“What gets measured gets managed.” – Peter Drucker
In the business world, we love to put numbers on performance. We continually refer to the scoreboard to see how we are doing and to make important management decisions. But that begs the obvious question, what should we be measuring? What is the “score”?
Unfortunately, most management teams focus solely on lagging indicators. These are the data points that show the end result of a process – they lag behind the desired activity itself. Monthly revenue. Marketing qualified leads generated. Net income of the business.
And while these lagging indicators are very important for measuring business performance, they don’t give a great measurement of current success.
To understand how we are doing now, we need to be looking at leading indicators.
Leading indicators are helpful because they provide a snapshot of your current performance. They can highlight active progress, even if you are not yet hitting the desired end goals. More importantly, leading indicators are a great way to measure desired activity and behaviors.
Weight Loss Example
A good example of a leading vs lagging indicator is weight loss. Let’s say your goal is to lose 20 pounds over the next six months.
Your lagging indicator is going to be your current weight. It’s your current weight, but 20 pounds lighter that is the ultimate goal that you want your lagging indicator to hit. But how do you know if you are doing the right activities or behaviors to reach your goal weight?
Leading indicators of weight loss would be metrics such as daily exercise and calories consumed. If you want to lose weight, you should be tracking the number of calories you are consuming each day and the amount of exercise you are performing.
If done on a tracking spreadsheet, your goals/indicators might look like this:
If your goal is to lose weight, it can be discouraging to jump on the scale and see the needle barely moving (lagging indicator). But if you are also tracking activities and behaviors (leading indicators) that facilitate weight loss, you can get a daily dose of encouragement by tracking current progress.
Examples of Leading and Lagging Indicators in Sales
For sales teams, the focus is almost always exclusively on the lagging indicators. In particular – your sales number. But if you consider what activities lead to closed sales, you can begin to track important leading indicators as well. Below are some examples:
Examples of Leading and Lagging Indicators in Marketing
For marketing teams, I’ve found that, more than anything, there are not clear goals that everyone is focused on. Generating more leads is always important, but it’s not clear what high level metrics ultimately make that happen. Below are some examples of indicators that marketing teams may utilize:
Improving Performance Through Indicators
To improve your performance, think about the indicators that are most important to measure for your business. What data, if measured, will give you an accurate picture of both your current progress and your final results.
For leading indicators, ask, “What behaviors or activities will lead me to be successful?”. Once you determine what those activities are, then quantify your goals to hold yourself accountable.
For lagging indicators, ask, “What end result indicates that I am successful?”. Determine what the ultimate scoreboard is for your efforts.
Once you have identified your key indicators, I recommend setting up a simple tracking system. I’ve personally just used a spreadsheet that I manually update weekly with the latest data. Just the simple act of checking in on your progress is a great way to drive behavior and build effective habits.
