Journals Proceedings

Abstract

This paper examines the connection between structural equation modeling and Balanced Scorecard in a Swiss non-profit organization. Using financial and nonfinancial data taken directly from the establishment, the paper puts forward a rational construction and analysis of Balanced Scorecard by choosing the right indicators for the right strategic perspectives. This choice is made by implementing a series of Partial Least Squares in the proposed model. In addition, the method determines the cause-and-effect chain defined by Kaplan and Norton as: the measures of organizational learning and growth will impact the measures of internal business processes which in turn will affect the measures of the customer perspective which, finally, will shape the financial measures. It will be observed that the Kaplan and Norton model of Balanced Scorecard is different from the findings in this paper, a case somehow too general to cope with today’s complex market environment. Subsequent to this, the study suggests a general approach to build step-by-step a realistic Balanced Scorecard rooted in the actual company’s strategy. Finally, the proposed approach will be applied and evidenced in a detailed real case of a Swiss non-profit organization.