The Value — and Limitations — of Leading Indicators

Working in large organizations I became very familiar with “leading” and “lagging” indicators and, admittedly, sometimes  I found what I thought was the “complexity” of the concepts to be a bit overwhelming. But, I’m very data-driven and very committed to measuring the impacts of my efforts whether working in an organization, for a client or for myself. The premise is really quite basic: if you are looking for certain outcomes it makes sense to manage the inputs to those outcomes to boost your chances of success.

After spending almost four years now managing my own business, these metrics are much closer to my heart. But, whether you’re an entrepreneur, or working in an organization, I cannot impress upon you enough how important it is to establish leading indicators to predict the lagging indicators that will lead to your business’ success.

The concept is actually somewhat easier to grasp for small, entrepreneurial, businesses like mine, I think. I’ve discovered that I naturally monitor leading indicators all the time. For my business it’s fairly simple at this point in time – this is the process I use:

  • I establish my annual revenue goal and break it down by weeks and months.
  • Based on that goal I can determine the average revenue I need to bring in each month or week (I track both).
  • I can also determine the billings I need to generate by week, and..
  • The new projects/assignments I need to generate each week.

This helps me to determine the likelihood that I will meet my income requirements for the future.

It’s not that difficult to do, and it actually results in less stress in an environment where the future can sometimes seem uncertain. As long as I have enough projects in the pipeline, enough revenue coming in and enough work going out–based on the goals I’ve established–I can feel fairly comfortable. And, when I’m exceeding my goals I can sometimes kick back and relax!

In larger businesses I’ve worked in, or with, it sometimes felt like we were trying too hard to come up with leading indicators that weren’t necessarily that relevant. In a smaller business–or smaller business units–where these numbers become much more personal, it is quickly readily apparent what’s important to you. The things you need to be doing now to generate results down the road become obvious. It’s then just a matter of putting some numbers around those things so you can measure and track them and, most importantly, modify your actions as necessary to positively impact your results.

  • So, if you’re in sales, your leading indicators might be: numbers of cold calls made, number of leads generated, number of proposals sent, etc.
  • If you’re a grant writer, your leading indicators might be numbers of viable grant opportunities identified or numbers of grants submitted.
  • If you’re a PR professional, your leading indicators might be numbers of news releases generated or number of placements achieved.

Here’s one very important caveat, though. Don’t make the mistake of thinking that achieving your leading indicators is a good signal of success. I once had a grant writer tell me that she was being successful based on the number of grants she was submitting. She hadn’t, however, generated significant grant funding through her efforts. Yes, leading indicators are important, but they tend to be process measures. Lagging indicators are more likely to reflect the outcomes that are a measure of real results.


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