I was talking with a client the other day about adding OKRs to their BSC system and she stopped me in mid-sentence. “Wait a minute,” she said with a skeptical smile. “Are OKRs just KPIs with a new name so that you consultants have something new to sell?”
To her point, there is considerable overlap between these different methodologies. They are all designed for:
- Setting goals
- Creating alignment
- Measuring progress
- Improving performance
It is a bit frustrating to have competing frameworks that are so similar and then have advocates on social media arguing strongly for their favorite as if there are huge differences. But there is value in understanding the differences so that you can take advantages of the strengths of each. First, let me define each and then I’ll talk through the strengths and weaknesses of each.
Balanced Scorecard (BSC)
The BSC is a strategic planning and management system that organizations use to communicate strategy, create alignment, prioritize, and improve strategic performance across different perspectives. Objectives and measures are the heart of the system. It has broader applications on the planning side, but for this blog I will focus on the measurement aspect.
Key Performance Indictors (KPI)
KPIs are indicators of success toward a desired performance result. KPIs could be thought of as synonymous with the measures in a BSC, as good KPIs are normally indicative of achieving strategic objectives.
Objectives and Key Results (OKR)
Objectives and Key Results (OKR) are used by organizations and individuals for collaboratively setting ambitious goals, tracking progress, and aligning action with an organization’s strategy to achieve measurable results. OKRs tend to be written in a SMART (specific, measurable, attainable, relevant, and time-bound) format, meaning the Key Results include a targeted level of performance and a milestone.
Strengths of these frameworks
The short-hand explanation is that BSC is a framework to map out and manage strategy. Normally used for an organization, a good analogy on the personal side is to use BSC to visualize my cause-effect strategy for healthy living. KPIs are continuous long-term measurements, so one of ongoing measures of healthiness would be my weight. And OKRs are for individual short-term goal setting, so this quarter I might try to reduce my weight by 7lbs/3kg by reducing carb intake by 25% and increasing aerobic exercise by 60 minutes per week.
BSC and KPIs tend to be tracked continuously while OKRs tend to be set every quarter. BSC and KPIs emphasize alignment / line of sight while OKRs emphasize agility and autonomy. BSC/KPIs tend to be better for long-term strategy execution and continuous improvement while OKRs are great for individual goal setting, accountability, and action.
Weaknesses of these frameworks
In terms of weaknesses, BSC/KPI are often accused of being too static / sluggish and difficult to work into the day-to-day rhythm of a typical employee’s day. On the other hand, OKRs often have strategy misalignment/line-of-sight issues and can be very difficult to implement in a disciplined manner, which leads to a host of problems, such as OKRs that are really glorified to-do lists, long laundry lists of trivial measures, and a “set it and forget it” mentality.
To overcome these weaknesses, you can use them together or choose one and learn from the other. Some of our clients use BSC / KPIs but try to infuse agile/OKR thinking into their individual level KPI development and day-to-day execution. Then some OKR companies create “shared” OKRs at various organizational and strategic levels that look an awful lot like a BSC.
If you would like to learn more about any of these terms, you might consider one of our professional certification programs:
Objectives and Key Results Professional (OKR-P)
David Wilsey is the Chief Executive Officer with the Balanced Scorecard Institute and co-author of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.