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Leading and lagging indicators are two types of measurements used when assessing performance in a business or
organization. The difference between the two is that a leading indicator can influence change and a lagging indicator can
only record what has happened.
Leading Indicators: Leading Indicators are a potentially predictive measurement of how a company might perform in the future. They
are more easily influenced than lagging indicators but are harder to predict. For example, a leading indicator, if you wanted to increase
sales, could be increasing the number of sales calls or developing a stronger marketing plan. Measuring these activities provides a set
of Lead Indicators, but it is difficult to measure what exactly was the cause of the increase in sales. They are difficult to assess because
they are not straightforward.
Lagging Indicators: Lagging Indicators, on the other hand, are easier to measure because they measure what has happened in the
past. For example, a Lagging Indicator for Sales would be measuring the number of sales calls made last month. This kind of
information is easy to obtain and measure. Lagging Indicators are a post-event measurement which are essential for charting progress
but not helpful when attempting to influence the future.
When developing a business strategy, a combination of Leading and Lagging Indicators is the best way to measure
performance. The reason for this is that a lag indicator without a lead indicator will give no indication as to how a result will
be achieved and provide no early warnings about tracking towards a strategic goal.
Leading Indicator Measures Quarterly Targets (measured across four quarters to reach annual target goal)
Lagging Indicator Measures Quarterly Targets (measured across four quarters to reach annual target goal)