How leading and lagging indicators can assist young leaders in making timely course corrections before the ship sinks…or is impounded.
How effective is your leadership? When you ask someone how their company leadership is going, some may provide you with a detailed response. One that includes their highlights and worries, as well as the projects they’re working on and why.
On the other hand, others would remark something like, “I’m not sure.” You get the idea that certain things are working well and others are not. But you can’t tell for sure what we should do differently or whether we should change anything at all.
You’re not alone if you fall into the latter type. Therefore, many young executives attempt to assess how their company is performing. They do this in an environment that seems turbulent, unclear, complicated, and ambiguous, with no clear conclusion.
The absence of measurement might be one source of uncertainty. “What doesn’t get measured, doesn’t get done,” as the adage goes. Measurements may help you cut through the uncertainty by giving you a clear picture of how far you’ve come in your job.
As a result, the inevitable question is: “What should you measure?”
However, there’s a lot of confusing jargon out there, so let’s start with an essential contrast that will benefit you right now, namely looking backward vs. looking ahead.
Lagging Indicators: A Look Back
Consider end outcomes such as total revenue, profitability, expenses, number of sales, and more as a starting point when deciding what to monitor.
These indicators are simple to calculate. They may give you a fair picture of how things progress. That is to say, you can compare them to where you want to be.
Things are fine if you’re ahead. If you’re falling behind, there’s still time to catch up.
Experts call them lagging indicators. Lagging indicators measure the past since they are a result that has already occurred. Consider it as though you were going along the road; lagging indications serve as a kind of rearview mirror, allowing you to see where you’ve gone.
Although lagging indicators are a crucial predictor of success, concentrating only on them might lead to a few dangers.
First, when the results aren’t what you expected, you may feel discouraged. Or you may feel resigned since the events have already occurred, and you can’t alter them.
Second, even if results are exactly what you expected, lagging indicators aren’t the most extraordinary forecasts of what will happen. The future in business seldom stays the same. Due to market pressures, competition, shifting costs, and other considerations, most businesses are heading up or down.
Finally, you might overlook the process. As a result, a solitary concentration on results might be shortsighted.
What happens when the team does not meet monthly objectives and the end of the month approaches, and they’re behind? The team members may make judgments that benefit short-term profits at the expense of long-term prosperity.
Leading Indicators in the Future
You do, however, have leading signs. Leading indicators represent progress toward the essential circumstances for attaining a goal.
Meanwhile, lagging indicators show movement toward the objective. These are measurements that predict a result. For example, if you make no sales calls in a month, your sales would almost certainly suffer.
In a world that seems increasingly out of our control, leading indications to offer you control. You have no control over how many new customers you sign.
However, you have control over who you contact and what changes you make. Similarly, how much enthusiasm you bring, and how much work you put into follow-up.
Trailing signs might be disheartening if you’re falling short of your objective while leading indicators can be motivating. They may also deter you from resting on your laurels in good times. That is to say, they are predicting whether or not your present behaviors will continue to lead to future success.
However, despite their many advantages, leading indicators should not be your whole focus. The results will tell you if you’re concentrating on the appropriate activities. You could spend all of your time and energy on a succession of chores that don’t move the needle if you don’t have them.
Putting It into Practice
You’ll probably discover that finding the correct mix of lagging and leading indicators is easier said than done. There is no precise formula that tells you which indicators to use, how to measure them, or when to do so.
Of course, luck and unanticipated circumstances will play a part.
Here’s a fun way to work on your “measurement muscles.” Choose one crucial work objective (lagging indicator). Then brainstorm as many actions (leading indicators) as possible to help you achieve it.
Now, depending on the following questions, rank the activities on this list:
- Can you see how these actions help you achieve your goal?
- Is it feasible to get the required result without these activities?
- Are there any activities that can only be effective when combined?
- Which actions are most likely to go unnoticed if they aren’t measured?
- Are there any actions that may assist in the removal of roadblocks?
- Do you have any actions in place to help you enhance your processes?
- Is it possible to quantify these actions in the actual world?
Finally, you may choose how and when to measure these actions to make timely course corrections.
As you can see, when you ask yourself, “How’s business?” you’ll hopefully get a far more informative response. Consequently, it will be a practical, and helpful response if you use the perfect blend of lagging and leading indicators.
Remember what the Russians say: Don’t count your bombs before they’ve exploded.
