Lead vs. Lag Metrics: What every Business Owner Needs to Know

by Sean Foster | December 1, 2022 | Newsletter

Those who are close to me are aware that I write about what I have recently encountered, and this time there is no exception. I thought Lead vs. Lag measures were done and dusted, but it turns out I was wrong. I challenge you to consider yours.

Every successful business owner knows that success begets success, and to ensure that you’re focusing on the right areas in your business, it’s important to measure your performance. Knowing what metrics to track is a challenge for many business owners. Usually, the list can become very large, and the more you focus on, i.e. the more measurements, the less is their benefit. Focus on just a handful and you are almost guaranteed success.

When I have asked what their lead and lag measures are, I find that 80% of the measures are Lag indicators. That's not good, but worse than this is that most did not realise this either.

What is a Lag Measure?

Lag measures are backward-looking indicators used to measure results after the fact. They provide insights into how well we performed against targets in the past and allow us to track overall performance over time. Examples of lag measures include total sales revenue, total number of customers acquired, the total number of conversions, etc. It’s important to pay attention not only to the results achieved but also to any patterns or trends in those results over time when tracking lag measures.

What is a Lead Measure?

Lead measures are forward-looking indicators used to measure progress towards a goal or desired outcome. They are predictive in nature, providing insight into how well a team is doing over time and allowing everyone to make more informed decisions about their strategy. Examples of lead measures could include customer satisfaction (Net Promoter) scores, the number of leads generated from a website, average order value (AOV), etc. It’s important to have both short-term goals (days/weeks) as well as longer-term goals (months/years) when considering lead measures.

Why are Both Necessary

Lead and lag measures both play an essential role in helping businesses reach their goals. Lead measures provide insight into how close we are getting towards achieving our goals while lag measures provide feedback on whether or not those goals were met after the fact. By tracking both sets of metrics together, you can get a better understanding of what strategies work best for your company and make more informed decisions about where you should focus your resources going forward.

Now Let's Get Buy-in

In Utopia, all of our staff get wildly passionate about these measures and actively track them to ensure the company's success. For the rest of us not living in Utopia, we spend hours formulating and tracking these measures and are grateful during the next team meeting when we get a few nods and smiles when we present the results. Pretty blah, isn't it?

Just like the saying goes: “You can lead a horse to water but you cannot ...", the same applies to these measures. Unless your individual staff members have actively contributed to formulating these measures, and fully understand how they work, and they know how their outcomes directly impact them at a personal level, then you are up the proverbial creek without a paddle.

And this is where simple wins. Without creating barriers by overthinking complexities, just ask simple straightforward questions like: "When things are going really well, what is the one most common factor that is at play that is causing this success?" Is this 'thing', the 'thing' that we should be measuring? Now sometimes you have to dig down a few layers to get to this most important 'thing', but the good news is that all you have to do is to direct the questioning. You want your staff to stumble on the answer and for you to all agree that this is it. 🙂

When it comes to measuring your 'thing' (sorry, that could be grotesquely misinterpreted), don't rush off to your IT expert with a request that we need to automate this measure. If appropriate, just get your staff to manually track the data on some paper and to report their findings at the next and ongoing meetings.

Conclusion

This NewsBrief is brief. It would be great if you pick up these concepts and run with them, but with the interest in brevity, I am only outlining these approaches. If you need additional input then just say the magic word.

Regards,