I wanted to talk briefly about the difference between lag and lead measures and how you can use them to grow your business. Before I became a business consultant I spent 20 years working for business owners to help them build profitable businesses. I am a charted management accountant and ex-CFO and so spent a large amount of time being surrounded by data and metrics on how the businesses was progressing. One thing really noticed was that despite having lots of great goals and targets, in many cases the businesses were often falling short in achieving them. On the recommendation of one of my mentors I read an awesome book called The Four Disciplines of Execution by Sean Covey and Jim Hulling and I learned just why that is. The metrics that the vast majority of businesses surround them with are historical figures meaning that by the time the directors get to see them, they are able to do nothing to influence the outcome them and they do not on their own do anything to drive real change within the business. So what is the difference between a lag measure and a lead measure? Well a lag measure is a measure of something that has already happened. Basically it measurement of what has happened in the past. You can’t don’t anything to affect the outcome of a lag measure because it’s already happened. Revenue is a typical example of this that every business will record and its a tracking measurement that shows how you are doing against your goal. A lead measure is different. A lead measure, measures the most high impact things that need to be done in order to meet the goal and therefore they can influence changes in behaviour and it can drive the success of the lag measure. To be a great lead measure it has to be predictive of future results and it has to be influenceable by you and your team. So an example of a lead measure. If you have a sales target of say $100K (this is your lag measure) and you know that you need to make 10 sales a week to do that, then you may also know that you need to do sales run throughs with 20 people and to do that you need to make 50 phone calls per week (10 per day). The lead measure that you and your team can easily influence is the number of calls you make and if you make those calls they are predictive of you meeting your goal of $100K per year. Another great example from the book was a supermarket that was performing badly and need to increase their sales. The lead measure that they used was to ensure that all popular selling items were always in stock and on the shelves. It might seem obvious but it wasn’t being done and when it was it meant that customers didn’t have to go else where for the item and they were more likely to come back because they no longer had to go to multiple places to do their shop. In it’s self the lead measure may seem like a small and menial thing to measure but it can have a huge impact on the goal because it’s something every team member can control. They act like a lever to help you to move a huge rock, might look like a small stick but if welded consistently in the right way the rock will move. I would love to hear your ideas on how you can use lead measures in your business so leave me a comment below. Until next time, bye for now.
As well as being a Chartered Management Accountant (CIMA) and ex-CFO with over 20 years experience, she has also worked extensively with small and medium sized business owners to help them grow profitable businesses.
She's also a certified coach, NLP practitioner, Metadynamics TM Consultant and contributor for Kochie’s Business Builders.
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