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Trailing and Leading Indicators

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June 7, 2023

Trailing and Leading Indicators

When you’re running a business or building its strategies, you have to measure how well you’re doing against your goals. Leaders use key performance indicators (KPIs) to measure progress on where they’ve been and where they want to go. They’ll use both trailing and leading indicators to monitor their success.

Trailing Indicators

Trailing (or lagging) indicators show a snapshot of previous performance. Some liken this to looking out the “rearview mirror” of the business by showing a snapshot of what’s already happened. They track data on what has already occurred.

Trailing indicators can help explain a trend (aka history repeats itself). Trailing indicators can be used as part of lessons learned in post-job briefs. Because trailing indicators take a long time to change, most leaders will review trailing KPIs quarterly or monthly.

For example, by reviewing the number of orders that resulted from a marketing campaign, leaders can determine the effectiveness of that campaign. Or if a business creates a new employee program, they can measure any impact it had on team morale through engagement surveys.

Leading Indicators

Leading indicators can provide a metric to monitor where a leader wants a company to go and adjust their proactive strategy. Using the same car analogy, think of it as looking out the “windshield” of the business. Leading indicators show leaders a wider lens to include areas outside the business-as-usual operation to find new ways of doing business.

By attempting to predict the future, leading KPIs monitor trends that can lead to success down the road. They offer a look at potential opportunities that can help a business achieve longer-term goals. Because these can change rapidly, most leaders track leading indicators weekly or daily depending on their industry’s pace.

For example, by measuring the number of new sales leads per week, leaders can predict the impact on future revenue goals. Or if business leaders can determine future employee retention rates based on the results of employee engagement results.

Which One’s Better?

Some may argue that tracking trailing indicators is useless because you cannot change the past. However, strategic planners do well to use a mixture of both to guide their initiatives.

By breaking down a long-term goal, leading indicators can help a team decide potential avenues to pursue that may bring them closer to their goals. For example, a team may choose to direct marketing and sales effort toward a new client demographic or niche based on industry trends.

Meanwhile, trailing KPIs can be very good at confirming trends or their results. So, trailing indicators can help determine if devoting resources to that new client demographic were ultimately successful.

Used together, leaders and use the training indicators to decide whether to increase, maintain, or decrease resources moving forward.

How to Measure

You’ll find tons of ways to monitor leading and trailing indicators. Everything from fancy software programs to excel spreadsheets or good old pen and paper can be effective.

Critically, whatever method you use, make sure your entire team has access to the numbers at all times. And review the metrics regularly to determine if you’re on track to achieve goals and to inform future decisions.



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