Typically, organizations rely on lagging indicators to measure and monitor performance. These metrics may present a picture of past performance, but they tend to expose problems after the fact, when the problems are more complicated and expensive to fixif they can be fixed at all.
Leading indicators are predictive metrics that can help identify potential future problems and enable you to correct the course before they become real problems.
Adding leading indicators to traditional lagging indicators creates a balanced view of past, present, and future business health. But, predictive metrics aren’t always easy to establish, which is why many companies fall back on a more accessible historical view.
The following example illustrates the value of using both leading and lagging indicators:
An insurance company determined that telephone hold time was a key factor influencing customer experience, so it measured and reported the average time to answer incoming calls to its service center. This approach, however, assumed that the telephone was customers’ preferred method of communicating with the company. Further analysis found that the real issue was whether the call center was still the preferred channel for customer service. In addition to measuring hold times (a lagging indicator), the company also needed to report call volume (a leading indicator). By doing so, it observed a decrease in call volume and learned that customers preferred service through its website. The company then refocused on ensuring a richer customer experience through online channels.