Leading and lagging KPIs (2024)

FAQs

What are leading and lagging indicators for KPIs? ›

These KPIs, such as the number of enquiries, help predict future sales and give you the ability to plan and make strategic decisions. The key difference between Leading and Lagging KPIs is that Leading KPIs indicate where you're likely to go, while Lagging KPIs only measure what you have already achieved.

If a leading indicator informs business leaders of how to produce desired results, a lagging indicator measures current production and performance. While a leading indicator is dynamic but difficult to measure, a lagging indicator is easy to measure but hard to change.

For example, productivity is a leading KPI for labor cost. A lagging indicator refers to past developments and effects. This reflects the past outcomes of KPIs. If productivity is a leading HR KPI for labor cost, sickness rate would be a lagging KPI.

Specific: A KPI should be a detailed, simple and clear description of what exactly you want to achieve. For example, “Improve customer satisfaction” is too broad. A better KPI is, “Improve customer satisfaction ratings by 10% by the end of Q3.”

Leading indicator examples include the Consumer Confidence Index, Purchasing Managers' Index, initial jobless claims, and average hours worked.

Leading indicators look ahead and attempt to predict future outcomes, whereas lagging indicators look at the past. Some people fixate on leading indicators, arguing that what happened in the past is useless.

Leading indicators simply measure inputs to a system, lagging indicators measure outputs. Or put another way, lead measures are within your control, lag measures aren't. For example, take the human body.

The number of back injuries from patient lifting is the lagging indicator that you hope to drive down with a leading indicator. In this example, your leading indicator is the arrival time of your lift team, and your goal is for arrival to be within five minutes.

Leading and lagging indicators are metrics that tell you about the health of your organization. Leading indicators help predict future performance, whereas lagging indicators give insight into past outcomes. It's important to track both because they help identify product and business improvement opportunities.

A leading indicator is a predictive measurement, for example; the percentage of people wearing hard hats on a building site is a leading safety indicator. A lagging indicator is an output measurement, for example; the number of accidents on a building site is a lagging safety indicator.

What are leading and lagging indicators balanced scorecard? ›

Leading indicators are those that are more immediately measurable, lagging indicators are those that are a result of implementing and continuously monitoring the activities which impact leading indicators.

For example, say your business had a KPI along the lines of “make the workplace neater” or something else similarly vague. In this instance, employees might clean up their desks and make their workspaces nicer, but still fall short of the goal because there's no measurable standard.

Some general examples of lagging indicators include the unemployment rate, corporate profits, and labor cost per unit of output. Interest rates can also be good lagging indicators since rates change as a reaction to severe movements in the market.

Once a team is clear about its lead measures, their view of the goal changes. While a lag measure tells you if you've achieved the goal, a lead measure tells you if you are likely to achieve the goal. No matter what you are trying to achieve, your success will be based on two kinds of measures: Lag and Lead.

Leading indicators are those that are more immediately measurable, lagging indicators are those that are a result of implementing and continuously monitoring the activities which impact leading indicators.