OKRs vs the Balanced Scorecard

Comparing Strategy Execution Frameworks : Two Frameworks, One Challenge

In our previous article, we argued that comparing OKRs to KPIs represents a category error—akin to comparing a vehicle with a speedometer. The more meaningful comparison, we suggested, is between OKRs and the Balanced Scorecard: two genuine strategy execution frameworks that occupy the same conceptual space and address the same fundamental challenge for the firm.

That challenge is as old as strategic planning itself: how to translate high-level strategic intent into aligned, measurable action throughout the firm. Research consistently demonstrates that the majority of strategies fail not in formulation but in execution. The gap between boardroom aspiration and frontline reality has been the graveyard of countless strategic initiatives.

Both OKRs and the Balanced Scorecard emerged as responses to this execution gap. Both provide structured approaches for setting objectives, measuring progress, and aligning the firm's effort. Both have been adopted by thousands of firms worldwide. And both have passionate advocates who argue for the superiority of their preferred approach.

In this article, we shall examine both frameworks in depth, compare their philosophies and mechanics, and offer guidance on which might be better suited to different firms’ contexts. This is not a competition to declare a winner; both frameworks have proven their worth across diverse settings. Instead, it is an analysis to help firms make informed choices about their strategy execution approach.

The Balanced Scorecard: Origins and Philosophy

Robert Kaplan and David Norton introduced the Balanced Scorecard in a 1992 Harvard Business Review article entitled "The Balanced Scorecard—Measures That Drive Performance." The framework emerged from a year-long research project involving twelve companies at the leading edge of performance measurement.

Kaplan and Norton's central insight was that traditional financial measures, whilst important, were insufficient for managing modern firms. Financial metrics are lagging indicators; they tell you what has already happened. To manage effectively, firms need leading indicators that predict future performance and provide insight into the drivers of that performance.

The Balanced Scorecard addressed this limitation by organising objectives and measures into four perspectives:

Financial Perspective: How do we look to shareholders? This perspective retains traditional financial measures such as revenue growth, profitability, and return on capital.

Customer Perspective: How do customers see us? This perspective includes measures of customer satisfaction, retention, acquisition, and market share.

Internal Business Process Perspective: What must we excel at? This perspective focuses on the critical processes that drive customer and financial outcomes.

Learning and Growth Perspective: Can we continue to improve and create value? This perspective addresses the firm's infrastructure—people, systems, and culture—that enables performance in the other perspectives.

The power of the Balanced Scorecard lies not merely in its four perspectives but in the cause-and-effect relationships among them. Investments in learning and growth drive improvements in internal processes, which drive better customer outcomes, which ultimately drive financial results. This logic chain, often visualised as a strategy map, provides a coherent narrative of how the firm creates value.

Within each perspective, firms establish objectives (what they want to achieve), measures (how they will track progress), targets (the level of performance they seek), and initiatives (the actions they will take). This comprehensive structure ensures that strategy is translated into specific, measurable commitments at every level of the firm.

OKRs: Origins and Philosophy

As we explored in earlier articles, Objectives and Key Results emerged from Andy Grove's work at Intel during the 1970s and were subsequently popularised when John Doerr introduced them to Google in 1999. The framework has since been adopted by numerous technology companies and, increasingly, by firms across all sectors.

The OKR philosophy differs from the Balanced Scorecard in several important respects.

Simplicity: OKRs employ a deliberately simple structure—Objectives (qualitative statements of what you want to achieve) and Key Results (quantitative measures of success). There are no prescribed perspectives, no strategy maps, no formal initiative tracking. This simplicity is intentional; it reduces overhead and enables rapid adoption.

Ambition: OKRs embrace stretch goals. Achieving 70% of an ambitious Key Result is often considered success, whereas the Balanced Scorecard typically employs targets that are expected to be fully achieved. This philosophical difference has significant cultural implications.

Cadence: OKRs typically operate on quarterly cycles with weekly check-ins, whereas Balanced Scorecards are often (though not always) annual constructs with monthly or quarterly reviews. The shorter OKR cycle enables more rapid adaptation to changing circumstances.

Transparency: OKRs advocate for radical transparency, with all OKRs visible across the firm. The Balanced Scorecard does not preclude transparency, but it does not emphasise it to the same degree.

Decoupling from compensation: OKR practitioners generally recommend separating OKRs from direct compensation decisions, arguing that linking stretch goals to bonuses creates perverse incentives. The Balanced Scorecard is often (though not universally) linked to performance-based compensation.

Structural Comparison

Understanding the structural differences between the two frameworks illuminates their respective strengths and limitations.

Comprehensiveness versus Focus

The Balanced Scorecard's four perspectives ensure comprehensive coverage of strategic concerns. An firm cannot focus exclusively on financial outcomes whilst neglecting customers, processes, or firm's capability. The framework forces balance.

OKRs, by contrast, encourage ruthless focus. Firms typically set three to five Objectives per quarter, each with two to five Key Results. This limitation forces difficult prioritisation decisions but risks neglecting important areas that do not make the quarterly cut.

Stability versus Agility

The Balanced Scorecard provides a stable strategic architecture. The four perspectives remain constant; objectives within them may evolve, but the overall structure endures. This stability supports long-term strategic consistency.

OKRs are inherently more dynamic. The quarterly cycle means that objectives can shift significantly from one period to the next. This agility enables rapid response to changing circumstances but risks strategic whiplash if not carefully managed.

Cause-and-Effect versus Outcome Focus

The Balanced Scorecard's strategy map explicitly models cause-and-effect relationships. Leaders must articulate how investments in people and systems drive process improvements, which drive customer outcomes, which drive financial results. This discipline forces strategic clarity.

OKRs focus on outcomes without requiring explicit causal modelling. An firm might set a Key Result to increase customer satisfaction without formally articulating the process improvements that will drive that outcome. This simplicity enables speed but may sacrifice strategic coherence.

Cascading versus Alignment

Both frameworks address the challenge of aligning effort across firm's levels, but they approach it differently.

The Balanced Scorecard typically cascades downward. Corporate objectives inform business unit scorecards, which inform departmental scorecards, which inform individual performance plans. This cascading ensures alignment but can become bureaucratic and slow.

OKRs encourage bidirectional alignment. Whilst firm's OKRs inform team OKRs, the process involves dialogue and co-creation rather than dictation. Teams propose OKRs that contribute to firm's objectives, and these proposals are negotiated upward. This approach is more engaging but requires more coordination.

Cultural Implications

The choice between OKRs and the Balanced Scorecard has significant cultural implications that firms must consider.

Risk Tolerance and Ambition

OKRs, with their emphasis on stretch goals and acceptance of partial achievement, suit cultures that embrace risk-taking and view failure as learning. The expectation that not all Key Results will be fully achieved creates psychological safety for ambitious goal-setting.

The Balanced Scorecard, with its expectation of target achievement, suits cultures that value reliability and predictability. Targets are set to be achieved, and failure to achieve them is a matter of concern.

Neither culture is inherently superior; the question is which aligns with the firm's values, industry context, and strategic situation.

Transparency and Trust

OKRs' radical transparency requires a high-trust culture. When everyone can see everyone else's objectives and progress, there must be trust that this visibility will be used constructively rather than punitively. In low-trust environments, transparency can become a source of anxiety and defensive behaviour.

The Balanced Scorecard does not require the same degree of transparency and may be more suitable for firms building toward higher trust.

Pace and Adaptability

The quarterly OKR cycle suits firms operating in fast-moving environments where priorities shift rapidly. Technology companies, startups, and firms undergoing transformation often find this cadence appropriate.

The Balanced Scorecard's more stable structure suits firms in steadier environments where strategic priorities evolve gradually. Established companies in mature industries may find annual or semi-annual review cycles sufficient.

Practical Considerations

Beyond philosophy and structure, several practical considerations influence the choice between frameworks.

Firm Maturity

The Balanced Scorecard's comprehensive structure provides guardrails that can be valuable for firms new to formal strategy execution. The four perspectives ensure nothing important is overlooked; the strategy map forces strategic clarity; the structured cascading process ensures alignment.

OKRs' simplicity can be both a strength and a weakness. Mature firms with strong strategic muscles may find the simplicity liberating. Less mature firms may find that simplicity leaves them without sufficient guidance.

Implementation Complexity

The Balanced Scorecard requires significant implementation effort. Developing strategy maps, establishing measures across four perspectives, and cascading scorecards throughout the firm is a substantial undertaking. Many firms engage consultants and invest months in initial implementation.

OKRs can be implemented more quickly. The simple structure means that teams can begin setting OKRs with minimal training. However, this ease of initial adoption can be misleading; becoming proficient with OKRs—setting truly ambitious yet achievable objectives, writing measurable Key Results, maintaining discipline through weekly check-ins—takes time.

Tool Support

Both frameworks are supported by dedicated software tools, though the markets differ. Balanced Scorecard software tends toward comprehensive enterprise platforms with strategy mapping, cascading, and reporting capabilities. OKR software tends toward lighter-weight, more collaborative tools with emphasis on transparency and check-ins.

Firms should consider their existing technology landscape and preferences when evaluating frameworks.

Integration and Hybrid Approaches

It is worth noting that OKRs and the Balanced Scorecard are not mutually exclusive. Some firms employ hybrid approaches that draw upon the strengths of both.

One common pattern uses the Balanced Scorecard as the strategic architecture—providing the four perspectives, strategy map, and long-term objectives—whilst employing OKRs as the execution mechanism for quarterly priorities. In this model, quarterly OKRs are derived from Balanced Scorecard objectives, ensuring that short-term focus remains aligned with long-term strategy.

Another pattern uses the Balanced Scorecard at corporate and business unit levels, where strategic stability is valued, whilst employing OKRs at team and individual levels, where agility and engagement are prioritised.

These hybrid approaches can capture the benefits of both frameworks, though they add complexity and require careful integration to avoid confusion and redundancy.

Guidance for Choosing

Given the foregoing analysis, how should a firm choose between OKRs and the Balanced Scorecard? Several questions can guide the decision.

What is your strategic context? Firms in fast-moving, uncertain environments may favour OKRs' agility. Those in stable environments with long-term strategic horizons may favour the Balanced Scorecard's stability.

What is your cultural starting point? Firms with high-trust, risk-tolerant cultures may embrace OKRs' transparency and stretch goals. Those with more cautious cultures may find the Balanced Scorecard's structure more comfortable.

What is your firm's maturity? Firms new to formal strategy execution may benefit from the Balanced Scorecard's comprehensive guidance. Those with established strategic capabilities may prefer OKRs' simplicity.

What are your implementation constraints? Firms with limited time and resources for implementation may favour OKRs' lighter footprint. Those willing to invest in comprehensive implementation may prefer the Balanced Scorecard.

What does your workforce expect? Younger, technology-oriented workforces often respond well to OKRs' transparency and dynamism. More traditional workforces may prefer the Balanced Scorecard's familiar structure.

There is no universally correct answer. The best framework is the one that fits the firm's context, culture, and capabilities—and that leaders will actually use consistently.

Conclusion: Frameworks in Service of Execution

The comparison between OKRs and the Balanced Scorecard is meaningful precisely because both are genuine strategy execution frameworks addressing the same fundamental challenge. Unlike the comparison with KPIs, this is a comparison of like with like.

Both frameworks have proven their worth across thousands of firms. The Balanced Scorecard, with three decades of refinement and a comprehensive body of supporting methodology, provides a robust architecture for strategic management. OKRs, with their simplicity, agility, and cultural emphasis on ambition and transparency, provide a dynamic approach well-suited to fast-moving environments.

The choice between them—or the decision to employ a hybrid approach—should be made thoughtfully, with attention to strategic context, firm's culture, and practical constraints. Neither framework is inherently superior; both are tools in service of the larger goal of strategy execution.

What matters ultimately is not which framework a firm adopts but whether that framework is implemented with discipline and commitment. A well-executed Balanced Scorecard will outperform a poorly implemented OKR system, and vice versa. The framework provides structure; the firm must provide the leadership, discipline, and cultural commitment to make it work.