Balanced Scorecard: Step-by-Step for Government and Nonprofit Agencies, 2nd Edition

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Linking Resource Allocation to the Balanced Scorecard

Roadmap for Chapter 10 Humorist Will Rogers once remarked that “The budget is a mythical bean bag. Congress votes mythical beans into it, and then tries to reach in and pull real beans out.” As long as they’ve existed, budgets have been a source of monetary pain and controversy for public, nonprofit, and private firms alike. Ostensibly designed to pair dollars with results, most budgeting efforts lack a true “strategic stake,” and are instead characterized by chicanery and politics of the highest order. One recent study conducted by CFO Research Services found that 45% of respondents felt budgeting is contentious and political, 72% said the process yields unrealistic numbers, and 53% said budgets make managers behave badly.¹

In this chapter, we’ll examine the role of the Balanced Scorecard in linking resource allocation to strategy. A five-step process will be presented to demonstrate how a series of cascaded Scorecards can drive the budgeting process in any organization. Following the techniques outlined in this chapter will help your agency avoid the dubious distinction of joining 60% of all organizations that do not link budgets to strategy.

HISTORY OF PERFORMANCE AND BUDGETS

Interest in the linkage of performance measures to budgets has been growing in the public sector for many years. The past dozen years in particular have introduced a number of elements improving the environment for a merger of budgets and performance. ...