Beginning with Tom Peters and Robert Waterman's In Search of Excellence in 1982, a large literature exists on businesses that have achieved iconic stature through high performance. Numerous management experts have devoted careers to explaining why some businesses achieve long records of excellence on measures ranging from profits and return to shareholders, to innovation, to employee empowerment and satisfaction. The task of identifying high performing businesses is simplified by the fact that there is a bottom line: the market sorts out with sometimes startling speed those that are excelling and those that are resting on their laurels.
In the nonprofit sector, assessing organizational performance is more challenging. Financial success is but one measure of institutional success, and achievement toward nonfinancial, mission-related goals is both more important and more difficult to quantify. In some segments of the nonprofit sector—higher education, for example—methodologies for assessing performance have been developed and are accorded considerable attention, even if the metrics and the uses to which they are put are not universally applauded.
Performance measurement of nonprofits may still be in its formative stages, but prominent management consultants like Jim Collins are nonetheless mapping out principles and approaches that show promise. As observed by the late John Sawhill, in addition to financial metrics, every nonprofit organization needs performance metrics to measure its success in mobilizing resources, its staff's effectiveness, and progress in fulfilling its mission. "[G]iven the diversity of the organizations in the nonprofit sector," Sawhill cautioned, "no single measure of success and no generic set of indicators will work for all of them." He maintained, however, that "with creativity and perseverance, nonprofit organizations can measure their success in achieving their mission—by defining the mission to make it quantifiable, by investing in research to show that specific methods work, or by developing concrete micro-level goals that imply success on a larger scale."
The health care sector has been a laggard in developing performance measures and using them to improve the quality, safety, accessibility, efficiency, and equity of care. Recent progress on a variety of fronts suggests, though, that in a matter of years providers, payers, regulators, and consumers will have access to reliable performance measures for individual hospitals, health plans, nursing homes, and, ultimately, for physician groups and even individual physicians. The Commonwealth Fund and other private foundations are contributing significantly to the development of individual measures and to testing their use along with incentivized payments to improve performance. The recently released National Scorecard on U.S. Health System Performance is itself an indicator of the progress made in this field; as a tool that enables the assessment and monitoring of a system encompassing 16 percent of the U.S. economy, the Scorecard is a product of years of research and testing by dozens of organizations.
This essay discusses the "balanced scorecard" adopted by the Fund to measure organizational effectiveness, clarify goals and strategies, and ensure continued high performance.
To read the complete essay, divided into the sections below, download the PDF at right or view the Annual Report.
- Scoring the Performance of Private Foundations
- Development and Implementation of the Fund's Performance Scorecard.
- The Fund's Performance Scorecard
- Toward Greater Use of Performance Scorecards by Private Foundations