Every company has two management loops. The first (the inner loop in exhibit 4, below) deals with operational, day-to-day, short-term management issues. Its performance indicators are known; typically they involve the speed, cost, and quality of processes. These metrics are monitored consistently. The second loop of management (the outer loop in exhibit 4) is more hands-off. New targets are determined, and different performance indicators may emerge as the environment changes or as ways to further optimize processes from the first loop become clearer. The problem within many companies is that the two loops of management are often disconnected. Each has its own set of performance indicators, and those metrics are only implicitly linked. Operational management, which is responsible for the first loop, may be unaware of the issues in the second loop, and vice versa.

In high-performance organizations, however, the two loops are aligned. Corporate strategy is not only translated into high-level plans, but also linked to first-loop indicators. And these monitoring indicators are, in turn, explicitly linked to the feedback process. HPOs also have trigger-based processes that invoke the loops. If the organization's strategy changes, new targets and process optimizations are communicated to the people responsible for the first loop of management so that they can update their management methods. If changes in the environment are picked up by the first loop, these immediately invoke the second loop of management to respond quickly. The different people responsible for the two loops communicate, and executives can see developments registered by the operational first loop in the context of the slower-moving -- but further-reaching -- second management loop. This whole process is part of an emerging trend called "business activity monitoring."

A great example of an organization that has undertaken a major alignment effort is Ter Beke Group, a Belgian company that produces processed meats and frozen meals sold throughout Europe. The strategic objectives of the company are clear. Ter Beke wants to become a preferred partner of its customers. It does not compromise on customer service or product quality. Profit and growth are necessary, but they're a means for continuity, not goals in themselves. Ter Beke's mission statement includes several stakeholders; it specifies that the company wants to be socially responsible, provide fair returns to shareholders, ensure safe products for consumers, take care of its staff, and pay attention to the communities around its six manufacturing plants.

The company has achieved remarkable focus on this mission among employees. Each factory has its own balanced scorecard, as do all the commercial units (per country and channel). Supporting departments -- such as logistics, finance, customer service, and HR -- also have scorecards. All of these scorecards are linked to the corporate scorecard, and they serve as both measurement tools and as a fully integrated part of the budgeting process. Incentive pay is linked to the corporate balanced scorecard, so strategy, management processes, and personal goals are tied together. A manufacturing plant in which one performance indicator was off track installed a traffic light that shone green, yellow, or red depending on that metric's performance each day. In addition, every plant holds a daily five-minute-long meeting at 9 a.m. The quality manager, the controller, and various team leaders discuss the previous and current days and provide feedback to senior management. These activities have increased interaction among Ter Beke's entire staff and aligned performance goals throughout the organization.

Data and Process Standardization

For organizations that seek to become HPOs, it's not enough to introduce an aligned strategy, define the mission statement of the organization, and identify the company's values. Processes must also be efficient. Limited resources must be leveraged to maximize their value. At the very least, the organization must strive to become more efficient structurally than the competition. This is possible only if best practices, processes, and systems are recognized throughout the organization and if every part of the company follows a common business model. Very few companies realize this ideal.