We understand the conceptual difference between leading and lagging indicators, but we struggle to convert our lagging financial results into actionable, leading weekly numbers. How do we build this connection on our Scorecard?

Question

Tyler Smith · Accepted Answer

Lagging indicators tell you what already happened. Your monthly profit and loss statement, total revenue, and customer retention rates are all lagging indicators. By the time you see a drop in revenue, the damage was done weeks or months ago. To run a proactive business, you must identify the leading activities that create those lagging results. To build this connection, work backward from your lagging goals. If your lagging goal is to close ten new client contracts per month, ask yourself what specific actions must happen to achieve that. First, you might need to conduct fifteen discovery calls weekly. That is a leading indicator. Second, to get fifteen discovery calls, your sales team might need to send one hundred personalized outreach messages weekly. That is another leading indicator. If you hit your weekly target of one hundred outreach messages and fifteen discovery calls, you can confidently predict that you will hit your lagging goal of ten new contracts. Apply this same logic to operations. If your lagging indicator is client retention, your leading indicators might be the weekly number of proactive client check-in calls or the percentage of project milestones met on time. When you monitor these leading activities on your weekly Scorecard, you gain the ability to predict the future. If the leading indicators are red for two weeks in a row, you know your lagging financial results will suffer next month. This gives you the warning you need to fix the problem before it hits your cash flow.