KPI: Leading vs. Lagging

KPI: Leading vs. Lagging

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KPIs are a personal pet peeve of mine — mostly because people consistently use the term incorrectly. One would think that the acronym — Key Performance Indicator — would be self explanatory, but apparently it isn’t. In particular, it seems like it’s somehow become just a simple synonym for “metric”. Of course, there’s nothing wrong with metrics, but not all metrics are KPIs. To be a KPI, first it has to actually be indicative of performance. And much like the stock market or your mutual fund, past results are not indicative of future behavior. The industry has gone to great lengths to work around this deficiency, creating convoluted jargon like “forward looking” and “backward looking” or “leading” and “lagging” indicators. The truth is, backward looking or lagging “indicators” are just metrics. They still may have value, but they’re not KPIs.

If you want to have a team that is not only highly performing, but also continually improving, then don’t rely on sales performance, look at sales behavior. The CRM is great, but it’s not sales management. You need to suss out which metrics are actually forward looking indicators for your particular team, and then distill those down to ones that are actually key (snowfall on a given day may be a forward-looking indicator for that month’s sales, but calling it key defeats the purpose, as there’s no control over it).

Effective sales managers are always thinking ahead; they can recognize what small trends indicate before they become big problems. By noticing small changes in sales rep performance in what otherwise might look like still “reasonably” good numbers, the sales manager can be proactive by coaching reps as they perform. In doing so, the manager helps prevent weaker performances from becoming anchored as bad habits that sap overall yearly productivity and sales.

If you have a sales operations team, then having them figure out what your teams actual KPIs are is probably the best use of their time. If you don’t have a team, you’ll have to do it yourself — and I mean have to do it, yourself. Unless, of course, you don’t want a highly-performing, continually-improving team.