The previous blog discussed what key performance indicators (KPIs) are, but what are lagging and leading indicators—and what’s the difference? The difference between the two is what they individually indicate, and how they provide individual value in an organization.
Lagging indicators are measured after sales have taken place, and the information is systemically analyzed.
On the other hand, leading indicators are actions and activities that can be tracked during the sales process. The lagging indicators are “outputs” and “results” of that analysis.
Lagging indicators often get the most attention from executives and shareholders because they demonstrate tangible results, and are often the metrics that go into reports. Lagging indicators can include:
• Gross margin dollars growth
• Gross margin % growth
• Product mix
• Share of wallet
• New customers
• Revenue from new clients
• Renewal rate
• Acquisition costs
• Sales cycle length
Lagging indicators provide valuable information “after the fact,” which allows executives and management to understand past growth or decline, sales behavior, and market share.
Leading indicators are actions and activities that can be tracked during the sales process. Leading indicators are tracked while opportunities develop and while the pipeline is built. It’s easy to think about leading indicators as the activities and actions of the sales team that are monitored in order to keep track of different metrics during the sales process. Leading indicators can include:
• The number of calls a sales person makes per week
• The number of calls that turn into opportunities
• The number of those opportunities that turn into wins
• How sales representative’s perform relative to their peers
• Opportunities added
• Opportunities lost
• Number of proposals sent
Leading indicators can be more difficult to track if there isn’t a proper system set up to track and monitor the sales team’s patterns and behaviors. If measured properly, leading indicators can be incredibly useful to pinpoint any issues in the sales process, but also to assess coaching and guidance strategies and whether or not they are effective. Leading indicators can directly influence the behavior of the sales team. The goal is to enable sales teams to focus and execute leading indicator activities effectively to improve overall sales effectiveness.
Combining Lagging and Leading Indicators
It’s important to manage both leading and lagging indicators because both provide different and important value to an organization. Lagging indicators are great for systematic analysis and to understand the bigger picture of the sales function. But as the name indicates, they’re lagging, and this means you’re really analyzing behaviors and results that have already taken place, and can’t be changed. On the other hand, leading indicators can be monitored, and analyzed on a day-to-day basis which gives management the opportunity to adjust behavior and goals on the go, not after the sales cycle has ended.
To gain a full understanding of your organization’s performance, combining both lagging and leading indicators will give a high-level perspective and a day-to-day perspective.
Vortini has an extensive library of metrics for your organization to choose from. We have both lagging and leading indicators, and also unique metrics based on the needs of your organization. Metrics are easily modified and customized for your organization and information that isn’t useful or relevant can be removed and new metrics can be added.
Take a moment to sign up for a no-obligation demo, and get the discussion started to use Vortini on a free trial basis.
Jess is a communications professional and Vortini’s lead content/web developer. Her current interests lie in the intersection of sales technology and machine learning. In her free time she reads a book-a-week, practices yoga, and is an avid gardener.