A brief overview with examples for leading, lagging and coincident indicators
Leading indicators should be good warnings-like a compass, so that one can steer towards the targeted goal. Lagging indicators are a measure of what has already happened, and they are normally used to simply validate the success or failure of the goal, not to cause it. Coincident indicators are like triggers which show up at the same time when the objective is met. Here are some leading,lagging and coincident indicators examples for a cruise.
Case: A boat starts from Dublin and is expected to reach Liverpool in 5 days
OBJECTIVE: To reach Liverpool in 5 days.
Timer: to record time taken to reach Liverpool
Travel log: provides information on the boat speed and the distance covered.
Anemometer (wind indicator): provides information on wind speed and direction, thus adjustments can be made to sail to maximize speed.
Compass : provides information on the course being steered thus enabling the course to be plotted.
Radar: highlights obstructions en-route.
Sea level gauge: to find out depth of water. When this level reaches a certain threshold, the boat has reached ashore safely.
A word of caution needs to be said here: any indicator does not necessitate successful fulfillment of the objective being measured. Going by our previous definition a good indicator is that which can sufficiently warn (leading indicators), measure (lagging indicators) or be triggered (coincident indicators). For leading performance measures to play an effective role in the improvement process, there must be an association between the inputs that the leading performance measures are measuring and the desired lagging outputs. There needs to be a reasonable belief that the actions taken to improve the leading performance measure will be followed by an improvement in the associated lagging measures. For eg: the fuel tank gauge on a car’s dashboard indicates the level of fuel while driving the car and is a necessary leading indicator to reach the destination on time (time taken being a lagging indicator). Reading this gauge and taking steps to ensure that the fuel tank has enough fuel to go the distance ensures that the time taken to reach is minimum.
Using a good mix of leading, lagging and coincident indicators , we can ensure that all are initiatives and quarterly goals are being met with predictability and are helpful to measure success. I bet my next quarter is going to be different, at the least, more predictable.