Measurements of Success – Lead and Lag Indicators
Do you have goals you are looking to crush this year?
Good business owners set goals and work toward them all the time! And, they are often centered around increasing profits and financial gain. All businesses, including non-profits, must make money in order to operate, and any organization looking to grow, will need new goals to motivate their success.
At Business Builder Camp, we are HUGE believers in setting goals. In fact, every 120 days we go through a process to set intentions for our next 120 days (and beyond).
Usually, it is not one particular variable that gets you to your goal. It is often a bunch of moving parts, departments, and team members that help push your organization in the right direction. So, how do you know what indicators to use to ensure you are on the way to meeting your goals?
Break It Down
Steve Howard, in this TEDtalk, says, “You should measure things you care about. If you’re not measuring, you don’t care and you don’t know.”
Without measuring progress, your goals can seem long and daunting.
Take running a half marathon (13.1 miles) for example. It may take you months or even years to reach that distance after you start running. So, how do you know that you are going in the right direction if you don’t track your successes along the way? Chances are without measuring progress, you are going to feel overwhelmed and want to give up.
The same can ring true for your business’s team members. If they are constantly running towards the big picture goal and not measuring or celebrating any successes along the way, they will become less engaged and unmotivated. Ultimately, making it harder to reach the goals of your organization.
However, if you introduce different indicators to help measure progress, you may find your team more committed to the end result. For example, while getting ready for that 13.1 miles you may track how many times you run each week, your pace, etc. By breaking down some of the factors that help get you to your goal, you can be assured you are going in the right direction, and you can even make any adjustments as necessary.
What indicators should you use?
It can be hard to decide what indicators to use when working towards a goal, but it is important to always make sure that you are using both leading and lagging indicators to measure progress.
Lagging Indicators
Lagging indicators are essential for tracking progress, but they are long-term and only show results from past events. Examples of lagging indicators include your return on investment, customer churn rate, and revenue growth. Although very accurate, they don’t paint a picture of what led to your results, which makes it harder to tell what efforts had the most impact.
Leading Indicators
Leading indicators, on the other hand, may not be as accurate as lagging, but they do help you measure the progress being made towards your objectives. They provide more timely feedback which can give you an opportunity to make adjustments as necessary. Some examples include tracking the number of new user accounts, the number of participants at a webinar, or the number of new downloads. You are measuring the variables you believe are going to “lead” you to your larger goal. Leading indicators are also important for keeping your team engaged, as it is easier for certain departments or employees to take ownership of these indicators and see how their efforts are directly contributing to your success.
Whatever metrics you decide to use, make sure both your lagging and leading indicators work to complement each other, and be sure to make adjustments as necessary in response to the data you receive.
Celebrating the Success
With goals and measurements in place, you will be able to track the success of your business more accurately, and chances are that success would not be possible without your team. It is important to find ways to celebrate accomplishments as they arise. After all, showing appreciation to your employees can boost morale, increase trust, motivate your team, and ultimately increase productivity. So, no matter what indicators you are tracking, make sure you show gratitude towards the people who helped get you there.