Lagging metrics reveal past performance. Scores such as customer satisfaction % are lagging indicators because they tell how well you did in the past, but that doesn’t necessarily explain how well you will do in the future. For example, I owned a Saturn and was very happy with it. I also owned a Honda Accord and was very happy with that as well. If I completed surveys for both companies as very satisfied, it wouldn’t tell Saturn that although I liked their product, I don’t intend on purchasing another one in the future, nor would I go out of my way to tell everyone about my satisfaction with their cars. Lagging indicators are useful in that they can shed light on improvement opportunities with an existing product and/or service regardless of the products’ future attractiveness in the marketplace.
A leading indicator sheds some light/predictability on how well your company will perform in the future with respect to a certain product/service. Customer retention/loyalty metrics are leading indicators because they determine in part how likely your customers will repeat purchases/services from your organization in the future. Comparison questions/metrics about the overall quality of your service versus your competitors’ services would tell me as a business leader how well we are doing with respect to our competitors – which is what really matters to shareholders.
Hope this helps….
Mark
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