Lag vs. Lead Indicators

Lag vs Lead Indicators for businesses
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If your business operates like most, you have regular meetings with management where you review your progress to your goals and objectives. I have personally organized and participated in hundreds if not thousands of these meeting over the years. Until I knew better I would often leave these meetings thinking, “this seems like the right thing to be doing, that is, checking in on our progress, yet it still seems somewhat futile.” What I came to realize is that the reason I felt this way had to do with the focus being on lag measures and not the lead indicators, and I couldn’t do anything about. It’s like watching a movie of what happened and whether its good or bad you can’t do anything to change it.

Let me explain. Most businesses focus on things like revenue, profits, return on equity, customer satisfaction scores, etc, etc. Don’t get me wrong, these are all important indicators of what happened. The problem with only focusing on these indicators is that they are all history. In other words, there is nothing you can do about it now.

A lag measure tells you if you hit the goal where as a lead indicators tells you if you are likely to hit the goal. Lead measures are, effectively, predictive of lag measures. There is a very important distinction here. A lag measure is something you can’t do anything about where as a lead measure is something you can control.


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