Analytics – leading or lagging metrics?


lagging-and-leading-technical-indicators[READ TIME: 3 mins]

Another driving analogy

Think about driving alongside a pavement crowded with shoppers. A pedestrian steps out and thanks to your lightning reactions and the ABS on your car you manage to avoid hitting them. So ‘agility’ is whether you are able to respond if something jumps out in front of you. The measure is “did you hit them”. You could have been just as ‘agile’, but required a far less violent reaction if you had been alert to the possibility and had had earlier warning of the pedestrian’s actions.

There is a strong parallel with corporations. Many are striving to be so nimble that they can change direction in an instant, but are failing because a nimble 10,000 person organization is an oxy-moron[1]. It is impossible, especially when you realize the increasing demands to comply with various legislation. So surely a better approach is to be prepared for change (process) and have early warning (leading metrics).

Pick your KPIs carefully

Put another way. Are the Key Performance Indicators (KPIs) that you are using to make your decisions leading indicators or lagging indicators. Things can start to go wrong in a business well before the performance measure turns the traffic light on your scorecard red. Using metrics that measure past events is like driving while looking through the rear window.[2] You can easily miss the opportunity or threat on the road ahead until you’re upon it.

Examples of lagging and leading indicators

Lagging Leading
software bugs reported to Support in Release x.x % of identified software bugs fixed in Release x.x
Q2 revenue contracts in negotiation for Q2
Call centre calls completed within 2 minutes Customer cases currently open
Product returns in November Customer complaints 3 month trend

The wrong metrics?

So if leading indicators are clearly more valuable than lagging, why do many (most) projects seem to deliver reports and scorecards full of lagging indicators? There are probably 3 reasons

  1. Lagging numbers are the easiest to find in the corporate databases – they are the numbers that are found in the regular monthly reports
  2. They are the easiest to identify, especially if you do not have intimate insights into the operation of the business (and many projects are given to IT to deliver)
  3. When IT are under pressure from the business to deliver “scorecards for the top team”, they are the quickest way to satisfy the demand.

 

[1] An Oxymoron is where two terms contradict – such as Military Intelligence or Microsoft Help.
[1]Like most mothers driving monster 4x4s (SUVs) around the city filled with fighting kids.