Balanced Scorecard in Perdoo

The Balanced Scorecard rose to fame in the 1990s and is probably the best-known strategy framework of all time. Developed by Robert Kaplan and David Norton, the Balanced Scorecard has been used by thousands of organizations of all shapes and sizes, to focus the organization around a set of core business performance KPIs.

We’ll dive into the framework below and compare it with OKRs (another strategy execution framework), before outlining how you can manage all of this on the Perdoo strategy execution platform.

What is the Balanced Scorecard?

The Balanced Scorecard measures your company’s performance from a set of four “perspectives,” namely Financial, Customer, Internal Process, and Learning & Growth. You’re encouraged to identify a set of metrics and set KPIs to monitor success in each area. Here are examples of the metrics you could use in your KPIs:

• Financial: EBIT, revenue, average deal size
• Customer: NPS, CSAT, customer health score
• Internal Process: cycle times, no. of open support tickets, open bugs
• Learning & Growth: eNPS, retention, average tenure, time to hire

Kaplan and Norton state that there is a relationship between these four perspectives. Starting at the bottom of the list, and working your way up, each perspective enables the next. Now, of course, that’s not to say that you should start with the Learning & Growth perspective when approaching strategy execution. Instead, you should start with the Financial perspective. Indeed, Kaplan and Norton would argue you should even go beyond this Financial perspective to really start with your organization’s vision and strategy. Either way, it’s worth noting how these different perspectives reinforce one another to help you realize your growth ambitions.

Balanced Scorecard, OKR, and KPIs

We’ve got our Balanced Scorecard perspectives, but now we need a way to monitor success on them.
KPIs, or Key Performance Indicators are simple goals that let you know if a particular area of your business (eg a “perspective”) is healthy. KPIs are the best way to monitor success in each area of your Balanced Scorecard.

OKR, or Objectives and Key Results, is both a strategy execution framework and a way to formulate goals. OKRs are generally set in a particular cadence (eg quarterly) to promote more frequent reflection and learning than is found in traditional annual goal-setting. OKRs are most commonly used to solve tough organizational problems that’ll help deliver the strategy. The Objective tells you where you want to go (a qualitative statement) and the Key Results are quantitative measures that let you know if you’ve got there.

As you can see, OKRs and KPIs are different types of goals, with different purposes. So, many organizations choose to use them side by side. When thinking about Balanced Scorecard perspectives, you can monitor progress on those perspectives with KPIs, and use OKRs as goals that’ll push each area of the business forward, or get any unhealthy KPIs back on track. Many organizations stick to only monitoring KPIs in relation to Balanced Scorecard perspectives. But then they lack transparency about what’s being done, or what has been tried in the past, to push these KPIs forward. And that’s where OKRs come in. Indeed, in the Perdoo platform, you’ll be able to align an OKR to a KPI, to communicate this crucial relationship across your team and monitor progress in real-time.

Use Perdoo to operationalize your Balanced Scorecard

So we’ve defined the KPIs that you’ll use to monitor success on each perspective of your Balanced Scorecard. We then need a way to operationalize your scorecard and monitor progress effectively.

There are two approaches we've seen customers use when implementing the Balanced Scorecard alongside OKRs. Perdoo can support you with both.

Option 1: Strategic Pillars as Balanced Scorecard Perspectives

If your organization is fairly “new” to strategy execution, then this approach might be for you!

This approach basically involves orienting your strategy execution around your Balanced Scorecard perspectives.

• Start with your Ultimate Goal. This is what Kaplan and Norton would call your “vision”. What’s the purpose of your organization and where do you play? Which markets or customer segments do you specifically target?
• You’ll then add each perspective as a Strategic Pillar into your Perdoo Roadmap (see below).
• Monitor progress on those with relevant KPIs.
• Align OKRs to those Strategic Pillars to ensure your organization is working on the right things to push you forward on each of the Balanced Scorecard perspectives. Most organizations typically set annual company OKRs, and then quarterly group OKRs. Those quarterly OKRs are the ones that everyone in your organization will actively be working on from week to week.

Here’s how this approach looks in Perdoo:

This option puts a lot of emphasis on your Balanced Scorecard perspectives and is very easy to communicate across the organization. But one major criticism is that it doesn’t truly communicate your organization’s strategy.

Strategy is really a set of choices about how you’re different. The Balanced Scorecard perspectives are pretty much the opposite of that – they are designed to be universal to all organizations (although arguably don’t suit some organizations, like NGOs). So, many organizations choose to take their vision as the starting point when defining strategy. Let’s see how that works.

Option 2: Taking vision and strategy as the starting point.

This approach adds another dimension to your Balanced Scorecard implementation. It distinguishes between your Balanced Scorecard perspectives and your organization’s strategy.

• Start with your Ultimate Goal, just as in Option 1.
• Add your strategy into Perdoo as Strategic Pillars – these should explain how you’re different. Need inspiration? See these examples.
• Now for the KPIs that you were using to measure success on your Balanced Scorecard perspectives. Add those to your Strategic Pillars. Your Customer KPIs might be spread across a few Strategic Pillars. So Perdoo gives you the flexibility to highlight which perspective a KPI belongs to by adding them to the relevant “Group” in Perdoo. Groups are a way to organize your goals and people in Perdoo. You can then focus on the “Customer” perspective by checking its Group page in Perdoo.

• As in Option 1, you can then align OKRs to your Strategic Pillars. This guarantees that the OKRs you’re working on are truly aligned with your strategy and your Ultimate Goal. Here's how that could look:

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A Balanced Scorecard, and much more

Visualizing your Balanced Scorecard and strategy execution efforts in one consolidated dashboard keeps everyone aligned all year round. And our customers agree!

Of course, this isn't the only reason why ambitious organizations choose Perdoo:

• Automate check-ins. Research shows that by keeping goals up to date, you’re far more likely to achieve them. So Perdoo makes updating goals as easy as possible. Team members receive helpful reminders to update their goals. They can update in a flash via MS Teams, Slack, on mobile, or in our web app. And to avoid duplicate work, integrate Perdoo with 65+ business apps for always-updated goals.
• Robust reporting. Once your goals are always up-to-date, you’ve got concrete data you can rely on. Perdoo offers a range of pre-built reports and custom dashboards to give you the tools to analyze that data, anticipate challenges early on, and double-down on what works right now.
• Expertise for a smooth roll-out. Adopting any new strategy execution framework is a change process. It’s all simple on paper, more challenging in practice. That’s why Perdoo offers evidence-based resources and experienced coaches that’ll help you find success with OKRs and KPIs in no time.