Leading And Lagging Indicators Balanced Scorecard

A leading indicator is a predictive measurement for example. But of course that s an oversimplified definition.

Balanced Scorecard Summary

Linking the balanced scorecard to strategy california management review vol 39 no 1 1996 which demonstrates differences between leading and lagging indicators.

Leading and lagging indicators balanced scorecard. Lagging indicators tell you a story of what has happened. Leading indicators are those that are more immediately measurable lagging indicators are those that are a result of implementing and continuously monitoring the activities which impact leading indicators. The bsc framework is based on the balance between leading and lagging indicators which can respectively be thought of as the drivers and outcomes of your company goals.

A lagging indicator is an output measurement for example. The idea of leading and lagging indicators that kaplan and norton popularised is that the leading indicators of one perspective lie in the perspective below the one you are looking at. So within this article we ll do an in depth exploration of what both leading and lagging indicators are and why leading indicators are so vital for your business.

The number of accidents on a building site is a lagging safety indicator. Leading and lagging indicators are two types of measurements used when assessing performance in a business or organisation. The percentage of people wearing hard hats on a building site is a leading safety indicator.

The leading performance of the goal doesn t affect other goals on the scorecard. In contrast leading indicators reflect inputs that influence the process. The classic example of a leading or lagging indicator is that across the perspectives of a balanced scorecard.

Product returns are a leading indicator for customer satisfaction. The balanced scorecard approach of norton kaplan is probably the most common place where discussion of leading and lagging indicators are discussed the approach is about strategy and change and executing strategy. In the safety scorecard example below the indicator being displayed is the number and type of accidents.

If returns go up you can logically assume that your customer satisfaction score next month will go down. Notice how product returns crosses into multiple balanced scorecard categories. The other major bucket of indicators for most companies are lagging indicators which are so called because they display information from the past which has little to no direct influence on future performance.

This information is useful but you are just observing what happened and you cannot change anything. On your quality scorecard you need to have both leading and lagging indicators. The balanced scorecard bsc is a business framework used for tracking and managing an organization s strategy.

A short answer is that leading indicators contribute to the leading performance of the goal respectively lagging indicators contribute to the lagging performance of the goal. The following is an example from kaplan r s. On the other hand product returns is a lagging indicator for business processes.

In general leading indicators can be thought of as drivers and lagging indicators can be thought of as outcomes. The lagging performance of the goal is translated to other goals on the scorecard in the form of a leading indicator.

Defining The Balanced Scorecard Bsc