Our managers understand the theory of leading versus lagging indicators, but they struggle to find the exact leading activity that actually controls our lagging results. How do we systematically backward-engineer a lagging financial outcome to find the precise, controllable weekly activity that drives it?

Question

Tyler Smith · Accepted Answer

Backward-engineering starts with your primary lagging indicator, like monthly revenue or profit. To find the leading indicator, ask what must happen immediately before that result is realized. For revenue, it is closed deals. What must happen before a closed deal? A sent proposal. What must happen before a sent proposal? A discovery meeting. What must happen before a discovery meeting? Ten outbound calls or five marketing leads.

The leading indicator is the activity that your team has one hundred percent control over on any given Tuesday. You cannot force a prospect to sign a contract, but you can absolutely control how many outbound calls your sales team makes. By tracking the activity, you create a predictive model.

If you know that ten calls lead to one meeting, and five meetings lead to one proposal, and two proposals lead to one closed deal, then tracking weekly outbound calls gives you a clear window into your revenue three months from now. Focus on the activity-based inputs on your Scorecard, and the lagging outcomes will take care of themselves.