Lagging and Leading KPI Indicators

By guest blogger Warren Fowler [See Biography]

[May 26, 2018]  We all want to know where our business is going, but before the results can even be calculated or questioned, you need to know how to get there. The objective of a business is the primary KPI or key performance indicators.

You’ve surely heard of KPIs – every business owner and manager has. You have perhaps seen some amazing examples of KPIs for different businesses, but does this really help you determine the best trick for your own business? KPIs can do a great deal in helping you achieve the goals and reach those objectives, so it is about time to start focusing on the lagging and leading tricks.

Lagging vs. Leading KPI Indicators – What’s the Difference?

• Leading indicators are the measurable tool – a trick that tells you what’s necessary for you to achieve the goal. This factor measures the activities and leads to results.
• Lagging indicators are the opposite – outputs that measure the results. These show the score of the strategy determined by the leading indicators and your efforts.

Importance of KPIs                        

You need the lagging indicators to plan the leading indicators, which makes them highly important for the process. The leading indicators will depend on the objectives and goals you have (desired lagging KPIs), but these are the only ones you can truly influence.

‘’Just because your leading KPIs were positive, this doesn’t make the lagging ones positive, too. For example, you can set percentage of growth in sales pipeline as your leading indicator for the sales, but this does not mean that your company will actually convert this to sales. ‘’ – Hugh Trenton, an expert at SuperiorPapers

The lagging indicators can take time to be measured

You will only be able to see the lagging indicators at the end of the project. Therefore, you need to focus on the leading indicators that will bring you to successful lagging indicators.

For example, if you have a lagging KPI of a couple thousand dollars in sales revenue for a cycle of only 6 months, you should define another leading indicator such as pipeline size to ensure you can actually achieve the desired lagging KPI.

Leading KPIs are the benchmarks you track to change something

If you want to make some changes to achieve the lagging KPI, you need to change the leading KPIs. Measure your leading KPIs are tracked at all time to see if there aren’t any errors in the process.

Leverage the leading metrics to measure the lagging indicator

How fast and effectively you’ll measure the lagging indicator will depend on the specific leading metrics when the results come.

Combining Both KPIs

The best success of your company will be based on the tandem between these two – the lagging and leading indicators. If you want to work your way toward the desired results, you need to combine both.

Ultimately, you’d want to use the lagging indicators to work backwards toward the leading indicators. When you know what results you want to achieve, you can plan the action you will take.

Conclusion

Indicators, data, results and behaviors can be daunting for a businessperson. To make all this easier, track and measure the leading and lagging indicators and combine them to ensure that your projects are on the right track.