Balance Scorecard Vs. Objectives and Key Results - BSC Vs. OKR

Both are focused on objectives — broad goals designed to propel the organization forward — and metrics (called Key Results in the OKRs field and measures in the BSC) that gauge your success in achieving the objective.

The Balanced Scorecard is a strategic performance measurement and management framework developed by Robert Kaplan and David Norton. Its objective is to translate an organization’s mission and vision (implement strategy) into actual (operational) actions (strategic planning)(Performance measures).

| If you Can't measure it, you can't manage it.

Used for managing strategy - The balanced scorecard (BSC) is a strategic planning and management system that organizations use to:

- Communicate what they are trying to accomplish
- Align the day-to-day work that everyone is doing with strategy
- Prioritize projects, products, and services
- Measure and monitor progress towards strategic targets


The system connects the dots between big picture strategy elements such as mission (our purpose), vision (what we aspire for), core values (what we believe in), strategic focus areas (themes, results and/or goals) and the more operational elements such as objectives (continuous improvement activities), measures (or key performance indicators, or KPIs, which track strategic performance), targets (our desired level of performance), and initiatives (projects that help you reach your targets).

The balance within:

As the name suggests, the equilibrium or balance is an important principle in the balanced scorecard model. There must be a balance between the short-term and the long-term objectives, financial and non-financial criteria, leading and lagging indicators and external and internal perspectives. It is about cohesion in which an improvement in one perspective must not be an obstacle in another perspective.
This cohesion is reflected in the model through the mutually connected arrows between the four perspectives viz:

1) Financial: (How do we look to our shareholders) often renamed Stewardship or other more appropriate name in the public sector, this perspective views organizational financial performance and the use of financial resources. Examples of performance measures would include profitability, Return on Investment, Revenue growth etc.

2) Customer/Stakeholder: (How do customers see us) this perspective views organizational performance from the point of view the customer or other key stakeholders that the organization is designed to serve. Examples of performance measures would include customer satisfaction, retention, acquisition and market share.

3) Internal Process: (What must we excel at) views organizational performance through the lenses of the quality and efficiency related to our product or services or other key business processes. This would cover three business process area viz.
i) Innovation identifying the needs of the customers;
ii) Operations viz supplementing financial measures with quality, technological capability and redirecting cycle time to build long term strategy and
iii) Post sale services involves adding value to the product by getting feedback

4) Organizational Capacity (originally called Learning and Growth): (Can we continue to improve and create value) views organizational performance through the lenses of human capital, infrastructure, technology, culture and other capacities that are key to breakthrough performance. It covers categories like Employee skill sets, information system capabilities, Motivation and organisational alignment.

While financial perspective looks at the past, Customer, Internal business process and Learning and growth focus on the future.

Based on an analysis of its internal strengths and weaknesses and external opportunities and threats, the firm determines critical success factors (CSF's) for each of the four perspectives. Each factor is assigned a measurement unit. Linking the four scorecard perspectives eith the firm's strategy requires the use of three principles:

1) Cause and effect relationship - It can be hypothesized using if-then statements. Example - If the firm improves its training program; its business process will be improved, it will boost customer satisfaction; greater customer satisfaction will increase sales, increased sales will improve financial results.

2) Outcome measures (OM) and performance drivers (PD) - OM is Historical or lagging indicator and PD is leading indicator.

3) Links to financial measures.

The implementation of the Balanced Scorecard can be carried out in different manners.

Broadly, this could include the following steps:

- Set up a vision, mission and strategic objectives.
- Perform a stakeholder analysis to gauge the expectations of customers and shareholders.
- Make an inventory of the critical success factors
- Translate strategic objectives into (personal) goals
- Set up key performance indicators to measure the objectives
- Determine the values for the objectives that are to be achieve
- Translate the objectives into operational activities.

When it was developed it was used primarily as a measurement system – helping organizations balance financial and non-financial indicators. It has evolved over the years, and we’ve seen the creation of Strategy Maps, and the linkage of the Scorecard to risk, budgeting, and other key facets of the organization.

Both are subject to 'interpretation' by practitioners and academics." Executes are less interested in academic understanding of the concepts, but more in solving real problems, doesn't matter under what buzz word the solution comes.

OKR (Objectives & Key Results) has risen to prominence over the last 10 years The development of OKRs is generally attributed to Andy Grove the "Father of OKRs", who introduced the approach to Intel during his tenure there and documented this in his 1983 book High Output Management. Google's success in it's implementation have prompted start ups to use OKR's.

OKRs suggest a goal setting approach with ambitious, qualitative Objectives that are made measurable with the help of Key Results.

An Objective is simply what is to be achieved, no more and no less. By definition, objectives are significant, concrete, action-oriented, and (ideally) inspirational. When properly designed and deployed, they’re a vaccine against fuzzy thinking—and fuzzy execution. Qualitative descriptions of what you want to achieve.

Key Results benchmark and monitor how we get to the objective. Effective KRs are specific and time-bound, aggressive yet realistic. Most of all, they are measurable and verifiable. You either meet a key result’s requirements or you don’t; there is no gray area, no room for doubt. At the end of the designated period, typically a quarter, a regular check is done and grade the key results as fulfilled or not.
Where an objective can be long-lived, rolled over for a year or longer, key results evolve as the work progresses. Once they are all completed, the objective is necessarily achieved. KR's are a set of metrics (quantitative) that measure your progress towards the Objective

| “If it does not have a number, it is not a Key Result.”

OKRs can be two things, committed or aspirational.
Committed ones are like their name suggests—commitments. When graded at the end of a cycle, a committed OKR is expected to have a passing grade.
Aspirational ones, on-the-other-hand, are sometimes called stretch goals or "moonshots." The pathway to an aspirational OKR is expected to be forged since no one else has gotten there before. They also may be long-term and live beyond an OKR cycle or even be transferred between team members to stretch employee engagement.

An advantage of OKR is, the shorter cadence. As things are changing faster than ever, it’s vital we have metrics that allow us to be agile in our approach.

One common reason for weak OKR results is people's tendency to confuse achieving the Key Result(s) with achieving the Objective. Instead of chasing the Objective, they chase the Key Results. That's what's called "surrogation" - confusing what's being measured (the 'O') with the metric being used ( the KRs). OKR's are not task lists, there should not be too many objectives, and it should not be in isolation but aligned.