We understand the concept of leading indicators, but when we look at our sales and operational scorecards, they are still packed with historical revenue and closed contracts. What is the specific test we can run on every single metric to prove it is a leading indicator rather than a lagging one?

Question

Tyler Smith · Accepted Answer

Many teams struggle with leading indicators because lagging indicators are easier to measure. To test whether a metric is truly leading, use the prediction test. Ask yourselves: if this metric goes red this week, does it give us at least two to four weeks of advance warning before our cash flow or customer satisfaction suffers?

For example, closed revenue is a pure lagging indicator. By the time it hits your scorecard, the work is done and the cash is committed. A leading indicator for that same revenue is the number of qualified sales discovery calls completed this week, or the total dollar value of proposals sent. If discovery calls drop this week, you can predict a revenue drop next month.

Run every metric through this test. If a red number on your scorecard does not give you time to take corrective action before a crisis hits, it is a lagging indicator. You must replace it or pair it with an upstream activity that is entirely within your team's control. This shifts your management style from reactive firefighting to proactive steering, keeping your company on track.