
a community need, have users, clients, or beneficiaries in contrast to for-profit
businesses, which have consumers. NPOs are left to fight for financing,
volunteers, and government subsidies without traditional business models to
assist them in running their organizations and ensuring they have the resources
to serve their communities. NPOs have many stakeholders to consider in their
governance matrix, including individual and government funders, regulators, and
volunteers, as opposed to for-profit organizations, which often have owners (and
shareholders).
An open platform for creativity and innovation, Yayasan Mitra
Ruang Kolektif, commonly known as Common Room
Networks Foundation (Common Room), was officially recognized as a non- profit
organization in 2006 (Maail,
n.d.). This organization was established
as a Bandung Center for New Media Arts project (active until 2006). Common Room
has been attempting to engage with people from various social and cultural backgrounds
since it was first developed as a project that spanned interaction and dialogue
to promote multidisciplinary collaboration and connect multiple individuals (Nyström,
Karltun, Keller, & Andersson Gäre, 2018). Since its inception, Common Room
has committed to preserving a place for civic empowerment through art, culture,
and ICT/media resources (Lee,
Park, & Lee, 2019). Beginning in 2013, Common Room has also
actively participated in a joint effort to create urban and rural collaboration
platforms that foster creativity, innovation, and social entrepreneurship in local
and global contexts. CR organizes the Rural ICT Camp and School of Community Networks
(SCN) as part of the program Supporting Community-led Approaches to Addressing
the Digital Divide in Indonesia (Danos
& Turin, 2021). Rural ICT Camp "intends to
shed light on the rural revival movement as a nucleus of environmental and cultural-based
innovation supported by the utilization of the internet and digital platforms."
Representatives from nine provinces, namely Aceh, West Kalimantan, West Java, West
Sulawesi, Lombok, Bali, East Nusa Tenggara, Maluku, and Papua, were invited to
come and take part in the activities that were also intended as a method for
SCN to be developed.
Problems arise for actors engaged in non-profit organizations
because they cannot correctly assess the performance of their organizations (Bryson,
1988). So far, they have only assessed the
programs they run without conducting a thorough assessment of their organization
(Landoll,
2021). These phenomena can result in an
organization lacking in alignment with the organization's goals and strategy,
inefficient use of resources, poor decision-making, and a lack of
accountability, which can ultimately hinder the organization's success (Beer,
Voelpel, Leibold, & Tekie, 2005).
In order to maximize social returns, non-profit organizations
(NPOs) like Common Room concentrate on attaining a social objective and balancing
cost-effectiveness with program efficacy. Many NPOs know that if they want to
succeed, they must adopt the methods and terminology used by for-profit
businesses. NPOs, which often fulfill a community need, have users, clients, or
beneficiaries in contrast to for-profit businesses, which have consumers. NPOs are
left to fight for financing, volunteers, and government subsidies without
traditional business models to assist them in running their organizations and ensuring
they have the resources to serve their communities. NPOs have many stakeholders
to consider in their governance matrix, including individual and government
funders, regulators, and volunteers, as opposed to for-profit organizations,
which often have owners (and shareholders). These stakeholders use different views
and reporting frameworks. Therefore, managing numerous agendas is a difficulty for
NPOs. NPOs can better address stakeholders' competing needs when their
strategies are tied to performance measures. Finding a method for creating
efficient performance measures for non- profit organizations is a challenge.
METHOD
The steps in this research starts from identifying
their vision and mission, then choosing strategies from each perspective in the
framework, then determining the Key Performance Indicator (KPI) for implementation.
Figure 3. BSC Methodology for NPO
Step 1: Review mission,
vision, and strategy
1.
Gather
input from key stakeholders: To review the organization's mission, vision, and strategy,
it is important to gather input from key stakeholders such as employees, board members,
beneficiaries, and donors. These stakeholders can provide valuable insights and
perspectives on the organization's direction and priorities.
2.
Review
current mission, vision, and strategy: The next step is to review the organization's
current mission, vision, and strategy to determine if they are still relevant and
aligned with the organization's goals and objectives. This may involve
reviewing documents such as the organization's strategic plan and mission
statement.
3.
Identify
gaps and opportunities: As part of the review process, it is important to
identify any gaps or opportunities in the organization's current mission,
vision, and strategy. This may involve conducting a SWOT (strengths,
weaknesses, opportunities, and threats) analysis to identify areas for
improvement.
4.
Develop
a revised mission, vision, and strategy: Based on the input gathered from stakeholders
and the review of the current mission, vision, and strategy, the next step is to
develop a revised mission, vision, and strategy for the organization. This may
involve setting new goals and objectives, and identifying key priorities and
action steps for achieving them.
5.
Communicate
and implement the revised mission, vision, and strategy: Once the revised mission,
vision, and strategy have been developed, it is important to communicate these to
all stakeholders and implement them in the organization. This may involve
updating internal policies and procedures, and providing training and support to
ensure that employees understand and are able to contribute to the achievement of
the organization's goals.
Step 2: Choose or
confirm the value proposition
1.
Understand
your target audience: To identify a value proposition, it is important to understand
the needs, preferences, and pain points of your target audience. This will help
to identify the benefits that your products or services can offer that are most
relevant and valuable to your customers.
2.
Determine
your unique selling points: Identify the unique features or benefits of your products
or services that set them apart from competitors. These may include things like
high quality, convenience, cost savings, or environmental benefits.
Communicate
the benefits: Use clear and concise language to communicate the benefits of your
products or services to your target audience. Avoid using jargon or technical terms,
and focus on how your products or services can solve your customers' problems or
meet their needs.
RESULTS AND DISCUSSION
Analysis
The interview results with Common
Room in summary is as follows:
Table 1. Interview Result
|
Question |
Answer |
|
What is the vision? |
To ensure that
technology can be enjoyed by everyone |
|
What is the mission? |
To increase
capabilities of beneficiaries to access the Internet, to improve |
|
What is the strategy? |
The strategy is
building communication with stakeholders which are government, academics,
business, mass media, and community |
|
What are the
programs to accomplish the vision? |
The programs
include developing the infrastructure prototype of the Internet for community,
Sekolah Internet Komunitas, internal employee
training, etc. |
|
What are the steps
needed to run a program? |
Do issue
research yearly to see the new current issue, then do FGD about the proposed
program, find the relevant partners and donors |
Common Room is operating with
the ultimate goal of spending the given funds. Therefore, we see this as the
financial perspective being at the bottom of the strategy map. In addition,
efforts to develop internet infrastructure in the 3T region have several opportunities
related to the funding scheme. In implementing the Rural ICT Camp program,
there are 3 related funding schemes, including;
Village Funds
Village fund allocation
priorities are regulated through Permendesa PDTT No.
7 2021 related to the use of village funds. Alleviating the digital divide in rural
areas and remote areas is one of the important challenges that forms the basis
for the formation of this policy. Through a policy that continues the PDTT
Village Regulation No. 13 of 2020, the use of village funds can be allocated for
the management of information and communication technology in rural areas and
remote places
Universal Service Obligation (USO)
Implementation of Telecommunications and Universal Service
Obligations Informatics is a program run by the Ministry Communication and
Information (Kemkominfo) implemented by Telecommunications
and Information Accessibility Agency (BAKTI), accordingly with the Regulation
of the Minister of Communication and Informatics Number 25 of 2015. This
program aims to address the information technology gap, support economic
activity, strengthen defense and security, and educate the nation through
information technology and communication. BAKTI is in charge of not only building
ICT facilities in rural areas, but also provides telecommunication services and
affordable networks, as well as forming a lane network ecosystem broadband in Indonesia.
Social and Environmental Responsibility (Corporate Social
Responsibility/CSR)
Social and Environmental Responsibility
is the Company's commitment Limited (“PT”) to participate in economic
development in a sustainable way to improve the quality of life and the environment
beneficial, both for the company itself, the local community, as well as
society in general. CSR is regulated inLaw No. 40 of
2007 concerning Limited Liability Companies and Government Regulation no. 47 of
2012 concerning Responsibility Limited Liability Company Social and Environment.
Based on these regulations, the company has an obligation to carry out community
development and empowerment.
For the key stakeholder strategies,
the organization's ultimate goal can be seen as giving benefit to
beneficiaries, which are people and or communities who receive the program.
Therefore, the key stakeholder strategy is to improve beneficiaries'
connectivity to the Internet. To achieve this objective, Common Room launched
programs including digital literacy program, community- based Internet education,
provisioning Internet infrastructure, etc. Programs launched need to be researched
beforehand to make sure the program reaches the intended audience and solve their
internal problem. These are included in the Internal Process perspective, with
the strategic objectives being to improve program brainstorming quality,
improve training program delivery, and improve Internet infrastructure
readiness. To achieve the internal process objectives, the organization from within
needs to be capable and competent, particularly from the employee side and the tools
side, in this case modules for teaching programs. These are included in the Learning
& Growth perspective, with the strategic objectives being to increase
employee competency, optimize tools and modules, and create positive organisational culture. Financial perspective is put at the
bottom, with one strategic objective is to find financial donors.
From a stakeholder
perspective, people's connectivity to the internet can be measured by the number
of people connected to the Internet in that region, the number of Internet
voucher sales in that region, local support, and digital literacy improvement with
the initiatives include expanding the program to other untouched regions,
develop community-based internet infrastructure that is supported by local
stakeholders, starting from village leaders and officials, residents in the
local area, as well as related organizations and institutions, and develop
community-based internet infrastructure that is easy for anyone to learn, anywhere.
From an internal perspective,
the commonly used measure is Social Return On
Investment (SROI). Because SROI depends on the time and fund cost of the
program, the initiatives are to streamline both those costs (Gargani, 2017). In addition, the internal perspective can also be seen
by the number of installed internet infrastructure, with the initiatives
include developing community-based internet infrastructure utilizing simple and
easily accessible technology in rural communities and remote places, and managed
by residents in rural areas and remote places which have limited capacity and technical
equipment.
From
a Learning & Growth perspective, employee competency is measured by number of
certified employees, modules are measured by number of updated modules, and
positive culture is measured by employee turnover (Bristol, Kostelec,
& MacDonald, 2018).
Figure 4. A proposed strategic map for NPOs
In Figure
V, The strategic goals connected
to a soccer club's mission
and vision are specified for each performance standpoint. The performance indicators for assessing
the achievement of each of the
strategic objectives should be chosen (Yüksel & Coşkun, 2013).
Table
2. A proposed Non-Profit Balanced Scorecard with targets.
|
Per spe ctiv
e |
Strategic Objective |
Performance Measure |
Weight |
Target |
Point |
||||
|
100 |
80 |
60 |
40 |
20 |
|||||
|
Stakeholders’ Perspective (30%) |
Improve people connectivity to Internet |
Number of people connected to Internet |
2% |
50% of population in the area |
More than 50% of the popul ation |
40% - 50% |
30% - 40% |
20% - 30% |
10% - 20% |
|
Number of Voucher Sales |
10% |
2 times of population in a month |
x => 2 times of popul ation |
1.5 >= x > 2 time s of pop ulati |
1 >= x > 1.5 time s of popu |
0.5 >= x > 1 times of popu lation |
0 >= x > 0.5 time s the |
||
|
|
|
|
|
on |
latio n |
|
pop ulati on |
||
|
Increasing Digital literacy skill |
12% |
80% |
x >= 80% |
60% >= x > 80% |
40% >= x > 60% |
20% >= x > 40% |
0% >= x > 20% |
||
|
Social Support Index |
6% |
90% |
x >= 90% |
70% >= x > 90% |
50% >= x > 70% |
30% >= x > 50% |
10% >= x > 30% |
||
| Training Return on Investment |
5% |
100% |
x >= 100% |
80% >= x > 100 % |
60% >= x > 80% |
40% >= x > 60% |
20% >= x > 40% |
||
|
Training experience satisfaction |
3% |
30 for nps score |
>= 30 |
20 >= X > 30 |
10 >= X > 20 |
5 >= X > 10 |
0 >= X > 5 |
||
| Social Return on Investment |
5% |
5 Dollar |
>= 5 Dollar |
4 Doll ar >= X > 5 Doll ar |
3 Doll ar >= X > 4 Doll ar |
2 Dolla r >= X > 3 Dolla r |
1 Doll ar >= X > 2 Doll ar |
||
| Number of installed internet infrastructure |
4% |
2 in the area |
2 |
- |
- |
- |
1 |
||
|
Speed of the internet |
3% |
50 Mbps |
More than 50 Mbps |
40 Mbp s - 50 Mbp s |
30 Mbp s - 40 Mbp s |
20 Mbp s - 30 Mbp s |
10 Mbp s - 20 Mbp s |
||
| Jobstress survey |
4% |
10% |
Belo w 10% |
10% > x >= 15% |
15% > x >= 20% |
20% > x >= 23% |
23% > x >= 25% |
||
|
Employee satisfaction Index |
4% |
95% |
x >= 95% |
90% >= x > 95% |
85% >= x > 90% |
80% >= x > 85% |
75% >= x > 80% |
||
|
Employee Turnover Rate |
4% |
15% |
x <= 15% |
15% > x >= 18% |
18% > x >= 20% |
20% > x >= 22% |
22% > x >= 25% |
||
| Individual Leader Effectiveness Score |
6% |
75% |
x >= 75% |
70% > x >= 75% |
65% > x >= 70% |
60% > x >= 65% |
55% > x >= 60% |
||
|
Number of Certified Employee |
6% |
90% of total employee that get new certified each year |
x <= 90% |
70% > x >= 90% |
90% > x >= 85% |
85% > x >= 80% |
80% > x >= 75% |
||
|
Aggregate Communicati on Effectiveness Score for each employee |
2% |
9 |
x <= 9 |
8 > x >= 9 |
7 > x >= 8 |
6 > x >= 7 |
6.5 > x >= 6 |
||
| Number of Updated Modules |
4% |
10 new updated module every year |
x >= 10 modu les |
9 > x >= 10 mod ules |
8 > x >= 9 mod ules |
7 > x >= 8 mod ules |
6 > x >= 7 mod ules |
||
| Number of donors |
10% |
1 new donor each year |
1 new donor s |
- |
- |
- |
- |
||
|
Amount of Funding |
10% |
get funding with a minimum amount of $200,000 each year |
x >= US$ 200,0 00 |
US$ 180, 000 > x >= US$ 175, 000 |
US$ 175, 000 > x >= US$ 170, 000 |
US$ 170, 000 > x >= US$ 169, 500 |
US$ 169, 500 > x >= US$ 160, 000 |
||
The
BSC views depicted in Figure V serve as the foundation for the quantitative BSC
model that this study suggests for a non-profit organization. The BSC comprises
stakeholders, internal processes, learning and growth, and financial perspectives.
Specific performance measurements with weights were used for each strategic
objective. Since every non-profit has a unique mission and vision, no one model
applies to all of them
CONCLUSION
Aturan keuangan
terhadap akuntansi berbasis akrual
perusahaan dapat mengambil berbagai tindakan, seperti menerapkan prinsip-prinsip tanggung jawab sosial
perusahaan (Corporate Social Responsibility) dalam
setiap aspek kegiatan bisnisnya. Hal ini dapat mencakup upaya untuk mengurangi dampak lingkungan dari kegiatan bisnis, meningkatkan kesejahteraan karyawan dan masyarakat sekitar, dan membangun kemitraan dengan pihak-pihak terkait untuk mempromosikan
pembangunan berkelanjutan. Selain
itu, perusahaan dapat mempertimbangkan dampak sosial dan lingkungan dari kegiatan bisnisnya
dalam pengambilan keputusan
strategis. Ini dapat mencakup memilih bahan baku yang berkelanjutan,
mengembangkan teknologi
yang ramah lingkungan, dan menerapkan praktek bisnis yang etis dan transparan. jangka panjang,
perusahaan yang mengedepankan
kehidupan harmonis dapat memperoleh manfaat dari reputasi
yang lebih baik dan meningkatkan daya
tarik bagi investor, karyawan,
dan pelanggan. Selain itu, perusahaan
juga dapat memainkan peran yang penting dalam memajukan tujuan pembangunan berkelanjutan secara keseluruhan, termasuk melalui partisipasi dalam inisiatif
global dan nasional yang bertujuan
untuk mengatasi tantangan lingkungan dan sosial yang kompleks.
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