Hi,
You will often come across discussions regarding the difference between lead and lag indicators.
Lead and lag indicators come into play with balanced scorecards; Norton and Kaplan refer to them as Outcome measures. The cause and effect flow of goals and objectives with the balanced scorecard (BSC) lends itself well to producing actionable strategies.
It is worth looking at this chain effect across the BSC perspectives:
Goals are represented as bubbles on the strategy map; they have associated measures which gauge progression towards the defined targets. Formulating suitable goals and appropriate measures or metrics can be a formidable task to embark upon.
One important element is to maintain a level of balance between the lead and lag indicators. Put simply, lead measures are pro-active, in the future and track what is done to pre-empt; in other words you can influence their outcome.
By contrast, lag indicators measure what has already happened; hence are captured for reporting purposes.
Consider the following as examples of each of them:
Lagging: Leading:
- What time I woke up - What time the alarm clock was set for
- Revenue - Orders received
- New customers - Number of proposals submitted
- Budget spend by Q2 end - Forecast budget spend by Q2 end
Hence devoting time to ensuring the correct balance between the lead and lag indicators is an important factor for consideration when developing suitable balanced scorecard measures.
Regards,
Musab Qureshi
You will often come across discussions regarding the difference between lead and lag indicators.
Lead and lag indicators come into play with balanced scorecards; Norton and Kaplan refer to them as Outcome measures. The cause and effect flow of goals and objectives with the balanced scorecard (BSC) lends itself well to producing actionable strategies.
It is worth looking at this chain effect across the BSC perspectives:
- Effort at the Learning and Growth perspective in terms of 'enhancing organisational capability' leads to...
- More 'efficient and effective processes' at the Internal Processes perspective; these consequently result in...
- 'Increased customer satisfaction' at the Customer/Partner/Stakeholder perspective; which ultimately leads to...
- 'More profit' in the private sector and 'more satisfied stakeholders' in the public sector at the Financial perspective.
Goals are represented as bubbles on the strategy map; they have associated measures which gauge progression towards the defined targets. Formulating suitable goals and appropriate measures or metrics can be a formidable task to embark upon.
One important element is to maintain a level of balance between the lead and lag indicators. Put simply, lead measures are pro-active, in the future and track what is done to pre-empt; in other words you can influence their outcome.
By contrast, lag indicators measure what has already happened; hence are captured for reporting purposes.
Consider the following as examples of each of them:
Lagging: Leading:
- What time I woke up - What time the alarm clock was set for
- Revenue - Orders received
- New customers - Number of proposals submitted
- Budget spend by Q2 end - Forecast budget spend by Q2 end
Hence devoting time to ensuring the correct balance between the lead and lag indicators is an important factor for consideration when developing suitable balanced scorecard measures.
Regards,
Musab Qureshi
