Leading Indicators

Leading indicators describe performance drivers. Improve them and your business improves.

How would you describe your business? If I asked you to tell me about your business, what would you say?

leading-indicators

Would you tell me about your service or product? Would you describe your employees and the things they do? Those are all great things and valuable descriptors of your business.

But, do they say anything about how you will perform tomorrow? How would you know? More importantly, how will you ever be objective about improving it?

Indicators that 'lead' measure the things you know are important. They describe and also quantify the key activities that drive success. They are the "if, then", "cause-effect" keys to getting great results.

Outcome measures are lagging indicators that give you a high level look at the overall performance of your business. Leading measures provide objective information, linked to an appropriate outcome measure, that allow management of the day-to-day activities.

While two businesses in the same industry may have similar performace drivers, there are no standards or rules about what to measure and track. A good rule of thumb is to quantify everything.

Measure and track things like customers per day or hour. Measure complaints. Measure compliments. Measure computer uptime/ downtime. Measure sales transaction time. Measure sales mix. Measuren the number of rings before the phone is answered.

Measure everything. Then develop a deep understanding of how those measurements support what the customer wants. Determine how well the things you are measuring connect to your strategy. Then set targets that, if achieved, make you better (more profitable, more competitive, etc).

When you measure and monitor performance drivers, problems become visible. This way of managing allows for control of both the individual activities and the overall system. Your customers interact with the processes within the system. They experience the processes, but the "business" is the whole.

You can't manage the whole. You have to manage the parts. Leading indicators let you know (not assume or guess) what is working.

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