Difference between lagging KPIs and leading KPIs

I will share with you the difference between lagging KPIs and leading KPIs. Moreover, I will share with you different types of KPIs.

lagging KPIs and leading KPIs

A key performance indicator, or KPI, is an essential tool in the toolbox of any company. As a measurable metric, your KPIs tell you how well your business is doing in relation to its strategic goals. Although metrics and KPIs are often used interchangeably, it’s important to understand that KPIs do not just number. Tracking departmental and individual performance, according to a number of studies, enables strategic execution to be adjusted to meet business objectives. Additionally, by using these indicators, you can break down your strategic objectives into more specific, more specific data points.

Difference between lagging KPIs and leading KPIs

lagging KPIs and leading KPIs

Leading KPIs

Typically, leading KPIs track performance before the process or outcome shows any trends. Such KPIs predict trends and changes and are proactive rather than reactive. Process and system performance can be assessed using such a metric. By taking into account what actions the business needs to take, the leading indicator defines what the business needs to accomplish its goals.

It is important to have leading KPIs even though they may not always be accurate, such as:

  • Growth in subscriptions per year
  • Amount of visitors to the website
  • Percentage share of market growth
  • Number of customers who made purchases

Lagging KPIs

Lagging KPIs measure the performance of a process or business rather than how it has performed over time. Indicators provide data related to the efficiency of the processor system.

An organization’s current performance can be gauged using lag indicators, such as:

  • How many managers attended the corporate event?
  • In the past year, how many products have been produced?
  • What was the net income of the company?

Both provide information about the current business environment and future trends. Also, these metrics provide an indication of how well the company is doing as it works toward reaching its goals. Also, KPIs can be redesigned to reflect the threats posed by competitors and disruptive forces, as well as the opportunities created by changing customer needs and product features.

You can learn how to write KPIs

When an organization knows how various measurements are used and how they contribute to a picture of how things are going for an organization, the relative business intelligence value of the metrics will be greatly improved. There are several types of KPIs:

  • Inputs are measures of the resources consumed by processes that result in outputs (quantity, type, quality)
  • In process or activity measurement, efficiency, quality, or consistency of specific processes are examined; controls, such as tools used, equipment installed, or training programs, can also be assessed.
  • An output is a measure of what was produced and indicates how much work was done
  • A defined set of results is defined as an outcome. This can be an intermediate outcome (which is the result, say, of marketing or communications outputs), or an end result (which is the result of increased awareness).
  • A project measure provides information about the status of deliverables and milestones associated with an important project or initiative  

As a conclusion

When KPIs are simple to understand, they are most effective. It is necessary that every employee within a company knows what the expected outcomes are, how regularly you measure progress towards them, and how you plan to measure them. This information should be accessible to everyone within the organization, not just those who are in charge of the metrics.

In order to ensure buy-in from all stakeholders, the vision, mission, and strategic objectives of the organization must be communicated.

With the help of well-designed KPIs, employees can understand how their work contributes to the organization’s success. All employees know how their work aligns with the strategic objectives that motivate them to achieve them. Therefore, their teams will significantly improve efficiency and succeed in meeting their collective targets.