Leading and lagging goals

Part of my work involves guiding an organisation towards a certain direction. This direction is typically defined in some kind of corporate goals or objectives. These goals serve as milestones which show progress towards a desired outcome.

There are generally two types of goals we track. Some goals are leading and some are lagging. Lagging goals or indicators measure the intended result or outcome. For example, your weight is a lagging indicator if you are trying to lose weight. Leading indicators are predictive in nature and represent the actions you need to take to achieve your intended result. So if you are trying to lose weight, the number of hours you work out in a week is a leading indicator. Another leading indicator could be the steps you walk each day or the number of calories you eat daily.

Organisations and individuals tend to have more control over leading indicators compared to lagging indicators. For example, profitability is a common lagging objective for most organisations. However, obsessing over profitability is not an efficient strategy. It is better to focus on the things which improve profitability. A business owner would do better to focus on lagging indicators like growing sales volume, reducing costs, improving efficiencies, improving employee engagement, etc.

In designing appropriate goals we have to make sure the lagging indicators we choose align properly with the desired result. For example, if you want to increase your earnings you need to focus on acquiring more high-value skills. If you want to save more money, then you should focus on controlling your spending. If you want to achieve financial independence you should build more passive income streams.

In brief lagging goals help us determine our desired direction and leading indicators enable us to take action every day. We need both to achieve what we want.

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