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473
This note was prepared by Professor Robert S. Kaplan for the sole purpose of aiding classroom instructors in the use of Boston
L
yric Opera, HBS No. 101-111. It provides analysis and questions that are intended to present alternative approaches to
deepening students comprehension of business issues and energizing classroom discussion. HBS cases are developed solely as the
basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective o
r
ineffective management.
5-102-074
APRIL 8, 2002
Boston Lyric Opera
TEACHING NOTE
Pedagogical Objective
The Boston Lyric Opera case, the first documented application of the Balanced Scorecard to
an arts organization, was written to illustrate the application of the Balanced Scorecard to a
nonprofit organization, especially one whose performance some people believe can not be
quantified and measured. The case provides the history of the arts organization and describes its
The case includes the BLO strategy map and asks students to suggest and debate the measures
for the scorecards strategic objectives, particularly its customer perspective. Once the class sees
that plausible measures can be created for BLOs strategic objectives, it can discuss the benefits
and challenges the BLO faces from use of the scorecard. Students can also discuss the
implementation approach used by the BLO, and the management system that the general
director is using to imbed the scorecard philosophy into the organization.
The case was first taught in executive programs on managing and governing nonprofit
organizations, and in a second-year MBA elective on social enterprises. We have also used it
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
Reading
A great deal of reading is available for preparatory reading. The challenge is choosing from
among the many options to keep the students reading load manageable. For historical purposes,
one could use the original article that introduced the Balanced Scorecard concept:
Kaplan, R.S., and D.P. Norton, The Balanced Scorecard: Measures that Drive Performance,
Harvard Business Review (January-February 1992): 7179, HBR 92105.
This article, however, does not describe the explicit link of the BSC to strategy and use of
strategy maps. One could supplement this original article with a later article that does describe
the role of strategy and use of strategy maps:
Kaplan, R.S., and D.P. Norton, Having Trouble with Your Strategy? Then Map It, Harvard
Business Review (September-October 2000): 167176, HBR 00509.
I recommend, however, using the following article:
Kaplan, R.S., and D.P. Norton, Transforming the Balanced Scorecard from Performance
Measurement to Strategic Management: Part I, Accounting Horizons (March 2001):
87104.
This article provides a historical context for why the Balanced Scorecard became more
important in the 1990s (growth of intangible assets), discusses each of the four BSC
In the interests of full disclosure, I note an explicit article on applying the BSC to nonprofit
organizations:
Kaplan, R.S., Strategic Performance Measurement and Management in Nonprofit
Organizations, Nonprofit Management and Leadership (Spring 2001): 353370.
This paper describes several nonprofit examples and some specific issues and challenges that
arise when implementing the BSC in nonprofit organizations. Unfortunately, the journals
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
475
Assignment Questions
1. The Boston Lyric Opera working group has selected eight customer objectives for its three
strategic themes (see bulleted items on pages 57 of the case, also summarized in the
Customer row of Exhibit 5):
Develop loyal and generous supporters
What measures should the project team select for these eight objectives?
2. What changes were required to adapt the Balanced Scorecard to a nonprofit organization?
3. What are the benefits from developing the Balanced Scorecard at BLO? What challenges
and barriers must Del Sesto and Dahling-Sullivan overcome to capture these benefits?
5. Is Janice Del Sesto using the Balanced Scorecard as a performance measurement system or
a management system?
6. Comment on the process that the BLO used to develop the BSC. What was critical for the
success of the project?
Opportunities for Class Discussion
Instructors should get to class early so they can organize the front board with headings from the
Customer objectives in the strategy map of Exhibit 5 in the case (see Exhibit TN-2).
Before launching the case discussion, if this is the first class on the Balanced Scorecard for
students (or executives), I start by showing a representative diagram of a Balanced Scorecard
that includes a portion of a strategy map and columns for objectives, measures, targets, and
initiatives. See Exhibit TN-1 for an example of a strategy map for a revenue growth theme
using product innovation.
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
476
Initiatives are the action plans that help the organization achieve its stretch targets.
Many organizations get the measurement process backward. They view strategy as an action
Question 1: Can the BLO objectives be measured? What measures would you
suggest Sue Dahling-Sullivan select for the eight customer
objectives across the three strategic themes?
Turn to the students for suggestions of measures for the eight customer objectives. The first
theme, to develop and nurture loyal and generous donors, is straightforward and generally
generates lots of good responses. The challenge is to cut off the discussion early enough so time
remains for the other customer perspectives, and for a more general discussion on the scorecard
process. I recommend allocating about 20-25 minutes for this process.
Based on teaching the case several times, I prepared a listsee Exhibit TN-3of
representative measures for each of the eight customer objectives. You can challenge students
Question 2: What changes had to be made to adapt the Balanced Scorecard,
originally developed for businesses, to nonprofit organizations?
The changes required are relatively modest. The mission and customer objectives are placed at
the top of the strategy map and the financial objectives become a driver (or a constraint) but not
the ultimate performance measure for a nonprofit (or public sector) organization. Basically,
Question 3: What benefits does the BLO get from developing a BSC?
Students can identify several benefits from the case and background readings. Among these are:
The objectives and goals of the organization become transparent to everyone. Management,
board and the staff now have a better basis for managing tradeoffs and handling
disagreements.
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
477
The strategy map provides focus for management discussions. Note how Jan del Sesto puts
the three high-level strategic themes on the white board before every staff meeting,
signaling to all that discussions should remain focused on ideas that help the opera company
succeed in its three strategic themes.
The clear statement of objectives gives senior managers of the BLO the ability to say no
to foundation and board member initiatives that require significant management and
The BSC provides a more objective basis for making resource allocation decisions for how
limited resourcesmoney and peopleshould be assigned to departments and initiatives.
Even with an arts organization, the BSC approach helps to set parameters for making the
difficult judgments and tradeoffs on the artistic productions (the Balanced Repertory
Scorecard). The general director (Del Sesto) has an explicit basis for productive
discussions with Stephen Lord and Leon Major about achieving a good balance between
popular, familiar operas and new, original, and nontraditional productions that allow
exciting young talent to be trained and featured. She can balance the needs of her different
constituencies.
The staff, for the first time, has a clear idea about how the organization measures success.
All employees understand how they fit in and can contribute. Two vignettes in the case
The BSC process engages the board and senior management in tough, but productive
discussions about objectives and strategy. The process helped to persuade a strong board
member, the founder of Opera New England (ONE), to voluntarily cutback on the scope of
this outreach program because she saw the benefits from focusing resources in the
immediate Boston area. Such an agreement would have been difficult if not impossible to
achieve if this edict came down from Jan del Sesto or the BLO board chairman. But because
the board member participated actively in setting the strategy and objectives, she bought
into the more focused, somewhat scaled-down, mission for ONE.
Many nonprofits struggle to engage their boards in active discussions, beyond issues of
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
478
revise plans and budgets in light of much lower revenue and donation projections. But these
What challenges does the BLO have to overcome for the BSC to be effective?
Students generally note that a BSC project, especially for a nonprofit, seems to require
significant time and resources. Are the benefits worth the cost? This is a good issue to let the
class debate. The project did run for about four months but the work, of course, was not
Some of the measures can be costly and difficult to obtain. Conducting focus groups with opera
experts, and conducting surveys of donors, opera attendees, board members, and employees is
expensive. The organization must decide that the benefits they obtain from the measures exceed
this cost. Also difficult is setting targets, particularly when you are first in the industry to be
using such a measure-based approach.
The BLO experienced a backlash from a board member who felt that an arts organization cannot
479
Question 4: Is the BSC too controlling? Are BLO departmental managers, artistic
leaders, and employees empowered or suffocated by the BSC?
Whether the system is controlling or empowering clearly depends on how it is used by senior
management. A command and control manager can certainly use the BSC to set detailed
performance targets for each department or employee. Jan del Sesto, on the other hand, a true
One can draw the following diagram to illustrate the key issue involved in the control vs.
empowerment debate:
Standard cost systems and budgets control inputs and the processhow much can be spent and
the efficiency of the process (cost, quality, and time). This works well when the production
process is well defined and senior executives want employees to follow standard operating
procedures.
In contrast, the BSC sets targets, sometimes stretch targets, for outputs and outcomes.
Employees for the first time understand what their organization is trying to accomplish and how
they can make a difference. Senior managers should encourage departments and employees to
be creative and find new and better ways to accomplish organizational objectives. Employees
One can have an interesting discussion about whether the staff should have been engaged at the
outset in developing the BSC, or is it better to have the board and senior management develop
the scorecard and then communicate it out to middle managers and staff. In the case, Sherif
Nada (board chairman) contrasted the BLO approach with his experience at Citizen Schools
This discussion should lead naturally to the next question.
480
Question 5: Is Janice Del Sesto using the BSC as a performance measurement
system or a management system?
Janice (like executives in other successful BSC organizations) uses the scorecard interactively.
The BSC helps her communicate objectives and stimulate dialogue and discussion about mission
Question 6: Comment on the process used by the BLO to develop the BSC.
1. CEO Leadership. Strong leadership at the top of the organization is the most important
ingredient for any successful BSC project. Janice Del Sesto is an outstanding leader for the
2. Internal Project Leader. Sue Dahling-Sullivan, deputy director, was already an experienced
3. Board Leadership and Support. Ken Freed, head of the BLO planning committee and
Sherif Nada, chairman of the BLO board, were enthusiastic participants and supporters
4. Experienced and Capable Consultant/Coach. Ellen Kaplan had five years of experience
helping nonprofit organizations articulate their strategies and translate them into strategy
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
481
Question: Why is such an extended process, with board members, the CEO,
and artistic and management staff required to produce the strategy
map? Why not have Sue Dahling-Sullivan and Ellen Kaplan get
together for a day or two and craft the strategy map and BSC for the
BLO?
Arguably, Dahling-Sullivan understands well the mission and strategy of the BLO, and Kaplan
has the skills to work with Dahling-Sullivan to translate these into well-crafted strategic
objectives and cause-and-effect relationships. Why then take up the time of all the other
constituents?
The most successful BSC projects have both an analytic component and an emotional component.
Dahling-Sullivan and Kaplan can do the analytic component but they can not, by themselves,
Postscript
When Sue Dahling-Sullivan attended a class in December 2001, she brought a summary of the
initiatives currently underway based on the BLO Balanced Scorecard. Exhibit TN-5 is the
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
Exhibit TN-1 Example of Strategy Map and Balanced Scorecard
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
Exhibit TN-2 Front Board Plan for Customer Measures
Loyal and Generous
Supporters/Subscribers National/International Opera Scene Enhance Opera in Boston
Community
Exhibit TN-3 Potential Measures for BLO Customer Perspective
Loyal & Generous Supporters National/International Opera Scene Boston Community
1. TARGET LOYAL & GENEROUS DONORS 2. ARTISTIC REPUTATION 3. BUILD COMMUNITY SUPPORT
# new donors > $5,000
share of donors wallet
Peer review ratings
Press notices/awards in
Awareness survey in Boston
community
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
BOARD RECRUITMENT AND INVOLVEMENT
Strategic gap coverage
% board members involved in recruiting or
fundraising
2. SUCCESSFUL RESIDENCY PROGRAM
# BLO young artists with subsequent
appearances in national/international
productions
3. BUILD KNOWLEDGE ABOUT
OPERA IN BOSTON COMMUNITY
# people exposed to educational
programs (in person, Web)
PRODUCE A DIVERSE REPERTORY
# contemporary/nontraditional operas
# nontraditional productions
PROMOTE COLLABORATIONS
# prestigious partnerships
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
Exhibit TN-4 Boston Lyric Opera Strategic Measures
Strategy Map Theme Objective Department Target and Measure
Customer/Community Build community support Marketing TBD X% name recognition in community survey by x yr.
Customer/Community Build community support Marketing/Education TBD X # of community-oriented activities in which BLO takes
a major role.
Customer/Opera
Build artistic reputation for
high standards Marketing
50% of press references acknowledge a BLO
standards/style in 3 years.
Customer/Opera
Build artistic reputation for
high standards Marketing 75% annual subscription renewal.
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
Customer/Opera
Launch unique
comprehensive residency
program
Artistic 50% of debut artists engaged within 3 years at Level I or
equivalent opera companies.
Customer/Supporters Focus on board involvement
and recruitment Development 10% new board members (directors and overseers) each
year that fill specific needs.
Customer/Supporters Focus on board involvement
and recruitment Development 75% board participation in fundraising activities annually.
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
Int. Business Process #1 Enhance customer
relationships within key
groups through streamlined
process; increased one-on-
All/Executive One outstanding employee award given per production.
Int. Business Process #1 Enhance customer
relationships within key
groups through streamlined
process; increased one-on-
one contact; improved board
Development Gift Acknowledgements sent 2 working days after gift/pledge
received.
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
Int. Business Process #2 Increase Brand Awareness
with launch of
comprehensive PR
campaign; developing new
programs/products
Marketing/
Development
50% of all new programs/events are repeated in subsequent
seasons.
Int. Business Process #3 Insure operational excellence
through contracting best
talent; developing innovation
Artistic 75% of first-choice talent is contracted each season.
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
Learning & Growth #3 Integrate organizational
alignment to strategic goals
with a communications plan
and milestone evaluation
dates/plan.
All/Executive 80% of each years targets successfully achieved.
Learning & Growth #3 Integrate organizational
alignment to strategic goals
All/Executive 100% awareness level of strategic goals by board, staff, and
volunteers.
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
Exhibit TN-5 FY2002 Balanced Scorecard Initiatives
Boston Lyric Opera Balanced Scorecard
Case Study Follow-up December, 2001
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
491
Exhibit TN-6 Summary of BLO FY2002 Strategic Initiatives
Customer:
Major community initiative launched: Outdoor Performance on Boston Common in
September 2002.
Artistic Planning and reprogramming discussions: Stephen Lord/Music Director, Now
how will these repertoire changes fit into the Balanced Scorecard and our goals?
Internal Business Processes:
Internal software program developed by junior staff to capture donor data (Harmonic
Convergence).
New strategic education plan implemented: On-line learning initiative; Opera Insights
program: community previews programs launched to support outdoor production;
Learning and Growth:
Internal teaching teams/skills training program (peer to peer) developed.
Financial:
Contingency planning underwayBSC helps to guide trade-offs.
