Using Leading Indicator KPIs To Help You Make Adjustments
Leading indicators and results indicators are both key performance indicators (KPIs). I love leading indicators. The right leading indicators will guide you towards your desired outcome. If you pay attention to them, you can't help but think of necessary adjustments if you start veering away from your desired results.
Question: Sometimes it gets confusing between what my priority is and what a leading indicator is?
- A priority is something that you do. It's a project, a group of actions.
- A KPI is something that you measure. So for example, we want 5 signed contracts this quarter.
- A Leading Indicator is what you measure that helps you reach your KPI.
For example, your KPI might be "number of contracts." It is what you measure. Your priority of getting 5 signed is a collection of actions that you need to take with various prospects and customers to get the 5 signed.
Steps to get a leading indicator:
- Ask why's and how's. In our example, we want 5 contracts signed. In order to get 5 contracts signed - you may need to consider measuring things like - How many leads will we need in that quarter to get 5 signed contracts? How many meetings will I need to get 5 signed contracts? How many marketing efforts will we need to prepare and send in order to get 5 signed contracts? But it is something up stream from your result that you can measure so back up and figure out "how do we get signed contracts?"
- Predict the likelihood of achieving success and measure it. This is important so that you can identify your opportunities and challenges earlier while you still have time to act and change the outcomes, versus only measuring your outcome.
You can also think of leading indicators as levers that move your outcomes. Staring at the outcomes do not help you improve the outcomes. Working the levers will help you change your outcomes faster and with less effort.
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Editor's note: This blog was originally published on June 20, 2011, and has been updated.