Why Leading Indicators are Better to Measure Performance Than Lagging Indicators
When it comes to managing and measuring your team’s performance, is it better to look forward or back?
Both approaches have their merits. But many companies focus solely on what they’ve achieved, rather than plotting a course for what they want to achieve in the future. While keeping track of those numbers is obviously important, companies should also be focused on what lies ahead - even if that means peering into a crystal ball.
Leading indicators - those that ‘lead’ businesses to a desired outcome - are invaluable predictive measurements that help businesses see not just where they are, but where they’re going.
What are lagging indicators?
Lagging indicators, in contrast, are those that look backwards - tracking targets based on what’s already been achieved, rather than looking ahead to new goals. Simply put, these kinds of markers are reactive rather than proactive as they measure past results versus future outcomes.
Common lagging indicators include:
- Did we hit our revenue numbers?
- Did we meet our forecasted sales?
- Did we drive X% of traffic to our website?
- Did we close all our support tickets?
If you are only tracking the types of questions above, you’re not focusing on the metrics that will help propel your department forward and impact outcomes.
While lagging indicators are a useful evaluation tool, they focus on outputs rather than outcomes. Relying solely on lagging indicators denies managers the chance to tweak their strategies to influence future results.
Why managers should use leading indicators
While lagging indicators look at output, leading indicators focus on input. These indicators can be used to identify both negative trends - warning signs that indicate an upcoming dip in performance - and positive signs - rising customer satisfaction which points to an upswing in sales.
Leading indicators include:
- Customer satisfaction
- Employee wellbeing
- Market growth/demand
Defining leading indicators is a little more challenging than honing in on lagging indicators as they’re more abstract, unique to each company, and require thorough analysis of your business goals, drivers, and resources.
They’re worth the extra effort however as leading indicators identify opportunities for business growth e.g monitoring engagement with the latest sales campaign can help marketing identify new audiences; tracking when your team is most productive enables department heads to better schedule meetings or deadlines.
These metrics also help businesses manage risk by anticipating and planning for downturns in the market or company-specific roadblocks.
Choosing the right leading indicators prompts managers to ask questions such as:
- What skills does my team need to be successful?
- What steps can we take to make workflows more efficient?
- Where should we focus on efforts to hit our performance KPIs?
- Do we need to reallocate responsibilities to meet deadlines?
When creating their leading indicators, managers should start by clearly outlining what they want to achieve, how they intend to measure their progress towards that goal, and what leading indicators they can use to support those measurements.
Employee Productivity Monitoring solution Prodoscore gives managers an unobstructedview of how their team interacts with a company’s cloud-based tools - providing all the data leaders need to evaluate and predict performance before it’s too late to affect change. The easy to use software collates these metrics into a single dashboard, providing a real-time productivity score that can be used to identify trends, forecast roadblocks, and shape strategy. Contact our team today to schedule a demonstration and find out more.