Regardless of your enterprise’s sector, industry, organizational age, or size, routine performance measurement is undoubtedly an essential aspect of your performance management strategy. From assessing the success of ongoing and new ventures, improving products and processes, and making informed decisions about your operation’s future, measurement is essential to performance management.

This month, we’ll be exploring various performance management and measurement best practices that can help you improve your processes, ensure operational efficiency, and promote a thriving enterprise. Let’s begin with a deep dive into leading measures.

What Is a Leading Measure? A Crystal Ball of Sorts.

A key performance indicator, also known as a leading indicator or input, a leading measure is a metric designed to predict where your enterprise is heading — literally what outcomes your operations are leading to. In economics, a leading measure is one that changes before the rest of the economy does and can therefore portend a major economic shift. Durable goods orders, for instance, predict a general downturn when they start trending downward.

At the enterprise level, a leading measure provides a benchmark used to help determine what approaches might need to be implemented to meet specific longer-term goals. They suggest what might happen, given certain conditions, and can therefore lead to responsive change. As such, they are typically articulated on an organizational basis — leading measures are incredibly specific to your enterprise’s needs and goals.

What Are Some Examples of Leading Measures?

Because leading measures are so specific to your organization and niche, they are hard to generalize. Still, there are a few that are more commonly held. These include:

• Customer Satisfaction and Brand Loyalty
• Employee Satisfaction and Safety
• New Product Pipeline

Let’s explore these in more detail.

Customer Satisfaction and Brand Loyalty

Analyzing current customer contentment and loyalty to your brand can help predict how likely existing customers are to renew subscriptions, purchase new products or services, or tell others about your products and services, leading to sales growth. If your customers are highly satisfied, what processes can you put in place to capitalize on that satisfaction?  If your customers aren’t happy, how can you improve that relationship, retain their business, and expand your reach?

 Employee Satisfaction and Safety

Similarly, employee satisfaction can indicate future success — happy, healthy employees lead to higher productivity, increased innovation, and happier customers. How can you quantify employee satisfaction and safety? What metrics could you rely upon to do this in your industry? If you’re in construction, an appropriate leading measure might be hard hat use. If yours is a nonprofit organization, it might be unprompted social media engagement by employees on behalf of your enterprise.

New Product Pipeline

A robust funnel of new products or services could indicate how well your organization can continue serving existing clients and acquiring new ones. If your pipeline volume has stalled, what proactive measures can you take to jumpstart it? Similarly, if you’re looking to enter new markets or channels, what changes do you need to implement to get there?

But Wait! Aren’t Some of Those Leading Measures Actually Lagging Measures?

Great question. The answer is: They might be, depending on niche or department. For some enterprises, customer satisfaction is treated as a lagging measure, an indicator of past performance, not a predictor of future initiatives. Similarly, recruitment is a lag indicator for human resources but a lead for the rest of the organization. HR’s success is measured by how many people are hired; the talent and energy of those people predict future performance.

Generally, leading measures can be real-time proxies for lagging indicators, which are analyzed less often. Leading measures are proactive, identifying trends, and providing fast feedback and suggestions for progress. Lagging measures are often more concrete, recording what has happened — sales revenue, number of accidents, event attendance — versus what might happen based on future initiatives.

Both leading and lagging measures are critical to business analysis. Business Analysis is a practice that helps facilitate change in an organization by identifying needs and determining potential solutions, ultimately improving business value. Business analysis involves the detection of opportunities for improvement in your business at large. Leading measures often rely on data provided by lagging measures to help identify those opportunities.

Leading the Way to Performance Management

When your performance framework incorporates leading measures in concert with lagging indicators, your decisions can become more intentional, more transparent, and more measurable in the outcome. Relying on leading measures can help drive meaningful change, deliver quantifiable value, and support superior performance while meeting your most important enterprise objectives.

Leading measures are part of a library of practices, tools, and templates we at Momentum use to assist clients in their needs, including business improvement and change. Get in touch to learn more about how we might tap these tools to help steer your next venture.