A leading indicator is a metric that moves ahead of the final result it is meant to predict - sales pipeline activity ahead of closed revenue, or training completion ahead of skill improvement. Tracking it gives an early signal before the outcome itself is known.
What it means
Leading indicators are useful precisely because they can still be influenced - by the time a lagging indicator like final revenue is known, it is too late to change it for that period, whereas a leading indicator shows where to act while there is still time.
Where it fits in
A balanced scorecard's customer, process and learning perspectives are generally built from leading indicators, complementing the lagging financial perspective that only confirms results after the fact.
Key rules
- A metric that predicts future results, moving ahead of the outcome.
- Still actionable in time to influence the eventual result.
- Examples: pipeline activity, training completion, process efficiency.
- The basis for the non-financial perspectives in a balanced scorecard.
