Leading indicators are those things that change in the economy before the economy itself changes. The stock market is supposed to decline ahead of the economy's decline and also improve before the economy does. But the trick in organizational results and brilliant execution is to be able to correctly identify leading indicators that managers can manage that are critical top performance. This according to the book 4 Disciplines of Execution by McChesney,Covey and Huling.
Specifically their second discipline talks about identifying key leading indicators of outcomes (lagging indicators) that managers can influence or change. A neat example is about individuals trying to lose weight. What you see on the weighing scale is a lagging indicator. And most folks would agree that diet and exercise and the clear leading indicators. If you diet and exercise faithfully, you will lose weight. And if you get down to really measuring your diet (diary,meal plans etc.) and your exercise (time on treadmill, time with weights) you know have specific metrics that allow you to reach daily diet and exercise goals- the leading indicators of weight loss over a period of time.
As anybody who has tried weight loss will confirm, the above is easy to say but really hard to do ! And therein comes the discipline of sticking to leading indicators and measuring them sincerely.
The paradox is that organizations fret and fume over lagging indicators ( like sales) without correctly identifying the leading indicators that really matter and those that are amenable to action and measurement. For example, if say you know that for every 100 clicks to your website contact page you get two qualified leads and you are able to convert one of them. By increasing your search advertising budget you can increase clicks and by improving lead management and sales closing efforts you can possibly increase the 50% current lead conversion rate. Thus driving clicks and leads become one leading indicator and converting the leads become a second lead indicator to influence sales the lag indicator.
Why do companies obsess so much on outcomes? Because they are never entirely sure about the lead indicators also known in causal research as independent variables. However, with proper research and brainstorming among the team it makes great sense to focus on a few key lead indicators and vigorously try to measure progress on these indicators. Results should automatically follow. Contact StratoServe.