Leading and Lagging Indicators: The Key to Efficient Sales Management

Using the Right KPIs

The use of KPIs (Key Performance Indicators) is nothing new in business or sales. But if your KPIs are only of the lagging variety—the kind that shows the final results, such as gross sales, net revenue, or products sold—you’re missing out on the entire field of prediction.

This white paper explains how sales management must be conducted through the right combination of leading and lagging indicators, so that management is precise, and catches errors or issues well before they affect your final results.

KPIs are needed which help predict what those lagging indicators will be. These are called leading indicators, and they—along with their skillful combination with lagging indicators—are the subject of this white paper.

Nikolaus Kimla
CEO of Pipelinersales Inc.

The Combination of Leading and Lagging

The combining of leading and lagging indicators give you a full picture of your operation. Moreover, the combination gives you a comprehensive look at your risk, and allows you to make changes to improve the scene before your lagging indicators come into effect.

You should be able to utilize your leading indicators to show how your lagging indicators are going to appear, if nothing changes between now and the time of your lagging indicators. For example, if you add up the value of your opportunities in the pipeline, the percentage chances of their making it through, the rankings of each deal, and other leading factors, you see that, if all goes according to plan, you’ll have $1.5 million for the quarter. If you add up all your leading indicators and see that you’re falling short of your target, you then have time to do something about it.

Lagging Indicators

Far too often, sales management is conducted strictly with lagging indicators. A clue to the problem with analyzing and managing only through lagging indicators is right there in the name: lagging. It means, “what has already happened.” By the time lagging indicators become clear, it is too late to change anything.

But in managing for the future, we need something that will show us how the activities we are engaging in now will impact our figures for the quarter or the year.

Leading Indicators

Which leads us to the other kind of KPIs: leading indicators. Leading indicators could be said to be the KPIs that come between the big lagging-indicator victories.

The Combination of Leading and Lagging

The combining of leading and lagging indicators give you a full picture of your operation. Moreover, the combination gives you a comprehensive look at your risk, and allows you to make changes to improve the scene before your lagging indicators come into effect.

You should be able to utilize your leading indicators to show how your lagging indicators are going to appear, if nothing changes between now and the time of your lagging indicators. For example, if you add up the value of your opportunities in the pipeline, the percentage chances of their making it through, the rankings of each deal, and other leading factors, you see that, if all goes according to plan, you’ll have $1.5 million for the quarter. If you add up all your leading indicators and see that you’re falling short of your target, you then have time to do something about it.