Our sales and operations heads keep arguing about which weekly leading indicators actually predict our lagging financial success. How do we mathematically or logically prove the relationship between a leading metric and our ultimate bottom-line results?

Question

Tyler Smith · Accepted Answer

To prove the relationship between a leading indicator and a lagging financial result, you must track and analyze the data over a consistent period, typically twelve to thirteen weeks. A true leading indicator is an activity-based metric that is entirely within your team's control and directly influences a future lagging result.

Start by mapping out the timeline of your sales or operational process. For example, if your lagging goal is closed deals, look at the steps that occur upstream. You might find that it takes ten discovery calls to secure three proposals, which ultimately result in one closed deal. In this scenario, the number of weekly discovery calls is your leading indicator, and the revenue from closed deals is your lagging result.

If you track these numbers weekly, you will begin to see a clear correlation. If discovery calls drop in week one, your closed deals will inevitably drop a few weeks later, depending on your typical sales cycle. If you do not see a correlation after a quarter of tracking, it means you are tracking the wrong activity. You must then adjust and test a different upstream metric until you find the one that consistently predicts your lagging outcomes.