Sunday, 29 April 2012

Efficiency in the Third Sector

I'm reacting to a provocative piece in Guardian Professional recently. Alison Maclennan asks whether charities should measure efficiency and argues against reliance on tools such as the Balanced Scorecard. She suggests that some assessments can be manipulated and that "a hefty dose of intuition" is still needed.

Her premise that the voluntary and commercial sectors are different is indisputable. But this surely means they should measure performance differently, not that one should neglect measurement altogether.

Without detailing the definition of Efficiency (see my blog of 12/1/11), we're basically talking about getting better results from the resources invested - and resources here can be assets and volunteer time as well as cash. Put this way, it's unthinkable that any charity would not want to improve efficiency. This is not just about convincing donors their money is well spent. It's about achieving more in terms of the organisation's core purpose, what it exists for.

To improve you have to be able to measure. This doesn't mean though you have to do it daily to three decimal places using complex models and systems. For the third sector in particular, the effort that goes into measurement must be proportionate to the size and resources of the organisation. It must however answer three basic questions:

  • How well are we achieving our aims?

  • Are we improving?

  • How can we get better still?

There are many ways of doing this, and the Balanced Scorecard is indeed one. But I strongly believe that the real value of this framework lies not in the mechanics of the scorecard itself but in the thinking behind it. That thinking, and the associated principle of Strategy Mapping, is all about identifying cause-effect links. To improve the impact we have, what is it most important to do better? It then applies appropriate measurement to the things that really matter.

This fundamental thinking underpins many assessment models - SROI, EFQM, PQASSO as well as the Balanced Scorecard itself. It goes beyond simply assessing efficiency, to understanding what change you are achieving, and how you can achieve more. And that surely must be critically important for any third sector organisation.