Updated: Apr 12, 2022
Business leaders, supervisors, managers - do you ever feel that you currently aren’t aware of the business conditions and trends? It is easy to feel overwhelmed with the pile of work and stay up to date with measuring how projects or sales are currently doing and where they are heading. So, next time you leave a meeting, keep note of what the lagging indicators and leading indicators are. With these, you will be able to know where the company’s current state and get a scan of the overall important metrics that will guide the company to achieve accurate projections.
Difference Between Lagging & Leading Indicators
Did your business hit the jackpot from signing with a new client last week? Or is it up in flames and you don’t know about it? Simply put, lagging indicators help evaluate past performance and assess the current state of business. Lagging indicators are metrics that have already been taken place to achieve insight into projected success.
They are often easy to spot. Companies have a myriad of dashboards and reports in place to display some of their bottom line metrics. Lagging indicators are unresponsive and hard to change. They often change significantly at a slow pace and only through the combined efforts of multiple product teams. However, the final metrics are clear, but again they are only visible in hindsight. Here are figures that we can use to further comprehend:
On the other hand, leading indicators predict future conditions. Here, we look at metrics that will help lead towards succeeding in the outcome objective key results (OKRs) and goals. Here are links to more forecasting blogs and videos.
Leading indicators are difficult to uncover. Teams often don’t know which user behaviors lead to success and don’t have the data to measure it. Metrics change as the direct result of an individual team’s contribution. The change can be detected quickly and influences day-to-day decisions. The change in the metrics can be measured continuously with high confidence that focusing on them will contribute to high-level company metrics. Here are some examples of indicators to consider looking out for:
Net promoter score
Return on investment (ROI)
Need Both Leading and Lagging Indicators
A lot happens as managers, so it’s important to keep these indicators top of mind. We need these metrics in order to stay in check with current performance as well as move the company forward based on results. These two metrics are what help managers and up stay informed about meeting overall business objectives and goals.