Is your scoreboard Lagging or Leading?

Could something as simple as tracking the right metric make a difference on how much you get done? Experience and data say it makes a huge difference – and the most important component is whether you’re tracking something that’s lagging or leading.

We all have things we want to accomplish – make more money, lose weight, spend more time with friends and family. In your business there’s probably some kind of similar list – increase revenue, increase profits, get more customers, etc.

And if you’re serious about improving those numbers, you’re probably measuring what you’re doing:

“What gets measured gets done.”  – Tom Peters

But are you measuring the right things?  If you’re like most, then you’re probably focused on the results – which is typically a lagging measure.  If you want more revenue, then you’re tracking revenue growth month over month. If you want to lose weight, then you’re tracking the results of the scale whenever you weigh yourself.

Ultimately those lag measures, those results ARE what matter – but it turns out that using them to keep score isn’t very helpful (and it’s common trap that many will fall into).

“Management by results – like driving a car by looking in the rear view mirror.”  – W. Edwards Deming

By definition, a lag measure doesn’t tell you anything until after something has happened (or not happened). If I want to lose weight and I’m measuring that outcome by checking the scale every week, all I can do when I check the scale is figure out how things went last week. If they went well, I’m happy and hoping that repeats. If they went poorly, I’m upset and hoping it doesn’t repeat.  Either way it doesn’t give me a lot of control or much to work with…and it drives a lot of stress while you’re waiting to see how things went.

Same thing from the business perspective – imagine your goal is to make more money for the quarter (10% more than you made last quarter).  You and your team make that a focus and then wait three months to see how things turn out. For starters, it’s pretty frustrating to be in limbo for a couple of months…and it’s likely that your employees will lose focus while waiting to hear about results – especially since it’s likely that they feel like they can’t impact the outcome that much anyway.

A better solution – leading measures…

The good news is there is a much better way to use the idea of tracking and measuring to drive change and outcomes. The bad news is that it can be challenging to figure out what to measure and how to measure it.

The better way to drive outcomes is to focus on leading measures – look at the metrics of the activities that drive the results.

An easy example is to go back to the concept of weight loss. Just looking at results (the lagging measure) isn’t going to do much for you other than stress you out.  However…you know that the best way to lose weight is to eat less and work out more.  Therefore it makes sense to start measuring those activities. If you improve those metrics (cut calories by 10% and walk for 30 minutes every other day) then the results will follow.

The difference is finding the right leading measures – which isn’t always the easiest thing to do. In order for something to be a good leading measure, it needs to be both Predictive and Influenceable.

Predictive and Influenceable

A good leading measure is predictive of the results that you want – in other words, if you improve that metric, then the ultimate result that you’re looking for will improve as well.  Eating fewer calories has been proven to be predictive for weight loss.

A good leading measure also needs to be influenceable – something that you can actually control (or at least influence). Lag measures generally can’t be influenced…which is why it makes more sense to focus on activities or behaviors rather than outcomes.

There’s a great example of finding the right lead measures in the book ‘The 4 Disciplines of Execution’ by McChesney, Covey and Huling. In the book they talk about a client of theirs, a large retail department store that desperately needed to increase revenue after being down due to increased competition. Store management was under significant pressure – which initially led them to push their teams to simply ‘Sell More’.  Maybe the right idea, but it isn’t very helpful or actionable.

Trying to figure out a better approach, they started looking into the bright spots within the store – specifically they found a salesperson in the shoe department who was consistently selling a lot more than everyone else. They asked what she was doing differently. It turned out there were 3 specific things she did with every customer:

• Show at least 4 pairs of shoes to each customer (suggestive selling)
• Write thank you notes to each customer
• Invite every customer to set up a charge account

Once they recognized these behaviors, they set up an environment and processes to help the other salespeople to do this consistently as well. It wasn’t an easy change a lot of the team members, but now they knew specifically what they had to do in order to ‘win’ (as opposed to just ‘selling more’).

The result?  Sales went up from the previous year by over 10% within 3 months.

Suggestive selling and building customer relationships isn’t new to the retail world – in fact it’s pretty basic but it’s easy for team members to get distracted with lots of different initiatives. By clearly calling out and measuring 3 simple things they needed to do every time, it made it easy for the team to step up.

What are you measuring?  Are you simply looking at lag measures and hoping for better results? Or have you identified the right lead measure that makes a difference in your business?  We’d love to hear your thoughts – let us know in comments below.

Shawn Kinkade   Kansas City Business Coach