Leading and Lagging Indicators | Employee KPI by Department

Imagine sitting down in the cockpit of a 747.  There’s hundreds of gauges and readouts in front of you.  Some show you where you’re going, others, how the plane is operating.  

For most of us, this would be incredibly overwhelming.  There’s simply too much data at hand. Don’t touch that doomawidget, you’ll crash the plane!

Now imagine sitting in a performance car.  In front you is a streamlined gauge cluster focused on the handful of things you need to know as you flow through the corners ahead of you.  

When you’re running your business, it’s important to focus on the right KEY metrics.  These metrics help you understand the health of your business and effectiveness of the major functions within it.  

There’s a few concepts around metrics that you need to be aware of, including leading metrics, lagging metrics and balancing metrics.  If you want an accurate snapshot of your business and the levers to make changes, you need some of each type of metric in place.  

What are Lagging Metrics?

When most people talk about metrics, they’re referring to lagging metrics.  Revenue, profit, Customer churn rate, employee satisfaction are all lagging metrics.  They’re a measurement of results.  When driving, they’re like looking in the rear view mirror and seeing where you’ve been.  

What are Leading Metrics?

Leading metrics are all about the things that drive the results.  The number of sales activities drives revenue.  Leading metrics provide the levers you can adjust to achieve the results you want.  It’s why the middle of your sports car dashboard has a tachometer (engine speed), not an odometer.  You can change the revs to impact performance.  

What are Balancing Metrics?

Imagine your sales person goes out and sells $1,000,000 worth of product. That’s amazing!  Then you find out that he gave a massive discount to make that happen, reducing your gross margin to anemic levels.  

Imagine balancing metrics like a tug of war between two metrics.  In this case, revenue and gross margin.  To stay in balance, gross margin must stay at a certain level as revenues grow.  

How to Create Your Company Dashboard

I remember it like it was yesterday.  I was in a management meeting with a relatively new client and we got to their metric review.  The CFO opened Excel and got ready to launch into the company’s metrics.  

The first tab had dozens of metrics around productivity and utilization.  The next, margin and contribution, the next … you get the picture.  

Do you remember that 747 cockpit?  While her spreadsheet was elegant, it was just as overwhelming for everyone in the room.  

Nobody could see the trends or what was truly most important to the organization.  

Now take another client in the same space who runs a very lean dashboard.  There’s 12 .. maybe 15 key metrics, with a trend (months) for each.  

It’s structured a little like a P&L – At the top they have monthly revenue and weighted pipeline value, with the change.  

Next they have a group based on their cost of goods sold and a section for direct labour costs (including utilization).  The rest of the first page is simple.  

Their next page is a project stoplight report (based on their key factors) for their active projects.  You can see in 5 seconds any projects that are off-track or at risk.  

It’s like the sports car instrument gauge.  Everything they need to keep running at full performance and not a thing more.  Need more detail?  They can dive into that later.  

Their financial reporting is designed the same way – focused on INSIGHTS instead of DATA.  

The big hint when creating your dashboard:

Keep it simple.  Good enough is good enough.  Do NOT invest heavily in integrations and automations and stuff until you’re 100% clear on what you need.

Examples of Leading and Lagging KPI Metrics

Now, let’s have a look at some examples of leading and lagging KPI metrics by department:

Marketing Department Metrics

Lagging Metrics: Marketing Qualified Leads (MQLs) is the most important lagging metric for Marketing.  How many inbound, qualified leads came into the sales pipeline.  

Leading Metrics: Social media engagement (likes, shares, comments), event attendance, email list size, Google search console scores and a thousand more. These are immediate indicators of how effective your current marketing strategies are and can be adjusted quickly to improve results.

Key Performance Indicators for Accounting Department

Lagging Metrics: Accounting managers might look at lagging metrics like current accounts receivables, and total monthly payables. 

Leading Metrics: Number of reconciliations completed on time and the timeliness of month-end closing processes. These metrics give you the ability to monitor and improve financial efficiency in real-time.

Key Performance Indicators for Finance Department

Lagging Metrics: Cash flow. 

Leading Metrics: Budget variance tracking and forecast accuracy for financial projections. Accounts receivable and payable. 

HR – KPI to Measure Employee Satisfaction

Lagging Metrics: Employee retention rate and employee satisfaction scores. These tell you what’s already happened—whether employees are leaving or how satisfied they were after the fact.

Leading Metrics: Employee engagement, employee development

Time to fill open positions and the number of training sessions attended. These help you predict future staffing success and employee development, allowing you to take action before issues become problematic.

KPI for Project Management

Lagging Metrics: Projects on time / on budget / on scope

Leading Metrics: 

Estimate at completion, utilization rate, scope changes, quality

If you’re ready to run your business like a sports car and be confident that everything is working as expected so you can win your race, it’s important to get the right metrics in place, including leading, lagging and balancing metrics.  The most important ones should be reported in the leadership team’s dashboard for weekly review.  

That way the right insights are in place to drive decision making.

Let Incrementa guide you in identifying and tracking the leading metrics that matter most to your business success. Reach out to us today and transform your business performance from reactive to strategic.