Lead measures vs. lag measures: how to see growth coming

Most Leadership Teams watch their results closely: revenue, gross margin, net profit, cash. Those numbers matter more than anything else on the page. They also share a problem. By the time they move, the month that moved them is over.

One of the most useful ideas I've carried through 35 years of building businesses comes from The 4 Disciplines of Execution by Chris McChesney, Sean Covey and Jim Huling. They split measures into two kinds, and the split changes what a Leadership Team pays attention to.

Lag measures tell you whether you got there

A lag measure tracks the result you're after. Revenue, profit, new customers acquired, churn and the win rate on closed deals are all lag measures. They're the scoreboard. You can't argue with them, and you can't change them directly. When a lag measure shows up, the work that produced it is already done.

Lead measures tell you whether you will

A lead measure tracks an activity that comes before the result. The authors give it two tests. It has to predict the result: when it goes up, the lag measure follows. And the team has to be able to move it this week, through its own effort.

Revenue fails the second test. Nobody can decide to have more revenue on Tuesday. But a sales team can decide to hold twelve qualified first meetings this week instead of eight. If first meetings reliably turn into revenue a month or two later, that's a lead measure.

What they look like side by side

Sales and revenue. The lag measures are total sales revenue, profit and the number of new customers acquired. The lead measures are the activities that come before them: discovery calls made per week, emails sent to prospects, first meetings held, proposals sent.

Customer retention. The lag measure is the churn rate, say from 12% down to 8%. The lead measures are things a team can do this week: answering every support ticket within an hour, or shipping specific onboarding improvements.

A quick way to sort them: if you can only learn it after the month ends, it's a lag measure. If your team can move it by Friday, it's a candidate lead measure.

Why this matters for a Growth Plan

A Growth Plan sets monthly targets for revenue and profit. Those are lag measures. The Growth Levers in the plan, such as bids, close rate or average job size, sit one step upstream, and they tell you more. But even a Growth Lever like close rate is often the result of something else: how many proposals got a follow-up call, or how many estimates went out within two days.

That last step is where the weekly work lives. When a Leadership Team can name the one or two lead measures behind its biggest Growth Lever, the gap to plan stops being a monthly surprise. It shows up in this week's numbers, while there's still time to act. (For finding the Growth Levers themselves, see How to find the few Growth Levers that actually move revenue.)

Where the Scorecard fits

Teams that run on EOS® already track weekly activity on the Scorecard, so much of this will feel familiar. The difference is the link. A Scorecard measurable describes a healthy week. A lead measure is chosen because it moves a specific Growth Lever in the Growth Plan. Some of your Scorecard numbers will turn out to be strong lead measures. Others keep the business running, which is their job, but don't move the year. (More on that in Scorecard vs. dashboard: what each one is for.)

For more than two decades, in my own businesses and with clients, we've built dashboards and given every gauge in the Growth Plan one owner. EOS teaches why: when everyone owns something, no one does.

Try this with your Leadership Team

1. Pick the one Growth Lever in your Growth Plan that explains most of your gap to plan.
2. List every activity the team believes moves it. Aim for ten or more.
3. Cross off anything the team can't change week to week.
4. From what's left, choose the one or two most likely to predict the Growth Lever. Give each an owner and a weekly target.
5. Track them for eight weeks beside the Growth Lever. If the Growth Lever doesn't follow, swap in the next candidate.

Eight weeks is usually enough to see whether a lead measure earns its place. Keep the list short. A team can only push hard on a few things at once, which is the book's first discipline and has been my experience too.

The question to ask

At your next monthly review, ask: "What did we do this week that will show up in next month's revenue?" If nobody can answer with a number, the team is managing results it can no longer change.

If you'd like to see where your company stands before you choose your lead measures, take the Growth Benchmark. It takes about two minutes.