Your First 100 Days as an Account Management Leader Part 5: Leading and Lagging Indicators Your Team Should Hit

Analyzing the same thorny, complex challenges from different angles is key to creative problem-solving. If you see key account retention slipping through your fingertips, it's important to dig into the issue; don't just stop at employee performance, unwieldy CRM, or the first cause that crosses your path.

Instead, see what happens at the point when the account is lost, what happens leading up to the loss, and how that loss impacts downstream implications (like AM performance or impatience from key stakeholders). A multi-pronged investigation gives you more solutions to explore and more factors to weigh. Bernard Marr & Co. endorses this wider perspective by emphasizing the value of leading and lagging indicators:

Imagine your business is a car. Leading indicators look forward, through the windshield, at the road ahead. Lagging indicators look backward, through the rear window, at the road you've already traveled.

If you just focus on how bumpy or smooth the road is at the present moment, you can't slow down, change your course, or effectively pick up speed. Learn how to incorporate these before, during, and after assessments by:

  • Understanding what leading and lagging indicators are and their importance
  • How to start monitoring and measuring these indicators
  • Why these indicators are crucial for helping your team navigate toward their goals

What Are Leading and Lagging Indicators?

Leading indicators and lagging indicators (or lead indicators and lag indicators) are commonly measured performance metrics that account managers and other business professionals can use to measure performance over time. The basic concept is simple: these are factors that occur around an event or goal that can be used to measure the likelihood or success of that event or goal.

Leading indicators precede events or milestones; savvy analyzers can use them to predict events and likely outcomes. Lagging indicators follow key points in time, which managers can use to measure success and results.

However, as you dive deeper into these indicators they can become more complex. After all, some metrics operate as both leading and lagging indicators. Other metrics may seem connected but don't provide useful insights. Key account managers need to identify helpful indicators based on the particular area of performance they're looking at and then identify whether it's a leading or lagging indicator.

A Deeper Look at Leading Indicators

These forward-looking metrics can indicate probable or even definite events before they occur. For example, if 90% of customers tend to terminate a contract or fail to renew when their customer health score dips below a certain point, managers can predict that an account will leave once it has a score below that known level. Inversely, if a customer satisfaction score above a certain point is known to indicate that a customer will renew or respond positively to upselling, reaching that score can be a leading indicator and a trigger to start the upselling process.

A Deeper Look at Lagging Indicators

Lagging indicators can explain — or at least give insight into — past events. They can help implement more targeted changes and improvement plans for future iterations, but they can't impact the events that have already occurred. A lot of performance is measured by lagging indicators: number of accounts won, the total value of business won, number of touchpoints, etc.

However, these lagging indicators are all about quantitative output. So when managers exclusively pin employee success to lagging indicators, employees are incentivized to achieve those metrics at the cost of other metrics. For example, the sales team may make exaggerated promises to close a deal and leave customer satisfaction by the wayside.

Leading and lagging indicators both have their advantages, but they also have their detriments. They can also change the nature of what they're measuring by encouraging different behaviors. In physics, this is called the observer effect: you can't measure some things without changing them along the way. It's your job as the manager to know which indicators to value and best manage any resulting changes.

How Do Leading and Lagging Indicators Help Me and My Business?

With a proper balance of both leading and lagging indicators in your view, you can implement changes based on predicted future outcomes. You can also ensure that your business is operating at a healthy continued output. Some of the key uses for measuring leading versus lagging indicators to grow your business include getting answers to these questions:

  • Leading indicators: What are the warning signs that a process needs to change or that there should be an intervention? What steps need to be improved? 
  • Lagging indicators: What is our revenue? Are customers satisfied? Was a new product or service well-received?

Whether you're a manager or an owner, you can use leading and lagging indicators to guide your business to greater heights.

Discover everything you need to know in your first 100 days as an Account Management Leader.

What Does It Look Like to Put These Into Practice?

To start incorporating these indicators into performance assessments, QBRs, and other evaluative processes, make sure you measure both types. If you measure just one or the other, you don't fully understand the actual issue. Lopsided insight into KPIs can be even more perilous than no insight at all, as measuring and observing will directly affect the behaviors of those being monitored.

In fact, we recommend choosing three leading indicators and three lagging indicators that you should track. Those can include:

  • Leading indicators: These metrics are more abstract, as they measure future events or outcomes. For example, the number of customers that sign up in a given period indicates a future predictable revenue; customer satisfaction predicts future renewals and referrals.
  • Lagging indicators: These are more concrete and measure past events. This includes numbers of sales, numbers of terminations, and expenses.

Remember that some metrics can be indicators for both different concepts: a sales rate is simultaneously a lagging indicator of a salesperson's performance and a leading indicator of future revenue.

Start Reaching Your Goals by Hitting Lead and Lag Indicators

You can't measure either leading or lagging indicators without the right tools to gather, organize, and analyze your business data. At Kapta, we provide software solutions keyed specifically to account management so AMs, managers, and other stakeholders can both see the performance at a glance and dive deeper into business operations. Contact us today to learn more about the key metrics leaders should be measuring and how to do so with Kapta.

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CEO at Kapta
Alex Raymond is the CEO of Kapta.