OKRs vs. Balanced Scorecard

Which Is Better for Your Organization?

Today’s business environment demands a company’s attention to efficiency and efficacy. While this makes sense, it creates challenges for businesses that they have yet to experience. However, performance management methodologies give rise to change in uncertain times and help business managers forge ahead. The good news is that there are multiple options available from which companies can select. Carefully evaluating your needs is a great way to kick off the process in deciding which performance management system you may deploy.

The diverse management tools available support the efforts of teams from the top down in any organization. In this article, we examine two models that assist in this capacity: OKRs and the Balanced Scorecard.

OKRs vs Balanced Scoreboard

Let’s begin why learning more about the Balanced Scorecard first:

What is the balanced scorecard?

The Balanced Scorecard (BSC) links projects and processes together in a way that measures performance from four different perspectives. It combines elements of strategy such as milestones and project completion as opposed to OKRs which focus on operational efforts.

The BSC offers leeway and flexibility to teams that use it. It encourages accountability and assigns teamwork evenly. With the Balanced Scorecard managers can:

  • unify projects with objectives
  • evaluate KPS in a qualitative format
  • adjust the plan as needed

Companies that use the BSC appreciate its overall approach to strategy. The most significant disadvantage of the BSC is the buy-in must occur across the entire organization, or its efficacy diminishes and never takes off companywide.

What are Objectives and Key Results?

The Objectives and Key Results (OKRs) framework seeks to establish a few goals, typically between three and five and then assigns the same number of objectives to measure and analyze performance. Every task and goal requires teams to quantify their results. The goals you choose to prioritize are up to you.

OKRs are hierarchical. Employees set the first level of goals and progress upward through the ranks. The idea is that when employees achieve their goals then managers achieve theirs from bottom up.

In practice, OKRs measure performance by percentage with the maximum level of performance being 100. So, for example, if you have to ship 80 orders in a month, but you could only send 60, then your return is 75 percent. Consistent performance rewards tie in with increased compensation, benefits, and bonuses for workers who consistently produce high-quality work.

What are the main differences between the BSC and OKRs?

As you can see, both frameworks have several similarities. However, there are characteristic differences between the two styles. Here are a few ways in which the BSC and OKR differ.

Results clarification

The BSC is a little better at conveying results. Some managers find the results to be more accurate among BSC-operated projects. When it’s easier to read objectives, it may be more conducive to managing projects. Plus, it allows you to take insight and put it into action after recognizing the opportunities available.

Measurement cadence

OKR performance reviews occur more frequently. BSC functions on an annual review basis. OKRs work weekly, monthly, and quarterly, in addition to annually. Due to our rapidly changing environment, OKRs make sense for today’s needs. Doing so give organizations the chance to correct its course before going too far ahead in the opposite direction.

Implementation reach

OKRs, by nature, implement tactics in both breadth and depth across an entire organization. OKRs give teams more flexibility in designing their objectives. This allowance provides them with stability in terms of engagement and participation. BSC focuses on top-down leadership styles which are bit counter-intuitive for younger companies and some industries.

Compensation

OKRs do not link themselves to compensation amounts directly. They focus on performance and excellence instead. While companies that use OKRs reward high performers handsomely, it is done based on achieving quantifiable goals. The BSC is more traditional in the sense that it still ties performance to pay and bonuses even if only partial. 

Focus and aspiration

OKRs require companies to shift their focus to ambitious goals. In reality, it requires a willingness to fail in some ways. Instead of developing a list of practical objectives, OKRs encourage high-reaching, inspirational goals instead ones that employees know they can reach. In OKR, it’s reasonable never to reach 100 percent. Too high of a performance rating signals that the goals aren’t lofty or visionary enough.

Critical principles for implement a new framework

No matter which option you choose, there are common threads that define success. First, executive leadership must participate in a performance management system to work. When they buy-in, everyone else follows suit and adopts an approach that promotes accountability. 

Second, you must communicate the company’s ‘why’ to implement a performance management system to support your efforts. When employees understand the need for a new framework, then the process to adopt it is more fluid.

Finally, it’s essential to culturally align with the framework you choose. This decision isn’t one that managers and business owners make overnight. Instead, it takes time and patience before the implementation feels ‘natural.’

Final thoughts and considerations on the BSC and OKRs

The correct implementation of either BSCs and OKRs can transform an organization by turning planning into action. Choosing the right tool depends on the needs of your organization. However, the universal message is clear: don’t leave your strategic efforts on the backburner by putting them on the shelf. Use performance management strategies to amplify your efforts.

Consider Weekdone to accomplish your goals

Weekdone is your OKR-based solution that can help you meet your goals, strategize with your team, and implement a weekly planning session. We take it to the next level by offering easy-to-track activity options that allow your team to connect with each other across your entire organization.

Want to learn more about meeting your objectives? Check out our case studies to find out why OKRs work and how Weekdone can help you manage them more effectively.

Read more about OKRs in this free ebook

Step by Step Guide to OKRs

Step by Step Guide to OKRs

OKRs are not the easiest methodology to pick up, as countless articles and books out there would have you believe. Most books on the subject start by highlighting how they can revolutionize your company and boost productivity across your entire company, but they don’t give you much info on how to actually go about it.