Our leadership team understands that we need leading indicators, but we keep putting lagging financial results on our Scorecard because they feel more real and reliable. How do we break this addiction to lagging data and train our team to define true leading indicators?

Question

Tyler Smith · Accepted Answer

Lagging indicators tell you where you have been, while leading indicators tell you where you are going. Relying on lagging data like monthly revenue or net profit is like driving your car by only looking in the rearview mirror. By the time you see a dip in revenue, the damage was done months ago. To break your addiction to lagging data, you must force your leadership team to work backward from the result they want. Every lagging result is preceded by a series of predictable human activities. Start with your most critical lagging financial metric. If your lagging metric is monthly closed revenue, ask your sales leader what must happen one week before a sale is closed. The answer might be a signed contract. Ask what must happen one week before that. The answer is a final proposal presentation. Ask what must happen before the proposal. The answer is a discovery meeting. Ask what must happen before the discovery meeting. The answer is a qualified lead. By working backward, you find the leading indicators: qualified leads and discovery meetings completed. If those two numbers are green this week, your closed revenue will be green next month. Apply this same logic to operations and customer service. Once your team realizes that hitting their leading activity targets guarantees their lagging results, they will stop clinging to historical data and embrace the power of predictive metrics.