[MUSIC] In this lecture, I'd like to cover the details of what goes into a performance scorecard or dashboard. And at the highest level I argue that there are four main pieces you're want to going to have. You're going to want to have social impact measures, you're going to want to have financial metrics, you're going to want to have stakeholder metrics and you're going to want to have quality indicators. To build a dashboard, you gotta start somewhere. And what I'm going to suggest is you need to start with the social impact metrics, and you can get a head start by going back to your logic model and pulling out elements from that. Second, you're going to choose a small number of financial ratios that are going to give you some purchase on financial performance. Third, you're going to choose a group of metrics related to how well your stakeholders are engaged and satisfied with your organization and finally, you're going to come up with a few quality indicators. Let's go into each one of these now in a little bit more depth. Where would the social impact metrics for our performance scorecard come from? The answer is they will come from your logic model. You've already defined your outputs and outcomes, now you're going to take out of logic model, those critical outputs and outcomes that are going to be most central to understanding how well you're performing. And those are going to constitute the core piece of your social impact basket of metrics within your dashboard. So the first part of this project is pretty easy if you've done a good job with your logic model. You'll have some social impact indicators that you can pull out and use immediately in your dashboard. Then you're going to want to surround those social impact indicators with a set of financial metrics. I think there are six metrics that are basically universal, that are very commonly adaptable to all social enterprises. One is a metric of profitability. How much money is left over at the end of the year? If it's a non-profit, what's the fund balance and has it increased? If it's a for profit, what's the margin? But you need some measure of profitability. Second, I think you're going to want to have some kind of assessment of growth. Have revenues increased? Have the overall budgets of the organization's programs increased? Has there been a movement up in terms of size and expansion within the organization? So, think about some growth metrics. Third, you want to have some metric related to liquidity, cash on hand. An organization that has one month of payroll is very different than one that eight or ten months of payroll in the bank. Organizations need liquidity to have time to think and do their work well. You're going to have some metric of liquidity that you can use to give us, give your organization a sense of how much slack it has. Fourth, you're going to want to have a measure of financial stability or vulnerability. Organizations sometimes goes through waves of wealth and poverty. Organizations that are swaying from one side to the other, from resources to desperation. Those organizations are exposed to pressure. You're going to want to have some metric of stability and financial consistency to get a purchase on the question of how stable is your organization. Fifth, you're going to want to have metrics, I think, that relate to efficiency. How good are you at converting resources into program activities? Some ratio may be, some people use an overhead ratio of administrative to program expenses. Whatever the ratio is, some kind of metric would be useful to give you a sense of how good are you doing at using funds to produce programmatic results. Six, I think you want to have some measure of resource diversification. All the research shows that social enterprises that have multiple funding streams that don't depend on one single source, they survive longer. They're more stable and they're more capable of overcoming changes in the environment. You're going to want to have a metric that will give you a way of tracking how many different sources of funding are out there that are coming into your organization and how concentrated any of these flows are. There's an indicator that some people use, called a Herfindahl index, which ranges from zero to one that gives a measure of diversification. Whatever it is, you want to have some kind of sense of are you putting all your eggs in one basket or are you diversifying your funding needs. Beyond financial metrics are stakeholder satisfaction Metrics. Here you want to take an inventory of all the people inside and around the organization that you need to speak to. And get a sense of what do they think about your organization? That ranges from clients and customers to the funders that support the organization, be it individual, foundation, corporation, or other funders. You're going to want to have an understanding what the partner organizations that you work with think about your organization. You're also going to want to internally know how committed staff, board, and volunteers are to the enterprise. You're going to want to have metrics that are going to give you some sense of stakeholder support. With that in mind, you'll be able to have a much clearer sense of the degree of support that is out there for what you want to do. Those are some important starting points, but we also need one last piece. We need quality indicators. We need to ask the question how good are the systems inside the organization? What is the error rate that we have in producing our product or service? What metrics really tell this quality story? Which ones can communicate most clearly how good we are at doing the operational work of the enterprise? And finally, we want to know where can we improve. And a good quality indicator, a well chosen one, will point to the areas that need most improvement. So put it all together, you're going to come up with different metrics, different possible solutions, but they're going to fall into these four common baskets, I think. Now, is it possible you're going to want to use different metrics from one organization context to another? Absolutely. Is it possible you're going to want to vary the number of baskets? I proposed four here. Could you have three? Absolutely. Could you add a fifth basket? You might. My point here is that a good scorecard or dashboard is multi-dimensional and flexible. That means you can adjust it to the needs of your organization. You need to prioritize and choose what matters most. But there's a considerable amount of flexibility possible in this concept. So a dashboard is your starting point for performance measurement. It's your moment where you're going to say here are a bunch of different dimensions of performance. Three, four or five, and when in each of those dimensions I'm going to define a small number of metrics that are going to really tell my story effectively about how well I'm doing. Give yourself a lot of flexibility, use the base model I've presented here, but go in any direction you think is useful for getting you to the metrics that tell the story most effectively. [MUSIC]
