Sustainable Microfinance - Balanced Scorecard's added value for ...

3. Theory and Literature Review – Balanced Scorecard
‘The scorecard is not a way of formulating strategy. It is a way of
understanding and checking what you have to do throughout the organization
to make your strategy work.’ (Quote from David Norton in Leadbeater, 1997).
3.1 Introduction
The previous chapter ended with the conclusion that in order to enable MFIs to cope
with the double bottom line, a PMS is required that enables them to manage their
organization based on both financial and non-financial performance indicators.
Another conclusion was that in order to provide a prevalent contribution towards the
sustainability of the Dutch microfinance sector the focus of this research should be
on the MFIs that provide BDS to starting entrepreneurs. First background information
about the BSC will be provided. Secondly, lessons will be drawn from examples of
PMSs beyond the private sector different practises from development countries are
discussed. Finally the specific characteristics of MSEs will be discussed.
3.2 The Characteristics of the Balanced Scorecard
According to Gomes and Liddle (2009) public sector organizations have increased
their use of performance indicators as a tool for monitoring, managing and measuring
performance. Performance indicators have been devised from several different tools,
frameworks and models, such as the Business Excellence Model, Investors in
People, charter mark, ISO 9000, the balanced scorecard and benchmarking
(McAdam, Hazlett and Casey, 2005). An alternative list of performance management
models was suggested by Lee (2006): the Performance Pyramid, the Results and
Determinants Matrix, the Balanced Scorecard, the Consistent Performance
Measurement System, and the Integrated Performance Measurement System. The
common point between the two lists is Kaplan and Norton’s (1996) Balanced
Scorecard. To understand the use of the BSC its background will be discussed in the
next paragraph.
3.2.1 Background
During the early stages of the development of the model, the emphasis was on
integrating financial and non-financial measurements, (McNair, Lynch and Cross,
1990) to make it possible for these different metrics to provide the same signal or
outcome (McNair and Mosconi, 1987). In the early 1990s, Harvard professor Robert
Elmar Hoogendoorn 29
Sustainable Microfinance