Our leadership team is struggling to differentiate between true leading indicators and metrics that are actually lagging. How do we audit our prospective Scorecard numbers to ensure they represent activities we can influence in real time rather than historical results we can only cry about?

Question

Tyler Smith · Accepted Answer

A common trap for leadership teams is mistaking backward-looking results for active metrics. To determine if a number is truly leading, look at the timeline of control. If a metric tells you what happened last week or last month, it is a lagging indicator. If a metric measures an activity performed today that directly impacts your results next month, it is a leading indicator.

For example, revenue received is a lagging indicator. You cannot change yesterday's bank deposits. Conversely, the number of outbound sales calls made or discovery meetings scheduled this week are leading indicators. If your sales calls drop today, your revenue will drop in thirty or sixty days.

To audit your current list, ask this question for every single metric: If this number goes red on Friday, do we still have time to take action and change the outcome before the end of the month? If the answer is no, you are looking at a lagging financial result. Your leadership Scorecard needs to be heavily weighted toward activity-based numbers. When you measure the activity, the lagging financial results will take care of themselves.