How do you track your performance? How do you measure the completion of your goals? OKRs and Balanced scorecard are management approaches that can help you get answers. Explore how OKRs and BSC are similar and in what ways they differ.
OKRs and Balanced scorecard (BSC) are both strategic management tools designed to help you to define and achieve your goals. Besides the ways the two approaches differ from one another, they can be complementary and beneficial to achieving results. Understanding the driving forces behind each of the two approaches will help you apply their full power to your advantage.
Three of the key distinguishing factors when talking OKRs vs. Balanced scorecard relate to the questions “What defines both?”, “What are their review cycles?” and “How are both related to performance reviews on an organizational level?”.
Let's explore them in more detail.
There are three underlined characteristics of the BSC at the root of its embrace by corporate strategic management since its appearance in the early 1990s. These include its focus on the organizational strategic goals and measuring their execution, as well as the four perspectives it takes into account when identifying the objectives and their cause-and-effect relationship - financial, customer, internal, and learning and growth.
OKRs also aims to connect the strategic vision to its execution and highlight the importance of tracking whether you're moving in the right direction. However, an essential aspect of the OKRs framework is the emphasis on ongoing priorities and answering the questions “Are we doing the right thing?” and “How do we know if we are succeeding or not?”
While transparency and alignment with the organizational goals are common traits to both, strategic management using the BSC takes a top-down approach when defining goals. Whereas OKRs promote a less cascading manner of setting goals. Ideally, high-level OKRs are defined on a strategic level, and teams are encouraged to develop their own OKRs contributing to the strategic ones.
Let’s start with the similarities between a Balanced scorecard and OKRs.
Balanced Scorecard structure to performance management vs. OKR goal-setting framework
One of the leading causes for failing OKR and Balanced scorecard adoption is their too-literal interpretation as performance indicators. While both employ measures to indicate how well you achieve your goals, that data should be used to demonstrate the real value of your actions and not simply as KPIs.
In other words, instead of measuring the hours people spend in coaching and training to improve their soft skills, aim to track customer satisfaction with the service. Has it improved? Are there any emerging challenges among your collaborators? How to improve?
Good KPIs are essential to the success of Balanced scorecard strategies, however, KPIs can oftentimes be very output oriented. Alternatively, Key Results in OKR should measure the outcomes you seek to achieve that would bring you closer to your organizational goals.
Regardless of the strategic approach you take at your organization, it’s critical to review and discuss how well you are executing the laid-out action plan.
While company OKRs can be developed on a quarterly or annual basis, they are reviewed throughout the entire strategy delivery cycle. The reviews can be held during regular meetings where findings are communicated without losing momentum.
A BSC strategy map is normally developed for a minimum of one year, so the review cycle is annual. Not discussing the pace of the strategy delivery could threaten the success of the entire strategy completion.
Together, OKRs and BSCs can help you create a global strategic map of your goals (BSC) and narrow down those that are most important (OKRs). Visualizing your strategy map using OKRs ensures global transparency and invites feedback from all business entities.
By visualizing the strategy and making it fully transparent, you ensure that company and team OKRs are constantly aligned with the organizational vision. Additionally, the frequent OKR review cycles make all necessary priority changes prominent, keeping your strategy up-to-date and relevant.
Senior-level management can benefit most from OKR goal-setting in conjunction with a Balanced scorecard strategy map. Essentially, OKRs ensure that goals and execution activities are aligned. Meanwhile, Key Results make achieving the objectives easier. You can, therefore, ensure alignment at all times between all entities that influence each other and always consider their impact.
for outcome-driven enterprise agility.