What is the ideal ratio of leading indicators to lagging indicators on a healthy leadership Scorecard, and how do we ensure our weekly data is heavily weighted toward activity-based metrics we can control?

Question

Tyler Smith · Accepted Answer

A healthy leadership Scorecard should have a ratio of roughly eighty percent leading indicators to twenty percent lagging indicators. Lagging indicators like monthly revenue, net profit, and completed projects only tell you what has already happened. You cannot change the past. To run your business on data, you must focus heavily on leading indicators, which are the weekly activities that directly predict those lagging results.

To shift your Scorecard balance, look at each of your current lagging metrics and work backward to find the activity that drives it. If your lagging metric is closed deals, the leading activity is discovery calls completed. If your lagging metric is customer retention, the leading activity is proactive support check-ins completed. Leading indicators must be activity-based, highly controllable, and measured weekly.

When your Scorecard is heavily weighted toward leading indicators, you gain the ability to predict the future. If your leading indicators are consistently green, you can be highly confident your lagging financial metrics will be green in thirty to sixty days. This gives your leadership team the power to make proactive adjustments before a drop in activity turns into a financial crisis.