How to Create a Leading Indicator KPI

By Jessica Wishart

    Wed, Jun 6, 2018 @ 11:00 AM KPIs & Dashboards

    When thinking about the most important numbers to measure in your business, most of our clients have How to Create a Leading Indicator KPIno trouble coming up with a list of results they want to achieve. The usual suspects are Revenue, Profit, EBDITA, # of customers, employees, or locations, etc. These Result Indicator KPIs are important - you need to think about the results you want to achieve in your business and set those targets. But, don’t stop there. For your key performance indicators to truly help you solve business problems and reach your goals, you also need to spend time developing Leading Indicator KPIs.

    What are Leading Indicator KPIs?

    Leading Indicators can help predict what will happen in the future. They let you know if you are on track to achieve the results you want. Leading Indicators are measurable, and you have the ability to influence or move them. If you determine and track Leading Indicator KPIs and make adjustments based on those indicators every week, you will have an execution advantage over your competition.Tweet: If you determine and track Leading Indicator KPIs and make adjustments based on those indicators every week, you will have an execution advantage over your competition. @RhythmSystems https://bit.ly/2Hb5b9Z

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    4 Step Process to Determine Leading Indicators

    There’s no magic formula or standard set of Leading Indicators that works for every company. Leading Indicator KPIs only become powerful when you find that right lever to pull that impacts the results that are most important to your business. While we can’t tell you which leading indicators are most important in your business, we do have a proven process for determining the ones that will work for you:

    Leading Indicator KPI Process

    Step 1: Be clear about the business problem you are trying to solve, or the opportunity you are trying to maximize.
    Step 2: Clarify the desired result, and make it SMART by setting success criteria on this result KPI. We use a simple Red-Yellow-Green method.
    Step 3: Dig deeper with questions to determine how you get the results you want. Most people don’t ask enough questions to get to a meaningful underlying Leading Indicator.
    Step 4: Drive results by setting clear success criteria and putting your Leading and Results Indicators on a dashboard to status every week.

    Marketing KPI Example

    One of the most common business problems we hear about is difficulty achieving predictable results in sales and marketing. To help bring this process to life, here’s an example of how you might create a Leading Indicator KPI:

    1. Let’s say that you are having a problem with your marketing strategy. You’re just not able to generate the number of sales-qualified leads that your sales team needs to hit their quotas.
    2. The result you are trying to impact is the number of sales-qualified leads (SQLs) that the marketing team can generate each month. When you take a look at the data, you can see that your sales team closes 1 out of every 10 SQLs. Their quota for the month is 50 deals closed, so the marketing team needs to provide 500 SQLs for them to hit this number. In order for your sales team to hit their numbers Your Result KPI with Red-Yellow-Green success criteria might look like this:
      # of SQL per month
      Green: 500
      Yellow: between Red and Green
      Red: 400
      SuperGreen (stretch goal): 600
    3. Next, we need to dig deeper with questions to understand how we can move the needle on the number of sales-qualified leads that marketing pulls in each month. Here are some of the kinds of questions you might ask:
      - What makes a lead well qualified for sales?
      - Where do most of our SQLs currently come from?
      - Can we do more of what we’re already doing to get more SQLs?
      - What are our potential SQLs reading, or where are they going, that we can get in front of them?
      - Are we offering the right content to attract SQLs to our marketing site?
      - Are we promoting the content in the right places? 
      - Are there any trade shows or events where we can have a booth or a speaker to capture SQLs?
      - What are our competitors doing to get SQLs?
      Keep asking questions and digging deeper until you land on something that you can measure, that you can influence, and that you believe will make a significant impact on the result you are trying to achieve.
    4. From our questions, maybe we come to the conclusion that most of our SQLs come from events, like webinars, trade shows, and conferences. If this is how most people who are ready to buy are finding us, we decide to increase the number of marketing events we host or attend to try to capture more SQLs. Each event typically yields 50 new SQLs for us, so if we participate in 10 events per month, we should be able to hit our goals. Our Leading Indicator KPI might look like this:
      # of marketing events per month
      Green: 10 events/month
      Yellow: between Red & Green
      Red: 5 event/month
      SuperGreen: 15 events/month

      We can create a dashboard where we track the events (the Leading Indicator) and the number of SQLs (the Result) to see if this is the right lever:
      Leading Indicator Example

    This may be an overly simplified example, but I wanted to illustrate how the process works. The marketing team has control over how many events they do to get leads, so this is something measurable and movable. They can begin testing this for a quarter to see if pushing on this lever really does generate the number of leads that they need for their sales team to be successful. If moving this Leading Indicator doesn’t have the impact they intended on the results, they can go back to the questions in Step 3 and pick a different Leading Indicator to test, such as # of content offers on LinkedIN, # of ads in industry publications, etc.

    Take a look at your business and pick a problem to tackle this quarter by tracking Leading Indicator KPIs. See what you can influence to get the results you want, and measure it all in your dashboard, and talk about it in your weekly staff meetings. Good luck!

    Rhythm Systems Leading Indicator KPI Template

    Looking for some KPI Examples to help get you started? Check out our additional resources:

    25 KPI Examples for Manufacturing Companies

    Employee KPI Examples: How to Measure What (or Who) You Want to Move (Video)

    KPI Examples for Successful Sales Teams

    Marketing KPI Examples

    10 Best Employee KPI Examples

    Rhythm Systems KPI Resource Center

    Photo Credit: iStock by Getty Images

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