Lead and Lag Performance Indicators © Michael Marshall
Businesses are losing money and not realizing the full potential of their business and people performance. Achieving success in your business will improve with greater understanding and utilization of ‘lead’ and ‘lag’ performance indicators. Managing the ‘numbers’ can bring your performance to ‘life’.
Increasing your ability to discern between lead and lag indicators, how to identify, control/influence, track, and how each supports the Key Performance Areas (KPA) will make a significant improvement in your business performance. Knowing and tracking the leading indicators, through the use of a Visual Board, will help you monitor progress and enable you to take corrective actions while the work is in progress vs. waiting to see only the end result (the lagging indicator).
Language of Visual Management (a portion):
- Key Performance Areas (KPA) – What is important for you to measure?
- Target – What is the number you need to achieve (how much improvement is needed) by when.
- Lead Indicators – Reflects the specific factors you have identified and will focus on which impact the final result (activities within the process – ‘live / real time’ performance information). A PROACTIVE approach!
- Lag Indicators – reflects the outcome / actual result of the effort. A REACTIVE approach!
- Visual Management – Utilizing a ‘visual board’ which provides a visual representation of your data. This will provide a way to engage and energize your people by having a meaningful, easy to understand data that reflects the ongoing performance. This will allow people to take immediate corrective actions to ensure target is met.
You can only affect a lagging indicator by influencing the input / activities which are represented with the leading indicators. Leading indicators are measured and tracked on a frequency determined by you. A ‘trigger’ is identified that causes an intervention (adjustment to the process) when the short term performance, if continued, will not achieve the ‘target’.
Limit the total number of items you will measure and track. Trying to track / manage too many could create an extraordinary amount of work and prevent you from managing the information and necessary adjustments to fully realize the benefit.A key success factor is to ensure your people are informed, encouraged, committed, and empowered to make the necessary adjustments to ensure success.
“If you cannot measure it, you cannot improve it.” … Lord Kelvin
Lead and Lag Performance Indicators ©
How to get started:
- Identify what is most important to measure – the KPA (list, prioritize and identify the top 2-3 items).
- Identify the target number (how much improvement is needed) and by when.
- Identify the key factors (LEAD Indicators) that impact your ability to achieve and will monitor/track progress toward the TARGET. (Identify no more than 2 Lead Indicators for each KPA; list ideas, prioritize, & select the top 2)
- Determine how often will you measure the leading indicator? Who will measure? How will it be measured? Where and how will you document the ‘reading’ on your visual board? Identify what performance will trigger a corrective action that will move performance in the needed direction.
- Create a visual board with all relevant information and display in a highly visible area within your operation. The visual board can reflect multiple KPAs.
- Track your metrics and update your visual board (particularly the lead indicators) on an established frequency. This will allow your people to monitor progress and determine the appropriate adjustments to make on your process/es (based upon the leading indicators) along the way to increase the probability of achieving the target.
- Implement necessary actions to impact your metric and continue to track. (you can include the key actions on your visual board as well)