|Lag versus lead KPIs|
Far better to look at lead indicators that tell you if things are working and can give you some information about the future. In the safety example, you might like to track the level of hazard reporting, or incidents of non-compliance with safety procedures. If hazard reporting is increasing, and/or non-compliance is dropping, then (other factors being equal) it's likely that will see a reduction in lost time injuries. Some other examples of lead indicators might include speeding tickets, hours per year of driver training, forward sales, blood sugar levels, etc.
The difference between lag and lead indicators is crucial, yet sadly too often overlooked. You might have an organizational objective of making a profit (not unusual in modern business) but if you only track profit, it can be way too late to do anything about things, if you have an unprofitable year. Some lead indicators that might help would include:
- customer satisfaction
- employee turnover
- gross margins on new contracts
- number of contracts won
- risk exposures