A bizarre question, maybe, but ask yourself whether your executive management, managers and supervisors are using business information delivered through reports and scorecards to take the pulse of the organisation or to conduct a post mortem of last month’s performance?

Put another way, are the Key Performance Indicators (KPIs) that they are using to make their decisions leading indicators or lagging indicators?

Lagging indicators vs leading indicators
 
Some examples of lagging and leading indicators:

leading: Software bugs reported to Support in Release x.x   
lagging: % of identified software bugs fixed in Release x.x

leading: Q2 revenue   
lagging: Contracts in negotiation for Q2

leading: Call centre calls completed within 2 minutes   
lagging: Customer cases currently open

leading: Product returns in November   
lagging: Customer complaints 3 month trend

Things can start to go wrong in a business well before the performance measure turns the traffic light on the scorecard red. Using metrics that measure past events is like driving whilst looking through the rear window. It’s easy not to see an opportunity or threat on the road ahead until you’re upon it.

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 and regular monthly reports
2.    They are the easiest to identify, especially if you do not have intimate insights into the operation of the business
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.

So does is really matter?   Well – yes.

Firstly, delivering lagging indicators means that the business has a good idea of how well it has done, but little view of whether the direction / strategy is working. So not only is it wasting manager’s time looking at reports which are only showing a historical position – but more importantly it is squandering the opportunity to gain a competitive advantage.  Remember- ‘if it’s difficult for you, it’s probably equally difficult for your competition.’

Secondly, the promise or ROI from the scorecarding project is not being realised.  Scorecards should not just be the latest management fad for senior management.  They should be a valuable tool to aid decision making in the hands of managers and supervisors – in fact anyone managing a team. 

So how do you working out what the leading indicators are?  Simple.  Understand the end to end process and the answers will leap out at you.  Provided you've process mapped them correctly - now there is the subject of another post..... don't get me started.

The final word - Agility

Think about driving alongside a pavement crowded with Christmas shoppers.  A pedestrian steps out and thanks to your lightning reactions and the ABS on the car, you swerve and manage to avoid hitting them. So agility is all about 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 organisation is an oxymoron. It is practically impossible, especially when you realize the increasing demands to comply with various pieces of legislation.  So a better approach is to be prepared for change (process) and have early warning (leading metrics).

I'm presenting on this topic at the Unicom Performance Management conference on 22nd September.