In The Number One Function of Leadership, I shared this quote from Verne Harnish, “The fundamental journey of a growing business is to create a predictable engine for generating wealth as it creates products and services that satisfy customer needs and creates an environment that attracts top talent.”
The Number one function of a leader is the ability to predict.
Yet most leaders and managers are deficient in this ability.
The deficiency can be traced to their inability to recognize the value of leading indicators.
Leading Indicators – Two Characteristics
In the 4 Disciplines of Execution, the authors begin the chapter on Discipline 2 with these words:
“The second discipline is to apply disproportionate energy to the activities that drive your lead measures. This provides the leverage for achieving the lag measures.
Discipline 2 is the discipline of leverage. Lead measures are the “measures” of the activities most connected to achieving the goal.”
Many leaders believe having metrics is critical. Unfortunately, metrics alone aren’t enough to predict your outcomes or future.
A lag measure(metric) tells you if you’ve achieved the goal, a lead measure tells you if you are likely to achieve the goal. A lag measure is hard to do anything about, a lead measure is within your control. In virtually every case, fixating solely on the lag measures fails to drive results.
Discipline 2, in the 4 Disciplines of Execution requires you to define the daily or weekly measures, which will lead to goal attainment. Each day or week, your team must identify what are their most important actions to drive these lead measures.
Your team creates a just-in-time plan that enables them to quickly adapt while remaining focused on the WIG (Wildly Important Goals, or Your One Thing).
LAG VERSUS LEAD MEASURES
Here’s the difference between a lag measure and a leading measurement.
Lagging Measure/Indicator: A lag measure measures the result you are trying to achieve. We call them lag measures because, by the time you get the data, the result has already happened; they are always lagging.
Lead Measures/Indicators: They foretell the result. They have two primary characteristics. First, a lead measure is predictive, meaning that if the lead measure changes, you can predict that the lag measure also will change. Second, a lead measure is influenceable; it can be directly influenced by the team. The team can make a lead measure happen without significant dependence on another team.
How to Select Leading Measures
One of the simplest examples for determining leading measures is achieving weight loss. Suppose you want to move from 200 pounds to 180 pounds. 180 pounds would be your WIG or One Thing. This is your lagging measurement which will reveal if you’ve reached your goal.
What are the lead measures that would accurately predict achieving this goal? What measures would predict, and more importantly can you influence?
If you chose diet and exercise, you’d be correct.
These two measures fit the first characteristic of being predictive: Reducing calories consumed and increasing calories burned actively indicates you’ll lose weight. Just as important, these two leading measures can be influenced by you. Achieve these two lead measures at the specified level; you will see your lag measure move when you step on the bathroom scale.
You might be saying, “So Doug, all you’re saying is if you want to lose weight, you should diet and exercise. What’s revolutionary about that?”
You’ve missed the point!
There’s a massive difference between understanding the need for diet and exercise and measuring how many calories you’ve eaten and how many you’ve burned. The people who actually measure how many calories they’ve eaten and how many they’ve burned each day are the ones actually losing weight!
The trouble with leading measures/indicators is the difficulty in often determining what they are.
It’s easy to step on a scale to know exactly how much you weigh. It's difficult to find out how many calories you’ve eaten today or how many you’ve burned.
It takes real discipline to do it.
Leading Indicator Example
When I started as a sales manager in radio, predicting the outcome of each sales month's revenue was critical to my success. In An Index Card – Execution Discipline I shared how each salesperson developed their individual leading indicators which they monitored on the reverse side of a 3X5 index card.
For team success, I monitored the lagging and leading indicators together on a graph. The lagging indicator was sales sold; the leading indicator was dollars presented.
By monitoring the leading indicators for sales dollars presented, I could accurately predict how much we would sell since our closing ratio was a consistent 25%.
When dollars presented on a weekly basis went down, I would rally our team to focus on making more presentations with dollars presented to keep the focus on influencing our revenue achievement.
Need help building Leading Measurements for your business? Let us help you influence and predict better outcomes!
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Building an enduring great organization requires disciplined people, disciplined thought, disciplined action, superior results, producing a distinctive impact on the world.
Discipline sustains momentum, over a long period of time, laying the foundations for lasting endurance.
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