The forgotten cousin of OKR that could make it 10x better
I always thought OKR was a bit pointless.
My first introduction to it was back in 2018 at Facebook. I already knew the projects I wanted to do that quarter. My manager reviewed the projects and said, “Can you frame the goals in an ‘OKR’ format?”
I googled ‘OKR’, familiarised myself with the Objective — Key Results format, and rephrased my goals following it.
It didn’t change what I was working on or how I looked at it. It’s a good framing tool to make sure you have a clear objective and measurable key results, but that’s about it. My beef with OKR:
- It doesn’t capture how my work relates to the company's goals.
- It does little in ensuring focus and maintaining alignment as a company.
- Because it doesn’t actually improve my team’s ways of working, I saw it as a pointless extra admin that brought no benefit.
Enter Balanced Scorecard.
Quick background first. You might have heard that OKR is actually based on a really old management tool from the 1970s called ‘Management by Objective’. It’s not a sexy name and nobody talked about it in the tech world, until it was framed as OKR and popularised by Google.
In the 1990s, another management tool was introduced: Balanced Scorecard.
It’s a really cool tool, and it answers all my problems with OKR above.
In a Balanced Scorecard, a company’s goal is divided into 4 quadrants: Finance, Customers, Internal Business Processes, and Learning and Growth. It’s easiest to explain this with an example, and I will use Toyota in honour of the company that first taught me this tool back in 2011.
A (traditional) company’s number one priority is to maximise its revenue and profit margin, so that’s the first goal that we will put in the Finance quadrant.
The next question is, how can Toyota maximise its revenue and profit margin? What needs to be true for the Customers to achieve this?
For example: Customers want a high-quality car with zero defects. Customers want a car that satisfies their criteria of size and price. Customers want a car that can be sold for a good price in a secondary market later.
The next question is, what kind of internal business processes need to be put in place to achieve that customer values?
For example: We need to put a robust Quality Control process, we need to create an innovation lab to design cars for different needs, and we need to create a branding and marketing team that focuses on brand value.
The last question is, what kind of hiring, training and development need to be put in place to enable our workforce to build those business processes?
For example: We need to hire more expert engineers in certain areas, we need to promote managers to head up the factories, and we need to make sure every new employee goes through a quality training process.
In a Balanced Scorecard, these strategic objectives will be formatted like this. The arrows show the relationships between each objective — there’s no initiative that doesn’t contribute to the higher-level objective.
Next, each bubble (which is called ‘strategic objectives’) needs to be accompanied by a way to measure, and a target. We’ll take the bubbles related to defect/quality as an example.
Different departments will be responsible for different strategic objectives and moving their metrics, but everything is leading up to the same vision and outcome.
The elements in the table above are actually very similar to an OKR format, but Balanced Scorecard ensures alignment and focus. Think of Balanced Scorecard as a systematic way of translating the company goals into the team’s OKRs.
Putting Balanced Scorecard into practice
Adapting the quadrants to your company
Putting Finance at the top quadrant might not be the right thing for your company. You might be focusing more on user growth, or on the social/environmental impact. You do you — tweak the quadrants to suit your business model and stage.
In your quarterly planning process
Balanced Scorecard is a living document. The leadership team should evaluate and map out the strategic objectives on a regular basis — monthly, quarterly, whatever works— with a focus on the bottom two quadrants, Internal Business Process and Learning & Growth. The Finance quadrant is less likely to change much. It’s important to keep a lookout for the Customer quadrant to make sure we’re always on top of the customer trend.
Once the strategic objectives, measurements, and targets are agreed upon, they will be communicated to the team, who can then propose plans and initiatives to achieve them.
In business review
Most companies have a certain way to do a business review, either weekly or monthly. The business review process will evaluate two things:
- Our progress in building the initiatives that will allow us to move our leading metrics
- How our lagging metrics are performing
Initiatives that aren’t proven to bring the impact we expect to the lagging metrics should be killed or improved.
Genuine question: What do you think?
I love Balanced Scorecard, but nobody my age seems to know about it. I’ve not heard of any startups using it. Why is that? Do you think Balanced Scorecard can help your company’s alignment? Let me know what you think!
(Or maybe we just need a cooler name for it. And a giant tech company endorsing it, obviously.)
👋 Hi, I’m Debbie. I’ve been building products and solving customer problems in tech companies for over a decade. I write about how a PM can bring 10x value to their company, not just 10% improvement. Stay ahead of the game and get insights delivered straight to your inbox — subscribe to my newsletter today!
