Lagging vs leading indicators
Lagging indicators take a long time to change, and show the later-stage results of your efforts.
Leading indicators, on the other hand, measure the activities you think will help you reach your goal, and can be tracked on a more ongoing basis.
Benefits of using leading indicators
Faster feedback: By tracking leading indicators, your team can get feedback on their efforts more quickly and determine what actions they might need to take to achieve their over-arching objectives.
Team involvement: Because there are often many facets to broad goals, there are typically many leading indicators to track. Different team members and departments can own different metrics, so everyone contributes to meeting the company’s larger objectives.
Weaknesses of leading indicators
Just a proxy: If you’re using a leading indicator as a proxy for a lagging indicator, keep in mind that while the leading metric should affect the lagging indicator, it might not have the impact you expect. It’s important to track both so you can monitor ongoing progress as well as the actual outcome of your changes.
Benefits of lagging indicators
A clear indicator of success: In many cases, the metric that best assesses the impact of your efforts is going to be a lagging indicator because it takes time for your changes to take effect.
Weaknesses of lagging indicators
They take time to measure: By definition, lagging indicators measure long-term trends, so they take weeks or months (or even longer) to change.
You can’t see why: Lagging indicators show an outcome, but it can be unclear what variables impacted that outcome. You may know that your churn rate is high your lagging indicator but you don’t know which of the actions you took as a company impacted that rate.
Difficult to change: Because lagging indicators are often high-level metrics like revenue, impacted by a lot of different departments within the company, small projects may not make a measurable impact. It can sometimes be difficult to tell whether minor changes in the metric are because of your actions or if they are just chance.
Leading vs lagging indicators work together instead of apart
A lagging indicator may be the best metric for measuring the outcome of your effort, but tracking lagging metrics alone is problematic. It takes a long time to see results, and lagging indicators can’t help you make ongoing adjustments.
The solution is to use a combination of leading and lagging indicators. Look at leading indicators on an ongoing basis to make changes that will help improve your odds of success.
Use leading indicators that complement your lagging indicators and help you measure progress more quickly. Below are two examples of leading and lagging indicators that pair well together in different scenarios.