Speaker 1: Hello, everyone, and welcome to this presentation on using Balance Scorecard with OKRs to align, execute, and adapt. I'm David Wilsey. I'm the Chief Executive Officer for Balance Scorecard Institute. We've been partnering with Informa on these kinds of events for probably a decade, so I'm really excited to help close this one out. And sorry, we can't meet in person. I really wish we could do that again, but hopefully soon we'll be back in Dubai. But as we've all learned in the last year or so, you have to make do with these virtual events, right? So today's session is going to be focused on how to build on the strength of Balance Scorecard as a premier balance performance measurement system, premier strategic planning and management system. We're going to build on that strength by adding to it something called OKRs, or Objectives and Key Results. This is a framework that's gaining popularity. It's excellent for creating a culture of accountability and agility in your systems. Also, if you're using OKRs now, we're going to help you talk through how to create more balance, how to focus on outcomes, how to make sure that you're effectively implementing a system like this, you're creating alignment, and all those kinds of things. How do we execute strategy successfully is what we're ultimately trying to do. Now there's been a lot of confusion in this space. If you think about Balance Scorecard and OKRs, and then there's these things called KPIs. It's a very similar kind of a framework. It's confusing because they're all similar, right? They're all designed to accomplish roughly the same things. We're trying to set goals. We're trying to create alignment. We're trying to measure progress. We're trying to improve performance. These frameworks are all designed to do roughly the same thing. But I always like to compare this to having a stove, and a grill, and a microwave. They're three tools. They're all designed to do roughly the same thing. But each tool has different strengths and weaknesses, right? So if you're good at cooking, you know when to use which tool and for what purpose. So what we're going to talk about today is when do you use which tool and how do you use them together, perhaps, in a way that is more effective than any of them individually. So first of all, within that context, what are the strengths? What are the strengths of each tool? Balance Scorecard is ideal for communicating strategy, for visualizing cause-effect, helping your employees understand how your strategy works, and measuring and improving performance. Creating alignment. Balance Scorecard is ideal for creating alignment between the work that I'm doing as an employee, or that my department is working on, and our strategy, or whatever it is we're trying to accomplish. KPIs. If you have a Balance Scorecard, you probably have a set of measures, and you could call those measures. You could call those KPIs. They're tracking the most important things in our strategy. And KPIs are ideal for tracking performance in a continuous basis. Adding to that story are something called OKRs. OKRs are ideal for short-term, individual goal setting. It's creating accountability and making sure people are getting things done. Those are the strengths of the various tools. I always like to take a step back, though, and say, well, what are we ultimately trying to accomplish with our strategy management effort, with our system? And we're always trying to answer and connect the dots between these four questions. The first two are really about communicating what we're trying to accomplish. What is our mission, vision, what is our strategy, what are we ultimately trying to accomplish? And then what is our plan for achieving those goals or accomplishing what we want to accomplish? Then the second two boxes, the blue box and the purple box, are about creating alignment. First at the organizational level, at the operational level, departments. How do we make sure all of our departments are working in the same direction to achieve our goals? And then finally, in the purple box, how are our teams and individuals aligning with our strategy? OK, and how do we know as supervisors that our employees are getting something done? I want to create accountability along with that alignment. So what do I need to do from a systematic standpoint to accomplish these four things and connect the dots between these various levels? The first thing that we always start with is a balanced scorecard. My understanding is that many of you are familiar with this picture. This is a one-page strategic plan that we create in the balanced scorecard world. The top, I'm not sure if I can get my mouse on the screen, but the top part of the screen is focusing on mission, vision, strategy. Maybe you've got goals or priorities or something along those lines. Maybe you have some sort of focus areas, whatever terminology you use. We'd like to call them strategic themes and strategic results, but there's four themes. This is for a generic city, a city government, but the pieces would all look the same regardless of what kind of organization you're talking about. So the city government has four different focus areas that they're trying to accomplish. On the left side of the screen, we're communicating how our strategy works by laying out our objectives. Each of those ovals are objectives, and I can tell a cause and effect story of how our strategy works. So essentially, you've got those top two boxes on the last slide, communicating what we're trying to accomplish at the top and on the left. And then in the middle part of the screen, we've got KPIs or measures that help us understand whether we're making progress or not. We've got targets. On the right side of the screen, we've got initiatives. So this single picture really helps my employees understand what we're trying to accomplish. So the other two boxes on that last slide had to do with alignment. So what do I need to do to create alignment? So when I have a balanced scorecard, traditionally, what I would do is cascade this picture down into the organization. So what would that look like? Cascading looks like this. So we start with strategic assumptions, right? You look at our strategic environment and you say, what is our world, what kind of world are we living in, and what should our mission and vision, strategy, and goals be relative to those strategic assumptions? We create objectives at the organization level that help map out how we're going to achieve our strategy, our goals, our vision, and so forth. So the objectives at the top are telling the story of how our strategy works. Then we spend some time in this middle area where we build out objectives and KPIs and all that at the department level, business unit level, support unit level. So we're essentially translating that high-level strategy down into objectives at an organizational level. Then we go through the same process at the employee level. So we have objectives within each department at the employee level that should be aligned with the objectives of the department level, and then in turn at the organization level. So the agile world, all those software companies out there, the Jeff Bezoses that was just quoted by the last presenter, they look at this picture and they say, well, what happens if your strategic assumptions turn out to be wrong? What happens if COVID happens and we all have to pivot on a dime and change our strategy? Do you really have to go through this process again to catch up? It could take six months or a year for us to build all these objectives out. So they look at this question and they say, well, that's too slow for us. So we're going to use a completely different methodology for planning. So the system they use is called OKRs, or Objectives and Key Results. You see the Google logo here. There's been several books written about how Google uses this framework. They have the highest profile, but it's very widely used. Most of these logos you see on here are technology companies. But even in the non-tech world, governments, I know Walmart is using them, all different kinds of companies are now using this framework for goal setting because it's a simple and easy framework to use. Anyway, so OKRs are used by organizations to set goals, to track progress, align action with your strategy, and then achieve results. Keep us on track. So here's the basic model. It's very simple. Every employee in the organization creates objectives and key results. Objectives qualitatively capture what you're trying to accomplish. The key results quantifiably capture what you're trying to accomplish. It's very simple. Objectives, you'll notice that in the two examples, I want to improve my customer experience. Very general, high level. It's supposed to be inspiring, increase healthcare market share. Big picture, what are we trying to accomplish? But then how are we going to know if we're improving the customer experience? I need something that's concrete, something that's measurable, and it's timely. It's basically a smart goal. I want to have a 5% increase in our net promoter score by the end of the quarter. Anyway, so those are the examples. That's what the OKR model looks like. Oftentimes these things are tied to KPIs. I know several of you are sitting there thinking, wow, OKRs sound an awful lot like KPIs. What is the difference? The difference is there's not that much of a difference. The difference is that OKRs tend to be short-term goals. You can have a KPI like this. I've got two KPIs on this screen. One is around monthly web visits, and another one is on a newsletter setup rate. Those KPIs are something that I'm tracking on a regular basis. I've got dashboards. Maybe for decades I could be tracking these KPIs. The difference is the OKR is where I declare to my organization that this is what I'm going to focus on. I am going to focus on improving our website experience, and I'm going to move the needle from point A to point B. This is a little too small to read on the screen, but I'm going to move the needle from right about here to up in here. I'm going to move the needle from right here to right here. I'm going to make a targeted amount of improvement this quarter. So I've got actions that I'm going to implement to make sure that I'm making that happen. So again, a lot of OKRs are tied specifically to a KPI, something that you've been tracking forever. The idea is that all employees create their OKRs. Again, I'm not going to read through all these, but the CEO has OKRs that are shared transparently. So if you work at Google, you can log into their OKR system and see what the CEO is working on at any given point. You can see what the chief operating officer is working on. You can see what the VP for customer satisfaction or customer services is working on. What are their objectives, and what are they measuring for to know whether they're successful or not? And one of the keys to agility is that they don't have this top-down cascading process. They all create objectives and key results on a regular basis every quarter. And the idea is that the system aligns itself bidirectionally over time. So the CEO is just as liable to create an OKR based on something that somebody is working on as the other way around. And so then the OKRs are reset every quarter based on strategy. If your strategy needs to shift, if you're working in the software industry and things change dramatically very quickly, then everybody can reset their OKRs and you can adapt. There's Mr. Bezos again. We all seem to want to quote him. If you're good at course correcting, being wrong is less costly than you think, whereas being slow is going to be expensive for sure. So he's all about making sure that we can adapt on the fly. In other words, strategic agility, the ability to detect and quickly adapt to unforeseen changes in your organization's strategic environment. That's what we're aiming for here. And OKRs enable that. They enable it because it has a shorter update cycle. We're not talking about a five-year plan where you set your objectives and you hope that in five years you get there. Every quarter you have the opportunity anyway to update your strategy. Now I will tell you, most organizations don't shift their strategy every single quarter. I mean, that would be silly. The point is that you do want the ability to be able to do that when things change. The emphasis here is on action and getting something done. It's not on creating a complex alignment structure, which is what, you know, in our balanced scorecard world, we do tend to spend more time on the structure, trying to make sure we're creating a more visible alignment. So individuals don't have to wait all that time for the process to get to them. They can go ahead and get started. And frankly, even a small team, if you're working on a particular initiative and it's something important and the initiative was, the team was created on the fly, you can create OKRs on the fly. Any team can put together a set of objectives and key results for whatever they're focusing on. Now having said all that, OKRs are not going to replace your balanced scorecard. We get an awful lot of phone calls from people who use OKR and they wrestle with alignment. And I'm sure many of you are, if you're seeing this for the first time, you might be wondering, well, is it possible to create a big mess if you just set all of your employees free to go create their own objectives and key results without a lot of guidance? And the answer is yes. You certainly can create a mess if you don't have a disciplined process for this. People can create long to-do lists, they create too many measures, misalignment's a problem. People don't understand how the dots connect between what they're working on and what they're trying to accomplish. There's inconsistent implementation, lack of follow-up. People do not necessarily know how to create an objective. I've worked with teams that were very smart people. It's not that they're dumb, they're very smart people who do not know how to create an objective. It's just not intuitive for some people. And so they need a disciplined process, they need a consistent implementation approach. Then finally, they need something to align to. And this is a huge gap for some OKR companies. You ask your employees to go create OKRs, but you don't give them any high-level strategy to align to. And so this picture that I'm showing you of a strategy map can be very useful if you're one of these employees who doesn't really know where to start. If you're looking at the objectives at the organization level, it can make it much easier to create objectives. If you understand the strategy, understand that lowering cycle time or process efficiency is driving wait time for customers, and that seems to be really important to customers, then I can think through what are my objectives related to that process efficiency within the context of lowering wait time. So that can be very useful. So what we recommend is using these frameworks together. So the high-level strategy can be articulated using balanced scorecard. So you have your tier one balanced scorecard with objectives, measures, initiatives, as well as all the rest of the high-level strategy to help articulate what you're trying to accomplish. And then you will have some departments that are autonomous enough, strategically autonomous enough that they will benefit from doing some formal planning. And in those departments, it does make sense to do some cascading to create a tier two scorecard. But other than that, throughout the rest of the organization, you can use the OKR system, the OKR principles anyway, to create individual-level OKRs, either at the shared levels. All teams can use shared objectives, and then individuals can create their own objectives. So that helps drive accountability at the individual level. And then finally, my last point here is, whatever you do, make sure that you're implementing this using a disciplined process. Anybody who's familiar with the Balanced Scorecard Institute knows that we're all about the process. We have nine steps to implement a balanced scorecard. We have a step-by-step process for KPIs. And of course, we have a step-by-step process for OKR management. My point here isn't to teach you to become OKR professionals in 20 minutes. But I did want to at least show you the fact that we have a process, and it's super critical that you follow a disciplined process when you're doing this. Otherwise, your employees won't know what to do. And so you can very easily end up in a mess with inconsistent results. All right, any questions? So if you want to know more, just visit our website, balancedscorecard.org. We have certification programs in each of these methodologies. Informa teaches all of our classes. You can learn the methodologies in detail with those week-long programs. Otherwise, anybody have any questions? I think we have two minutes on my side. All right, well, thank you again. It doesn't look like we have any questions. Again, visit our website if you have any questions. You can contact me directly through that website. I'd be happy to answer anybody's questions if you think of something later. Otherwise, have a good day.