Question

Lead and lag indicators are measurements used to assess performance in organizations quality.

The leading indicator is considered a predictive measurement. A predictive measurement example might be road crews who wear reflective vests would be the leading indicator for safe work environment.

A lagging indicator is an output measurement where the number of vehicle accidents involving road crews might be an example. To fully understand the two just think that the leading indicator can influence change while the lagging indicator is what happened.

Past research shows that a combination of lead and lag indicators result in better business performance in the long run.

What do you think?

Answer 1

Leading and lagging indicators are kind of measurement tools used in effectively assessing business performance. Furthermore leading indicator is a predictive measurement and lagging indicator is an output measurement wherein leading indicator can influence change and lagging indicator can only record what has happened.

For instance if an organization wants to know how many accidents had occurred on the factory floor they can just refer the accident log which is regarded as lag indicators an after the event measurement tool essential for charting progress but ineffective when attempting to influence the future.

However to effectively influence the future a different kind of measurement tool is required which has to be predictive in nature. For instance if an organization desires for an increase in sales a predictive measure would be conducting more result oriented marketing campaigns. Measuring these activities provides us with a set of lead indicators which are in-process predictive measures.

Lead indicators are always more complex to determine than lag indicators because as they are predictive in nature they therefore do not provide a guarantee of success. However over years various research studies have proved that a combination of lead and lag indicators eventually result in enhanced overall business performance.

For instance satisfied and motivated workers are well proven lead Indicators of customer satisfaction whereas high performing processes are good lead indicators for cost efficiency. Thus while developing a business performance management strategy it’s always an excellent practice of using a combination of lead and lag indicators because a lag indicator without lead indicator would eventually fail to effectively indicate as to how an outcome would be achieved and provide no early warnings about tracking strategic business goals.

Thus a balance of lead and lag indicators are required to ensure the right activities are in place to ensure the precise business outcomes. There is a cause and effect chain between lead and lag indicators which are important while selecting measures to track your business goals. Furthermore as lagging indicators are much more result oriented eventually facilitates reflecting the direct result or output of your organization’s activity.

Leading indicators are easier to influence or improve since they deal with immediate progress and show the possibility that you will achieve your goals. However they’re difficult to quantify and measure at the end of your effort because you need to have well-defined process and very specific tools in place in order to measure them. Thus it necessitates improving leading indicators over period of time in order to enhance your lagging indicators which eventually can facilitate having a positive impact on the operational process, financial results or service excellence.