Before they can monitor progress, organizations must translate strategy into quantifiable terms. Key performance indicators (KPIs) are performance measures explicitly linked to strategic objectives. Even soft, or intangible, objectives can be monitored with KPIs. For example, a seemingly intangible goal such as improving employee satisfaction can be quantified based on changes in involuntary employee turnover, the results of quarterly employee surveys, or even the percentage of employees who bother to take each survey. An alignment-centric organization moves beyond traditional metrics that focus on end results to consider forward-looking measures that are the drivers of future performance. These so-called leading indicators are typically operational in nature; for example, they may include employee morale, brand recognition, and sales-force readiness. They are the gauges by which managers determine whether they are likely to reach their desired goals.

After they've chosen metrics, organizations need to find an efficient way to monitor them. Scorecards and dashboards are two popular methods. Although the terms are often used interchangeably, there are differences. Scorecards provide a high-level overview of progress toward goals, while dashboards offer a more quantitative look at specific metrics. In an alignment-centric organization, casual users gain a true account of corporate progress toward strategy by looking at scorecards that integrate operational and financial information with resource-allocation data. The interface is simple and easy to use. In contrast, dashboards typically display arbitrary metrics across multiple dimensions of performance. They are built for power users who need to slice and dice the data, drill down into areas of interest, and develop what-if scenarios for use in forecasting. Dashboards' analyses can benefit the organization as a whole because they allow for testing of the assumptions made in devising the strategy and identification of measures or targets that might contribute to dysfunctional decision-making.

When Pilot Fashions prepares to implement performance monitoring, it decides to give employees a high-level status report of progress toward corporate objectives. Doing so is challenging. Many of its objectives -- such as "foster a culture that encourages and rewards customer intimacy" -- are difficult to quantify because there aren't obvious ways to measure success using the data in the company's financial and operational systems. Yet these soft objectives are crucial. All of the goals in the company's strategy plan are closely interconnected, so reaching the soft objectives is key to achieving the other goals, including revenue growth.

For example, the personal relationship employees build with customers is a key differentiator for Pilot Fashions. The company expends substantial resources training employees to provide personalized customer service, which fosters customer loyalty. Due to the training investment in each employee and the value the organization derives from ongoing, established employee relationships with customers, minimizing employee turnover is critical. Therefore, employee morale and employee satisfaction are leading indicators that the company must track regularly. By monitoring employee attitudes through surveys, Pilot Fashions can head off problems before they cause significant damage and negatively affect financial performance.

Armed with a deep understanding of its KPIs, Pilot Fashions deploys scorecarding software that indicates the company's progress toward strategic objectives (see exhibit 4). It selects status indicators that blend leading and lagging metrics, subjective measures of progress, and gauges of action on corporate initiatives. The company allows different departments (such as sales, merchandising, and customer service) to create their own scorecard. Each of these departmental scorecards reflects the worldview of the group that creates it, but all explicitly link back to corporate strategy. For the most part, they contain a subset of the company's strategic objectives, plus a few supporting objectives that apply only to their department.

Because each department's scorecard represents its own progress toward goals, the status indicators for the same objective may read differently on different groups' scorecards. For example, the objective "cross-pollinate best practices" requires different behaviors for each function. The merchandisers at Pilot Fashions headquarters routinely collaborate to determine the best assortment of products for each store, but the store managers don't ever share information about successful layouts or end cap allocation for promotional items. Therefore, the "cross-pollinate" objective shows up green on the merchandisers' scorecard (effective collaboration), red on the store managers' scorecard (no sharing), and yellow at the corporate level (blend of merchandising, store management, and other scorecards).

The scorecard software's green/yellow/red status indicators provide enough information about corporate objectives for most employees, but many operational managers want to be able to drill down into the details of specific areas of performance. Some want quantitative information about trends and deviation from the norm. Others want to be able to benchmark their performance, either internally (e.g., one store vs. a region) or externally (e.g., entire chain vs. similar chains). Over time, Pilot Fashions' operational managers create a variety of role-specific dashboards that enable them to monitor the KPIs that are most important to them. For example, the director of inventory management creates a dashboard displaying a list of the top 10 out-of-stock items for both the previous week and the previous month, a bar graph of inventory turns by week over the past year, a pie chart showing the relative contribution of each store, and an exceptions list of items whose actual stocking position varied the most from forecast.

Of course, like most companies, Pilot Fashions has a small number of power users who are interested in more sophisticated analysis to help determine the root cause of trends or exceptions. These employees soon learn that starting with strategic objectives guides them toward the analysis they should be performing and dramatically reduces the amount of data they have to consider. For example, if the organization finds that sales are lower at specific stores, it might investigate whether customer satisfaction, a leading indicator of sales, is low in those same stores. If satisfaction is also low, Pilot Fashions might then check leading indicators -- employee training, product availability, promotional activity, etc. -- to identify the culprits of the poor customer satisfaction showings. Once the company understands the root cause of the problem, it can take active steps to turn around customer satisfaction.