Every company we work with seems to have some Key Performance Indicators (KPIs). But not many people know why they are winning or losing.
Based on the charts and graphs posted everywhere, most people can tell if they are achieving their goals or falling short. Most of the KPIs that companies track are “lagging” KPIs, which they use to keep score and report how successful they have been in the recent past. Lagging KPIs are akin the score at the end of the baseball game.
Business leaders also need to establish “leading” KPIs to understand their performance before the end of the month, when it’s too late to change anything. By choosing the right leading KPIs, managers and employees can both understand their performance and what they need to change to meet their targets.
A common mistake people make when attempting to track leading KPIs is using the same metrics with a shorter time frame. This is like tracking the score at the end of every inning, which is still a lagging KPI. The objective is to monitor the performance of the processes and the inputs that contribute to the final outcomes.
If you truly understand these processes and inputs, your management team should be able to determine the most important indicators and monitor them. By tracking these leading KPIs you will then be able to make intelligent decisions on what needs to change immediately when future results aren’t looking favorable.
In baseball some leading KPIs include on-base percentage, earned run average, and number of pitches thrown. By tracking these KPIs a baseball coach can make decisions during the game that affect the outcome, such as when to use a designated hitter or bring in a relief pitcher to win the game. These leading KPIs tell the coach what is working and what isn’t, and suggest what they should do as corrective actions.
Does your company use leading KPIs? Are you able to react quickly enough to negative trends to change month-end results?
