How to shape a Performance Management System for a Social Enterprise?

The KaBOOM! Case Study Fundamentals of

Sustainable Accounting & Finance(Cristiana Parisi)

Presented byChristian Emigholz

16th July.2009

Agenda• Short introduction to KaBOOM!‣ What they do

‣ How they work

• Introducing a Performance Management System (PMS)‣ Objectives of a PMS for a Social Enterprise

‣ Difficulties on the road

‣ Defining return & measuring performance: The KaBOOM! Formula

• Summary & Discussion

KaBOOM! - What they do:

• Social Enterprise founded 1995 by a Civic Engineer in response to a tragic accident

• Vision (2002): „Develop a country in which all children have within their communities fun and health play opportunities, with the participation and support of their families and peers“

• Playgrounds and skate parks in order to‣ Tackle obesity-related health problems

‣ Foster learning and social skills through playing and interacting

‣ Let children grow up with a safe place to play (CEO Hammond)

• Social Enterprise founded 1995 by a Civic Engineer in response to a tragic accident

• Vision (2002): „Develop a country in which all children have within their communities fun and health play opportunities, with the participation and support of their families and peers“

• Playgrounds and skate parks in order to‣ Tackle obesity-related health problems

‣ Foster learning and social skills through playing and interacting

‣ Let children grow up with a safe place to play (CEO Hammond)

KaBOOM! - What they do:

Social Enterprise:„Social enterprises are distinctive because their social or environmental purpose is central to what they do. Rather than maximising shareholder value their main aim is to generate profit to further their social and environmental goals.“ (www.socialenterprise.org.uk)

KaBOOM! - How they work:

• Mission (2002): „Every child through the participation of their communities should have healthy play opportunities“

• Building a playground by1. Partnering with corporate partners to generate funds (e.g.

Nike, Crysler Foundation, FannieMae)

2. Bringing corporate partners and communities together

3. Children designing their dream playground

4. Organising volunteers from corporations and communities to build the playground

KaBOOM! - Strategy:

Lead Seed Rally

•Example-building playgrounds and organisation through KaBOOM!•Very time intensive

•Provide support, planing tools and encouragement to interested community groups•Shift of work load and responsibilty

•Individual partners („Playboard“) who foster & organise playground building•Incentive to be recognised as „playful city“•Intensive PR Program

Agenda• Short introduction to KaBOOM!‣ What they do

‣ How they work

• Introducing a Performance Management System (PMS)‣ Objectives of a PMS for a Social Enterprise

‣ Difficulties on the road

‣ Defining return & measuring performance: The KaBOOM! Formula

• Summary & Discussion

Why introducing a PMS? • Initial Problem‣ 2002: The Board was overwhelmed with information, thus

unable to truly asses KaBOOM!‘s performance

‣ Prove to funding corporations the ablility to set and reach goals

• Objectives‣ consolidated timely, accurate and usefull information

‣ most important KPIs / consistent data points

‣ year over year benchmarks

•Goal‣ help to set strategic goals and to possibly reshape the strategy

(„feedback loop“)

Why introducing a PMS? • Initial Problem‣ 2002: The Board was overwhelmed with information, thus

unable to truly asses KaBOOM!‘s performance

‣ Prove to funding corporations the ablility to set and reach goals

• Objectives‣ most important KPIs / consistent data points

‣ year over year benchmarks

‣ consolidated timely, accurate and usefull information

•Goal‣ help to set strategic goals and to possibly reshape the strategy

(„feedback loop“)

Implementing a Balanced Score Card•Define strategy•Define measures of strategy (incl. cause-effect raltionships [causal maps] across 4 dimensions)•… (Anthony, R.N. and Govindarajan, V. (1998), Management Control Systems, New York, IrwinMcGraw-Hill, pp. 459-475.)

Problems on the road• How can the performance of a social enterprise

be measured? Impact vs. Output-Measures?‣ Reviewing Vision and Mission to clarify KaBOOM!‘s goal

‣ Main mission related output measure is therefore playgrounds built

‣ Social impact shown by social change model

• Which measures to focus on?‣ Relevant & reliable

‣ Financial measures are definately important; reflecting the implications of other measures

‣ Scientific theories shouldn‘t be proofed with a PMS

Problems on the road• How can the performance of a social enterprise

be measured? Impact vs. Output-Measures?‣ Reviewing Vision and Mission to clarify KaBOOM!‘s goal

‣ Main mission related output measure is therefore playgrounds built

‣ Social impact shown by social change model

• Which measures to focus on?‣ Relevant & reliable

‣ Financial measures are definately important; reflecting the implications of other measures

‣ Scientific theories shouldn‘t be proofed with a PMS

Vision (new):"Our vision is a great place to play within walking distance of every child in America"

Mission (new):“Our mission is to create great playspaces through the participation and leadership of communities“

Agenda• Short introduction to KaBOOM!‣ What they do

‣ How they work

• Introducing a Performance Management System (PMS)‣ Objectives of a PMS for a Social Enterprise

‣ Difficulties on the road

‣ Defining return & measuring performance: The KaBOOM! Formula

• Summary & Discussion

DuPont formula(for profit business)

Profit Net Profit Margin(net income / sales)

x

Efficiency Total asset turnover(sales/total assets)

x

Leverage Debt financing used to improve profits(total assets / common stock)

=

Return to shareholders Return on Equity (ROE)

The DuPont Formula

DuPont formula(for profit business) Social Enterprise measures

Profit/Mission related output

Net Profit Margin(net income / sales)

Created value for society

•# playspaces built•# LEAD builds in low income areas•# Playmakers

x x

Efficiency Total asset turnover(sales/total assets)

How efficient were internal ressources used

•Build efficiency (input vs output $)•Program effiency (% expense programs)•Fundraising efficiency (cost for fundr.)•Cash, Burn rate, total budget

x x

LeverageDebt financing used to

improve profits(total assets / common stock)

How efficient were external ressources used

•Earned Income•Orga: Turnover rate & Culture rating•Brand: Media mentons, CTR•Total volunteers

= =

Return to shareholders Return on Equity (ROE)

Incremental value to „shareholders“

(children, foundations, communities,

corporations…)

The KaBOOM! Formula

The KaBOOM! Formula• Derived from DuPont formula

• Defines‣ that return of KaBOOM! = (Output) x (internal efficiency)

x (external effciency)

‣ categories to which quantitative measures are allocated (these are different to those of the BSC)

• Return of KaBOOM! is „incremental benefit to its shareholders“‣ children, foundations, communities, corporations…those

who have a legitimate interest that KaBOOM! performs well in the three categories

‣ Additional benefit to society through KaBOOM!‘s work

Summary• The return of a purpose driven organisation (i.c. Social

Enterprise) is different from a for-profit organisation

• Before the return can be measured, it‘s relevant to clarify how the purpose (vision & mission) is reflected in numbers

‣ Output measure playspaces built

‣ Social change model to explain the impact

• The KaBOOM! Formula results into the incremental value created for various stakeholders („society“) through

‣ Output

‣ efficient use of internal and external ressources.

• The performance in these dimensions is assesed through relevant and reliable measures

Discussion: BSC & KaBOOM!What characteristics does the KaBOOM! Formula share with the

balanced scorecard. In which respect is it different?