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Application of the Balanced Scorecard in Higher Education Opportunities and Challenges

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Application of the Balanced Scorecard in Higher Education Opportunities and Challenges Application of the Balanced Scorecard in Higher Education Opportunities and Challenges An evaluation of balance scorecard implementation at the College of St. Scholastica. by Cindy Brown Introduction In the 1990s a new way of evaluating performance improvement in the business industry was introduced. The balanced scorecard (BSC) emerged as a conceptual framework for organizations to use in translating their strategic objectives into a set of performance indicators. Rather than focusing on operational performance and the use of quantitative financial measures, the BSC approach links the organization’s strategy to measurable goals and objectives in four perspectives: financial, customer, internal process, and learning and growth (Niven 2003). The purpose of this article is to evaluate the use of the Cindy Brown, DNP, MPH, RD, RN is an BSC in the nonprofit sector, specifically at an institution of assistant professor in the School of Nursing higher education. Case studies in higher education and at the College of St. Scholastica in Duluth, personal perspectives are presented, and the opportunities Minnesota. Her professional expertise is in for and challenges of implementing the BSC framework in public health, nutrition, and chemical higher education are discussed. dependency. She also provides nursing services at a housing facility for residents Balanced Scorecard Principles with chronic alcoholism. She has an interest in performance improvement evaluation in higher education; this article is a culmination Achievement of equilibrium is at the core of the BSC of her review and application conducted as system. Balance must be attained among factors in three part of her graduate course work for her areas of performance measurement: financial and nonfinancial doctorate of nursing practice degree. indicators, internal and external constituents, and lag and 40 July-September 2012 |Copyright © Society for College and University Planning (SCUP). All rights reserved. Application of the Balanced Scorecard in Higher Education: Opportunities and Challenges lead indicators. Equilibrium must also be attained between The BSC has evolved into a powerful communications financial and nonfinancial measures; nonfinancial measures tool and strategic management system for profit-based drive the future performance of an organization and are organizations. Harvard Business Review has recognized the therefore integral to its success. Further, the use of framework as one of the top 75 most influential ideas in nonfinancial measures allows problems to be identified and the 21st century (Niven 2003). Its successful use in the resolved early, while they are still manageable (Gumbus for-profit arena has been clearly demonstrated, but does it 2005). The sometimes contradictory needs of internal have applicability in the nonprofit sector, specifically in constituents (employees and internal processes) and institutions of higher education (IHEs)? external stakeholders (funders, legislators, and customers) should be equally represented in the scorecard system Use of Performance Indicators in Higher (Niven 2003). A key function of the BSC is its use as a Education performance measurement system. The scorecard enables organizations to measure performance through a variety of Like other nonprofit organizations, IHEs are increasingly lead and lag indicators relating to finances, customers, under pressure to provide external stakeholders such as internal processes, and growth and development (Niven 2003). communities, alumni, and prospective students with According to Niven (2003), lag indicators are past performance performance indicators that reflect the overall value indicators such as revenue or customer satisfaction, and excellence of the institution. Historically, however, whereas lead indicators are “the performance drivers that performance indicators in higher education have lead to the achievement of the lag indicators” (p. 23). emphasized academic measures (Ruben 1999). Driven by external accountability and comparability issues, IHEs often The BSC’s cascading process results focus on quantitative academic variables such as faculty demographics, enrollment, grade point average, retention in a consistent focus at all levels of rates, faculty-student ratios, standardized test scores, the organization. graduation rates, faculty teaching loads, and faculty scholarly activity (Ruben 1999). IHEs often assume that measuring The BSC framework provides tools to assist business external accountability through one-dimensional parameters organizations in mapping their performance improvement such as college rankings or accrediting agency mandates strategies and establishing connections throughout the various will influence internally driven parameters related to levels of the organization. Additionally, the framework institutional effectiveness; yet, unless these indicators are identifies cause-and-effect relationships. The strategy map linked in a meaningful way to the drivers of institutional component of the BSC provides a graphical description of effectiveness, desired improvements in service, productivity, the organization’s strategy, including the interrelationships and impact are unlikely to occur (Stewart and Carpenter-Hubin of its elements. This map is considered the blueprint for 2000–2001). Additionally, some of these academic variables the organizational plan (Lichtenberg 2008). Further, the do not reflect the value that the IHE adds through the BSC’s cascading process gives the organization a tool for teaching and learning process but instead reflect students’ taking the scorecard down to departmental, unit, divisional, existing capabilities (Ruben 1999). or individual measures of performance, resulting in a Another challenge in using traditional measures of consistent focus at all levels of the organization. Ideally, excellence in higher education is their failure to capture a these measures of performance at the various levels directly comprehensive image of the institution’s current status relate to the organizational strategy; if not, the organization (Ruben 1999; Stewart and Carpenter-Hubin 2000–2001). is just benchmarking its metrics. The cascading of the Further, the tendency for IHE performance indicators to scorecard also presents employees with a clear image of focus on external accountability fails to account for the how their individual actions make a difference in relation importance of internal assessment. Inclusion of internal to the organization’s strategic objectives. The cascaded assessment indicators broadens perspectives and, if done scorecard creates alignment among the performance correctly, provides a connection between the institution’s measurement outcomes throughout the various levels of values and goals (Stewart and Carpenter-Hubin 2000–2001). the organization (Lichtenberg 2009). Indicators used in traditional higher education performance Planning for Higher Education | Search and read online at: www.scup.org/phe.html 41 Cindy Brown measurement frameworks cannot be adequately translated The Balanced Scorecard and Higher into meaningful applications for the purpose of monitoring, Education planning strategically, or conducting comparative evaluations against standards of excellence among IHEs (Johnson and While implementation of the BSC cannot guarantee a Seymour 1996, as cited in Ruben 1999. These traditional formula for accurate decision making, it does provide performance indicators also lack the predictive power higher education with “an integrated perspective on necessary to adequately alert IHEs of needed changes goals, targets, and measures of progress” (Stewart and in a timely manner. In addition, traditional models for Carpenter-Hubin 2000–2001, p. 40). Some IHEs have taken measuring higher education performance are constrained by the step of measuring performance indicators through the departmental boundaries and are limited in their ability to link implementation of a BSC approach. These IHEs have individual performance objectives and performance evaluation identified the important characteristics of the scorecard: processes with institutional performance (Hafner 1998). inclusion of a strategic plan; establishment of lag and lead performance indicators; improvement of efficiency, Traditional models are limited effectiveness, and overall quality; and inclusion of faculty in their ability to link individual and staff in the process (Rice and Taylor 2003). Successful implementation of the BSC framework in higher education performance objectives with relies on the progression through various steps as part institutional performance. of the process. The first step is clear delineation of the mission and vision, including translating this vision into Not as much emphasis is placed on other less tangible specific strategies with a set of performance measures. indicators in higher education such as relevance, need, The next step is establishing communication and linkage accessibility, value added, appreciation of diversity, student among schools, departments, student support services, satisfaction levels, and motivation for lifelong learning; yet, institutional advancement, and other offices such as a common mission of IHEs is to foster lifelong learning. physical plant and maintenance services. This step is Many of these indicators, especially those related to important in establishing direct connections between the student and faculty expectations and satisfaction levels, individual unit goals and objectives and the macro-level
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