Whether you are running a small business or a large enterprise, ensuring its growth is your primary concern. Setting clear objectives is the first and most crucial step you need to take in this direction. There are several goal-setting framework options that business leaders can choose from.
OKR and Balanced Scorecard are two such sophisticated goal-setting frameworks. They help organizations create and fulfil goals more quickly, effectively, and efficiently.
Yet finding the proper framework to improve business efficiency and efficacy is quite challenging.
Are you struggling to choose between these two frameworks? Read on to learn about the key aspects of each framework to understand which is better.
Difference between OKRs vs Balanced Scorecard
Despite having many things in common, both the tools have a unique approach to goal-setting. This results in differences between OKR vs Balanced Scorecard. Given below is a listing of the most important of these differences.
Balanced Scorecard forces companies to set objectives and create a strategic map to fulfil them. The tool uses two leading and lagging indicators to measure progress. These indicators are Financial, Customer, Internal Processes, and Learning & Growth.
A balanced Scorecard focuses more on the strategic plan of an organization. It defines the expectations from the set goals without pushing the teams to exceed the same. It thus makes defining success easier for companies.
OKRs are more streamlined and help companies shift their focus to more ambitious goals. It encourages creating high-reaching and inspirational objectives with a willingness to fail. This promotes creativity and enhances the sense of goal-ownership among teams and employees.
The Balanced Scorecard follows an annual review of the goals that it creates. It breaks down more complex goals into smaller ones to make them easier to achieve.
In the case of OKRs, the reviews take place every quarter or even every month. This is apart from the annual reviews done by organizations. They help organizations to stay on track in the rapidly changing business environment.
The goal-setting in the Balanced Scorecard follows a top-down cascading approach. Business leaders handle the task of designing high-level organizational objectives. These objectives are then passed down across different levels of the organization. This approach gives less ownership of goals to teams and employees.
OKRs follow a bottom-up and sideways approach to goal creation. This gives teams and employees the freedom to choose their goals or have a greater say in the process. This improves organizational stability by increasing engagement and participation across all levels.
5Relation with compensation
A balanced Scorecard is more traditional as it is linked with performance. It uses performance and excellence as the basis to provide yearly salary growth and incentives.
“Annual performance reviews are costly, exhausting, and mostly futile.” John Doerr
OKRs do not link performance with compensation but focus on handsomely rewarding high performers. The tool rewards performance based on the ability to achieve quantifiable goals. They thus promote a culture of growth based on efficiency and competence.
6Level of transparency
The yearly reviews of Balanced Scorecards make it less transparent. Moreover, the cascading approach of this tool further hinders transparency. It also prevents teams and individuals from becoming aware of their interdependencies.
OKRs focus on goal alignment across the breadth and depth of the organization. Moreover, the greater frequency of reviewing objectives promotes transparency in goal-setting. It also helps to highlight the interdependencies between teams and employees, enhancing growth.
Similarities between OKR vs Balanced Scorecard
Most people view OKR vs. Balance Scorecard only as competing for goal-setting frameworks. While the two frameworks are different, they are also essentially designed for the same purpose. This naturally makes them similar in various ways. Following is a list of similarities between OKR vs. Balanced Scorecard.
OKRs and Balanced Scorecards both help enhance business growth and efficiency. They seek inspiration from an organization’s desire and capacity to change and succeed.
Both these tools help organizations to set and achieve high-level objectives. They make it possible for companies to create ambitious goals that may take years to achieve. They also make it easier to set broad objectives for fulfilling these objectives.
OKRs and Balance Scorecard rely greatly on leadership buy-in to be genuinely effective. They need a compelling reason to get active support and participation from leaders, sponsors, and the people using them.
Both OKR and Balanced Scorecard have a profound impact on organizational culture. They help promote the concepts of measurement and accountability, which helps create a culture of growth and transparency.
OKR and Balanced Scorecard rely on high levels of employee motivation to succeed. It is vital to nurture and regularly evaluate the goals set using these tools to get the desired results.
Where using OKRs is most suitable?
“By clearing the line of sight to everyone’s objectives, OKRs expose redundant efforts and save time and money.” John Doerr
OKR has become a preferred goal-setting framework among management in diverse organizations. However, there are some specific situations where using OKR is a more suitable option. Some such cases include the following.
- They are a better choice for companies that need to track their goals constantly. They also provide regular updates about their progress to help teams stay fully aligned.
- OKRs prove quite effective in keeping teams informed of the company’s top priorities. This helps to enhance employee engagement besides promoting transparency.
- OKRs are a preferred choice for organizations that need to boost the morale of their teams. The frequent reviews make the teams and employees aware of the real impact they make on business growth.
- Using OKRs as goal-setting tools enhances team satisfaction by making them feel involved in the process. The weekly check-ins to assess progress fills them with a sense of ownership besides help them stay focused.
Where using a Balanced Scorecard is a better option?
Using the Balanced Scorecard as a goal-setting framework provides greater scope and flexibility. Its approach to strategy makes the tool much preferred by organizations in the following situations.
- The Balanced Scorecard is the right choice when companies do not need to worry too much about processes and weekly engagement. This is generally the case in organizations having highly engaged and motivated teams.
- A Balanced Scorecard is also an excellent option for companies that want to highlight their end goals. The tools prove highly effective in helping teams and employees envision what the company aims to achieve.
- A balanced Scorecard framework is more suitable for creating ambitious long-term goals. The goals are set with the understanding that they may take several years to be fulfilled.
- With annual review, the framework provides greater scope for setting more significant objectives.
Is it possible to use OKR and Balanced Scorecard together?
“The definition of OKRs as a “critical thinking framework” is resonating even with organizations that do not formally adopt OKRs as their goal-setting model.” Ben Lamorte
Learning the above details about OKR vs. Balanced Scorecard makes business leaders wonder if they can use them together. The good news is that using these two tools can work in harmony for enhanced business growth.
A comparative analysis of both these tools clarifies that each can learn from and complement the other. Business leaders need to focus on integrating the advantages offered by each framework. This enables them to enjoy phenomenal outcomes for organizational efficiency and success.
Using the strategy map approach of Balanced Scorecard in OKRs enhances the focus and agility of organizations.
Similarly, a Balanced Scorecard can benefit by integrating the frequent review feature of OKRs. This helps make the Balanced Scorecard more relevant to the changing market dynamics.
There are several other ways in which companies can blend the best aspects of these tools. It will provide them with a more effective and successful way of setting objectives and defining the right strategies to fulfil them.
When it comes to choosing between OKR vs Balanced Scorecard, both are suitable for different workplace scenarios. Both these tools are unique in their ways and cannot replace the other.
So, business leaders need to understand the organization’s goal-setting needs to make the right choice. They also need to factor in the engagement needs, review frequency, and objective clarity before choosing a tool.