In the post “Lead Measures. Lag Measures. So What?” written on 04 Apr 2013, I talked about what lead and lag measures are. I hope you are taking the initiative implementing lead measures in your daily business!
I just came across a discussion on a LinkedIn group called “Automotive Fixed Operations Managers“. The discussion is about “Auto dealers service market share is shrinking every year over the past 5 years, from 27.5% in 2008 to 21.1% in 2012. Why? What do you think we should do at retail to stop this bleeding of customer loyalty?” I am not a member of the group, but I noticed one of my LinkedIn connections, Tom Gorham, making a comment to the effect that loyalty programs do not build loyalty, developing customer relationships on a daily basis does. That caused me to think about lead and lag measures right away.
Large firms, or large organizations, differ from large living organisms in that the internal communications systems within large living creatures is vastly superior to that of large firms. When a Sperm Whale decides to dive and get himself some giant squid, he does just that – he dives at once and gets himself some giant squid. Not everyone likes giant squid, I’ve heard they’re full of ammonia and a bit hard to eat, but that’s what he does. However, when a large medical products manufacturing company decides to refocus on preventive medicine, it is simply not able to do so at the drop of a hat. People need to be briefed in advance. They need to be given time to absorb the information, assimilate it, understand it and then decide if they would buy into it. Organizational charts need to be redrawn. Since organizational charts in most companies aren’t as flexible and relevant as they should be, this takes a huge amount of time. Inventory needs to be sold off, handed over or otherwise disposed of. Financial and legal details need to be worked out. All of this means that the flow of information and thus the nimbleness of large organizations is much lower than that of smaller organizations and living things.
So what does all that have to do with lead and lag measures? Simple. Lead measures tend to be more personal and more relationship-focused. That’s from CEO down to the last packer in the warehouse. What do we do everyday and what relationships are we enhancing that will contribute to the bottom line? Lag measures are the management indicators, the metrics, via which large organizations get some sense of whether what they are doing is profitable or not. Is there a direct relationship between lead measures and lag measures? There had better be! It’s up to you to work out what they are for your own organization, so get cracking if you haven’t figured that out yet!
So, remember this:
Lead measures = Everyday purposeful productivity and personalized relationships.
Lag measures = Periodic reviews of metrics at organizational level.
BOTH are essential!