{"id":10733,"date":"2023-03-20T14:49:07","date_gmt":"2023-03-20T14:49:07","guid":{"rendered":"https:\/\/agilenow.eu\/?p=10733"},"modified":"2024-11-13T14:45:50","modified_gmt":"2024-11-13T14:45:50","slug":"leading-and-lagging-indicators-in-okrs","status":"publish","type":"post","link":"https:\/\/agilenow.eu\/en\/leading-and-lagging-indicators-in-okrs\/","title":{"rendered":"Leading and Lagging Indicators in OKRs"},"content":{"rendered":"<p id=\"2d75\">One of the biggest challenges of using OKRs (Objectives and Key Results) is to define the Key Results that tell us if our objectives are on track or not. What are the&nbsp;<em>leading<\/em>&nbsp;and&nbsp;<em>lagging indicators<\/em>&nbsp;of success we hear about when talking about Key Results (KRs)?<\/p>\n\n\n\n<p id=\"46f2\"><strong><em>Lagging indicators<\/em><\/strong>&nbsp;are often what you are ultimately aiming for but they are slow to move. By the time you measure change in these numbers, it may be too late to correct the course.&nbsp;<strong><em>Leading indicators<\/em><\/strong>&nbsp;are proxies for these numbers that change more quickly. They may not be the ultimate goal, but they are useful guides because they suggest you are on the right track.<\/p>\n\n\n\n<p id=\"91bc\">Lots of teams struggle to find good Key Results for their objectives. After their first cycles they are often confronted with the question:<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"3898\"><em>Our Key Results won\u2019t progress until end of the quarter, now what?<\/em><\/h2>\n\n\n\n<p id=\"6c96\">This happens most of the time because they are focusing only on&nbsp;<em>lagging<\/em><em>indicators<\/em>. Don\u2019t get me wrong, there is nothing wrong with&nbsp;<em>lagging<\/em>&nbsp;<em>indicators<\/em>and we should definitely measure and look at them. But isn\u2019t the point of OKRs to help us align where we want to go together, focus towards a common goal and have a shared understanding about what success means? And above all,&nbsp;<strong>measure our progress and act accordingly?<\/strong><\/p>\n\n\n\n<p id=\"10c3\">Our Key Results should show us that we are going in the right path to achieve our goals, they should be a measure of where our business is going and possibly offer valuable insight about the future.<\/p>\n\n\n\n<p id=\"1aae\">But can we predict the future?<\/p>\n\n\n\n<p id=\"119f\"><strong><em>As Peter Drucker said \u201cThe best way to predict the future is to create it.\u201d.<\/em><\/strong><\/p>\n\n\n\n<p id=\"deab\">So, how can we create our future? By asking ourselves the right questions:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>What does success look like when we achieve it?<\/li>\n\n\n\n<li>What outcome(s) would qualify our desired end goal as success?<\/li>\n\n\n\n<li>How can we measure if we are going in the right direction?<\/li>\n<\/ul>\n\n\n\n<p id=\"3ec5\">These are really hard questions to answer and we won\u2019t get it right at first. We will learn how to get better by doing it.<\/p>\n\n\n\n<p id=\"3525\">Although the idea is to shift our mindset into asking how we can focus our efforts in finding&nbsp;<em>leading<\/em>&nbsp;<em>indicators<\/em>&nbsp;that will make our&nbsp;<em>lagging<\/em>&nbsp;<em>indicators<\/em>inevitable, we should strive to find a balance of both as they inform us in different ways.<\/p>\n\n\n\n<p id=\"d5f6\">The broader we get in the OKRs, for example in the Company OKRs level the harder it will be to find&nbsp;<em>leading<\/em>&nbsp;<em>indicators<\/em>, and the deeper we get into specific teams OKRs the more the&nbsp;<em>leading<\/em>&nbsp;<em>indicators<\/em>&nbsp;help us in understanding if we are on the right path to success.<\/p>\n\n\n\n<figure class=\"wp-block-image is-resized\"><img fetchpriority=\"high\" decoding=\"async\" src=\"https:\/\/miro.medium.com\/v2\/resize:fit:1400\/1*W58w7NCrq-Rv3gMhxyvycw.png\" alt=\"\" width=\"574\" height=\"262\" \/><figcaption class=\"wp-element-caption\">Inspired by Bastin Gerald<\/figcaption><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"b223\"><strong>What are Leading and Lagging Indicators?<\/strong><\/h2>\n\n\n\n<p id=\"f21a\">Let\u2019s take a deeper look at it, generically these are metrics that inform a company or a team that it is progressing successfully towards its objectives.<\/p>\n\n\n\n<p id=\"6e91\"><strong><em>Lagging<\/em>&nbsp;<em>Indicators<\/em><\/strong>&nbsp;are called like this because they usually lag behind the good we do. By their nature they are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Easy to measure;<\/li>\n\n\n\n<li>Hard to change;<\/li>\n\n\n\n<li>Triggered by an event that has occurred;<\/li>\n\n\n\n<li>Little more self-explanatory than&nbsp;<em>leading<\/em>&nbsp;<em>indicators<\/em>.<\/li>\n<\/ul>\n\n\n\n<p id=\"5a1b\">Here are some examples of&nbsp;<strong><em>lagging<\/em>&nbsp;<em>indicators<\/em><\/strong>.<\/p>\n\n\n\n<p id=\"9958\"><strong>Example 1<\/strong><\/p>\n\n\n\n<p id=\"4d70\">Consider a service like Netflix,&nbsp;<em>lagging<\/em>&nbsp;<em>indicators<\/em>&nbsp;might be churn or renewal rate. Either one of them is only measurable once the customer has made a decision to leave the service or to continue with the subscription.<\/p>\n\n\n\n<p id=\"42f6\"><strong>Example 2<\/strong><\/p>\n\n\n\n<p id=\"1484\">(based on&nbsp;<a href=\"https:\/\/medium.com\/@jseiden\/outcomes-as-leading-lagging-indicators-61dd740b9a83\" target=\"_blank\" rel=\"noopener\">Outcomes over Outputs by Josh Seiden<\/a>)<\/p>\n\n\n\n<p id=\"c9b8\">Consider a shop that sells mattresses. A great&nbsp;<em>lagging indicator<\/em>&nbsp;is the number of mattresses sold. But we will only know that once customers actually buy mattresses.<\/p>\n\n\n\n<p id=\"a665\"><strong><em>Leading<\/em>&nbsp;<em>indicators<\/em><\/strong>&nbsp;\u201clead\u201d to successfully meeting overall business objectives, which is why they are called leading. By their nature they are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Hard to measure;<\/li>\n\n\n\n<li>Dynamic, meaning they change quickly;<\/li>\n\n\n\n<li>More abstract measure of where your business is going.<\/li>\n<\/ul>\n\n\n\n<p id=\"cc15\">Here are some examples of&nbsp;<strong><em>leading<\/em>&nbsp;<em>indicators<\/em><\/strong>.<\/p>\n\n\n\n<p id=\"0a4c\"><strong>Example 3<\/strong><\/p>\n\n\n\n<p id=\"f173\">Consider churn from Example 1 above,&nbsp;<em>leading indicators<\/em>&nbsp;would be numbers which point to the reasons that might lead customers to churn in the future, so we will need numbers that will help us predict churn.<\/p>\n\n\n\n<p id=\"26a1\">A great example of those would be the Usage Rates \u2014 most of the times when a customer is about to churn they stop using the product before they actually decide to cancel the service. This gives us the opportunity to act immediately after a drop in usage happens and to think how we can influence the increase of usage so that we are given a chance to prevent churn before it happens. This way we would save the acquisition cost of getting that customer back to the service.<\/p>\n\n\n\n<p id=\"51bf\"><strong>Example 4<\/strong><\/p>\n\n\n\n<p id=\"e9f6\">Consider the mattress shop from Example 2,&nbsp;<em>leading indicators<\/em>&nbsp;would be numbers that help us predict if we are going to sell more mattresses. So what would those numbers be? For example, nobody buys a mattress without having laid down on it to experiment how it feels, so the number of people lying down on the mattresses at the store is a&nbsp;<em>leading indicator<\/em>&nbsp;we could use.<\/p>\n\n\n\n<p id=\"5205\"><em>Leading indicators<\/em>&nbsp;can also help us make decisions about how to structure a store or product to increase sellability, in this case by setting up the store to make it easier for people to lie down on the mattress for example. So they also help us identify what drives the behavior we want to get.<\/p>\n\n\n\n<p id=\"631a\"><em>Leading indicators<\/em>&nbsp;are not easy to come up with, they require us to try to predict the future. Everyone knows that predicting the future without a crystal ball is hard, so don\u2019t expect to have it right always. A good way of finding&nbsp;<em>leading indicators<\/em>&nbsp;is also by looking back into our past successes that had a similar outcome and ask ourselves:&nbsp;<em>What did we do to achieve it? How do we know it was successful? What were the criteria we used to consider it successful?<\/em>And with that information try to understand if there is any way we could predict it for this case.<\/p>\n\n\n\n<p id=\"4432\">As a final note, leading indicators should always show us if customers are extracting value from our product, whomever our customers are.<\/p>\n\n\n\n<p id=\"df76\"><strong>What now?<\/strong><\/p>\n\n\n\n<p id=\"b60e\">Just go ahead and create some leading indicators for your Objectives. And remember\u2026 no indicator is perfect, it just needs to be good enough!<\/p>\n\n\n\n<figure class=\"wp-block-image is-resized\"><img decoding=\"async\" src=\"https:\/\/miro.medium.com\/v2\/resize:fit:1400\/1*6UMetgLmatoaSzHMuzhjFw.png\" alt=\"\" width=\"540\" height=\"497\" \/><figcaption class=\"wp-element-caption\">Photo by&nbsp;<a href=\"https:\/\/unsplash.com\/es\/@gaellemarcel?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText\" rel=\"noreferrer noopener\" target=\"_blank\">Gaelle Marcel<\/a>&nbsp;on&nbsp;<a href=\"https:\/\/unsplash.com\/photos\/nKtmlg44rmw?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText\" rel=\"noreferrer noopener\" target=\"_blank\">Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n<p id=\"195f\">To finalize I would like to thank&nbsp;<\/p>\n\n\n\n<p><a href=\"https:\/\/medium.com\/u\/9357038cdc00?source=post_page-----98724960dc8d--------------------------------\" rel=\"noreferrer noopener\" target=\"_blank\">Nuno Silva Pereira<\/a>&nbsp;for reviewing this article and help make it better \ud83d\ude42<\/p>\n\n\n\n<p id=\"32ce\">What do you think? Feel free to clap if you liked this or comment with your thoughts!<\/p>","protected":false},"excerpt":{"rendered":"<p>One of the biggest challenges of using OKRs (Objectives and Key Results) is to define the Key Results that tell us if our objectives are on track or not. What are the leading and lagging indicators of success we hear about when talking about Key Results (KRs)?<\/p>","protected":false},"author":1,"featured_media":10738,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","inline_featured_image":false,"footnotes":""},"categories":[56],"tags":[],"class_list":["post-10733","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"acf":[],"_links":{"self":[{"href":"https:\/\/agilenow.eu\/en\/wp-json\/wp\/v2\/posts\/10733","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/agilenow.eu\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/agilenow.eu\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/agilenow.eu\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/agilenow.eu\/en\/wp-json\/wp\/v2\/comments?post=10733"}],"version-history":[{"count":6,"href":"https:\/\/agilenow.eu\/en\/wp-json\/wp\/v2\/posts\/10733\/revisions"}],"predecessor-version":[{"id":14968,"href":"https:\/\/agilenow.eu\/en\/wp-json\/wp\/v2\/posts\/10733\/revisions\/14968"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/agilenow.eu\/en\/wp-json\/wp\/v2\/media\/10738"}],"wp:attachment":[{"href":"https:\/\/agilenow.eu\/en\/wp-json\/wp\/v2\/media?parent=10733"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/agilenow.eu\/en\/wp-json\/wp\/v2\/categories?post=10733"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/agilenow.eu\/en\/wp-json\/wp\/v2\/tags?post=10733"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}