The Balanced Scorecard, Strategy Maps, and OKRs

Bottom Line:

If you’re working with OKRs, you may find it useful to think about the Balanced Scorecard perspectives when setting OKRs. Which Balanced Scorecard perspectives, or categories are you supporting with your current OKRs? Do you need to rebalance your efforts? Who and which departments are supporting each Balanced Scorecard perspective, i.e. Financial, Customer, Internal Business Process, and Learning & Growth perspectives?

If you use Balanced Scorecards, or if you have used Strategy Maps to define your strategy and execution planning, OKRs may prove a useful way to take your operational excellence to the next level, and improve the way in which you align the entire organisation behind your strategy.

The Balanced Scorecard emerged in the 90s as a popular strategic framework to translate strategic intent into results. Developed by Robert S. Kaplan and David P. Norton, the Balanced Scorecard remains a very influential strategic management framework.

In the Balanced Scorecard world view, company performance is categorised in four horizontal ‘Perspectives’: Financial, Customer, Internal Business Process, and Learning & Growth.

Kaplan and Norton later introduced the concept of the Strategy Map, to aid in the implementation and execution around the Balanced Scorecard methodology.

Balanced Scorecard Strategy Map

The Strategy Map visualises four key areas of business performance, which are referred to as Perspectives (Financial, Customer, Internal Business Process, and Learning & Growth). Within each Perspective, companies set Objectives, and define how each Objective supports or is dependent on other Objectives, indicated by arrow connectors between the Objectives. Objectives have Measures and Targets, which define the current and desired progress for each Objective.

In the example shown above, Shareholder Value is an Objective within the Financial perspective, supported by two Customer Objectives, which in turn is supported by three Internal Business Process Objectives, two of which are supported by a Learning & Growth Objective.

The Balanced Scorecard and particularly Strategy Maps share some striking similarities with Objectives and Key Results, and it seems reasonable to assume that one was at least partly ‘inspired’ by the other.

Cascading OKRs. Source: Gtmhub

Balanced Scorecards and Strategy Maps have evolved since the 1990s, and there are now dozens of industry specific interpretations of both the Balanced Scorecard template and the Strategy Map. A simple Google Image search will reveal the most popular.

Although the Balanced Scorecard is no longer the shiny new thing, ‘Balanced Scorecard’ still outranks ‘OKRs’ on Google by several orders of magnitude. In the visualisation from Google Trends below, that’s OKRs in blue, hugging the X-axis.

Google Trends visualisation of ‘Balanced Scorecard’ and ‘OKRs’ web searches. Source: Google Trends

Another way of illustrating the lasting impact of the Balanced Scorecard methodology is to look at job postings. On LinkedIn, a recent search for ‘OKRs’ for the US yielded 47 results, whereas a search for ‘Balanced Scorecard’ yielded 313 results.

The Balanced Scorecard is a strategy framework which surfaces what matters, and forces a business to define set Objectives and define Measures of progress in four key areas, known as Perspectives: Financial, Customer, Internal Business Process, and Learning & Growth.

OKRs are a way of aligning everyone in an organisation with company level goals, and overall mission.

Strategy Maps, an evolution on the Balanced Scorecard resembles OKRs in the way that they seek to illustrate the relationship and interdependence between Objectives across the organisation.

In the OKR methodology, the Objectives tend to emerge from a combination of top-down, bottom-up, and general negotiation of objectives between teams and individuals. Sometimes this means that OKRs will concentrate along one or two of categories defined in the Balanced Scorecard framework.

Organisations using OKRs may benefit from sanity checking their OKRs for excessive concentration, and may renegotiate existing OKRs, or introduce additional OKRs to ensure that the organisation is taking a balanced approach to its performance by referring to the Balanced Scorecard and Strategy Maps frameworks.

Organisations using the Balanced Scorecard framework may find that introducing OKRs will increase its operational agility and improve the ways in which employees convert the strategic intent laid out in the Balanced Scorecard and Strategy Maps into results.