TO UNDERSTAND LAGGING AND LEADING INDICATOR - BALANCED SCORE CARD BASED PERFORMANCE MANAGEMENT SYSTEM
In Balanced Score Card based performance management we talk a lot about “lagging” and “leading” indicators. But what do they specify accurately? Lagging indicators are typically “output” oriented, easy to measure but hard to improve or influence while leading indicators are typically input oriented, hard to measure and easy to influence. Let me demonstrate this with a simple example: For many of us an individual aspiration is losing our weight. A clear lagging indicator that is easy to measure. You step on a scale and you have your answer. But how do you truly arrive at your goal? For weight loss there are 2 “leading” indicators: 1. Calories taken in and 2. Calories burned. These 2 indicators are easy to influence but very hard to measure. When you order lunch in a restaurant the amount of calories is not listed on the menu. And if you are me, you have no clue how many calories you burn on a given day. Now let’s try to translate this to business....