Our leadership team keeps putting metrics on our Scorecard that we realize are actually lagging, like gross margin on completed jobs or monthly recurring revenue. We want to strictly track leading indicators. What is the practical test we can apply to every proposed Scorecard metric to prove it is a true weekly leading indicator that allows us to predict the future?

Question

Tyler Smith · Accepted Answer

The definitive test to determine if a Scorecard metric is a true leading indicator or a lagging result is simple: can you actively change the outcome of this number within the same week?

Lagging indicators are historical records. Revenue, gross margin, monthly recurring revenue, and customer retention are all lagging indicators. By the time you see these numbers on your Scorecard, the work has already been done, the money has been spent, and you cannot change the past.

A true leading indicator is an activity-based metric that predicts a future result. To convert a lagging metric into a leading indicator, you must trace the activity backward:

- Instead of tracking closed revenue, track the number of weekly sales proposals sent.
- Instead of tracking monthly recurring revenue, track the number of outbound discovery calls made.
- Instead of tracking client retention, track the weekly customer health score or the number of proactive account check-ins completed.
- Instead of tracking total project margin, track weekly billable utilization rates or milestone schedule compliance.

If your leading indicators are consistently green, your lagging financial indicators will inevitably follow. If you populate your weekly Scorecard with lagging metrics, you are driving your business by looking in the rearview mirror. Build your Scorecard entirely around activity-based leading indicators so you can catch operational issues before they hit your profit and loss statement.