Leading vs. Lagging Indicators: 3 Tips for Tracking Metrics

In business, leading indicators look forward to future events and outcomes. Leading metrics analyze present-day data to ensure greater predictability and a company’s future success. Customer satisfaction is an example of a predictive measure. Customers’ and subscribers’ satisfaction with your product or services can indicate future acquisition, retention, and revenue growth.

Lagging indicators look back at past events to measure success. These key performance indicators (KPIs) may include revenue earned or subscribers acquired. Lagging metrics are easy to measure and provide critical insights into a company’s historical growth. No matter the industry, lagging indicators are a sturdy performance measurement.

Leading indicators can help predict a company’s future performance. These predictive measures might include:

1. 1. Customer satisfaction: If customer satisfaction is high, customers will be more likely to recommend your products to others, boosting word-of-mouth marketing and potential new sales.
2. 2. Employee performance: Employee performance is an important leading indicator of productivity and helps companies track business goals. If performance stays apace, there is one less variable to worry about when predicting future sales.
3. 3. The economy: The global and local economy can also sway desired outcomes. People tighten their budgets during recessions, but consumers are more likely to spend in high times.

Lagging indicators help companies measure the success of past efforts. Lagging indicators can include:

1. 1. Acquisitions: Companies will check lagging indicators regularly, and one of the analyzed KPIs should be acquisitions. This definition will vary from brand to brand, but generally, it will consist of new subscribers, email sign-ups, and social media followers.
2. 2. Profit: Profit speaks to the netted money a company has made. Understanding how this value goes up and down over time can influence the types of initiatives a company starts and its strategic goals.
3. 3. Revenue: One of the most critical indicators is revenue, which will track how much money a company grossed over a period.

Leading indicators are essential for companies to know how they should allocate resources. The advantages of these indicators are that they offer a real-time look at company habits and can guide future decisions.

The disadvantages are that they can be harder to measure as they are specific to each company (while lagging indicators are usually standard across industries) and may prove unpromising as predictors. Customer satisfaction, for example, may not correlate to future solid sales.

Lagging indicators are great tools because they are easy to measure, provide quick insights, and are standard across industries. This standardization makes them helpful in offering accurate snapshots of company performance.

The difficulty of lagging indicators is that once companies see the insights, it may be too late to make any changes to already underway campaigns. Trends can be hard to change, and an overreliance on lagging indicators without spiraling in the metrics of leading indicators can mean such trends, if unaddressed, perpetuate.

Businesses will generally look at leading and lagging indicators in examining company performance. Consider these tips to maximize a performance management strategy:

1. 1. Act on data. Reading data is not enough; companies also have to react to the insights found in the numbers. If you have low sales or customer satisfaction, look into how those values can change.
2. 2. Hold regular meetings. You may have post-mortems after a campaign ends or quarterly meetings to dive into analytics. Having time set aside for such efforts ensures you take a moment to consider KPIs strategically.
3. 3. Try new ideas. Companies stay relevant by trying out buzzy campaigns; the way to determine if these are a success is to use leading indicators to see where a company stands, try out a new idea, and then measure it with lagging indicators after the fact.

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