The Critical Difference Between Lead and Lag Indicators
Lag indicators are sexier, but lead indicators are more powerful
It’s that time of year again.
Or, maybe it’s not. You could be reading this whenever, and not everyone responds to that New Year Energy the same way I do. For me, right now, it’s January. A time of year when I feel a rush of potential.
Even though I know, logically, that calendars are made-up and there’s nothing truly novel about a new year, it feels new. That newness always inspires me to start making plans. I want to do things and this always feel like the right time to start.
But the year doesn’t feel new forever. Heck, even January doesn’t feel new forever. There’s a point in every plan where you are no longer driven forward by pure excitement and you have to actually work for it.
To make matters worse, a lot of goals exists outside of our own control. Many common goals are determined by how other people react to our efforts. We may as well set out across a great lake of uncertainty and let fate decide whether we make it to the other side.
This happens every time we want to create something for public consumption with the goal that it is well-received. It happens every time we strive for a promotion, which is in the hands of our superiors. It happens when we set our sights on bestseller lists, subscriber counts, or ad revenue targets, all ultimately determined by consumer behavior.
With these kinds of goals, we can do our very best and still fail to reach them, and that can be heartbreaking.
So, what do we do about that?
I’m going to introduce two terms you may have heard before: lead indicators and lag indicators. I am not sure where these terms originated, but I hear them often when discussing software project management and they’re discussed in The 12 Week Year, which I am using as a basis for my goal-setting process this year.
They sound like technical jargon (and, honestly, they are), but they are both basically fancy words for ‘metrics’. Things that you can track numerically. Indicators of your progress.
The difference comes in when you differentiate between a lead indicator or a lag indicator.
Lead Indicators
Lead indicators, as their name suggests, come first. These are indicators that represent what you (or your team) are doing to move the needle on a certain goal or project.
- How many hours are you putting in?
- How many sales leads are you following up on?
- How many words are you drafting?
- How many workouts are you completing at the gym?
- How many times are you choosing to dine in instead of getting takeout?
- How many friends are you reaching out to each week?
No matter what your ultimate goal is, there is usually something you can do that you can control and measure. These are your lead indicators: the effort you’re putting in to the equation.
Lag Indicators
Think about the phrase “lag indicator” carefully, because its name tells you everything you need to know about where it occurs chronologically and also where its priority should be in your goal setting process.
Lag indicators are consequences of Lead indicators. At least, in a perfect world they are. These are the metrics on the other side of that lake of uncertainty that may or may not change as a result of your actions:
- recognition or promotion from a boss
- a change in sales revenue
- reviews on a published novel
- body fat % change
- increased personal savings
- more fulfilling relationships
Each of these lag indicator bullet points can be tied to the lead indicators that I listed before, but they come later, sometimes much later, and most of them go through a winding tunnel on their way to us.
Sometimes they get lost completely.
Lag indicators are the output of a complicated and often luck-driven formula that is only loosely based on our actions, and rarely matches our expectations.
This is why lag indicators can be a terrible basis for measuring goal progress, especially as an individual, where our perceived self-worth is tied much more closely to our actions than if these were business-level indicators.
Even though something like “make $100,000 in book sales” is a bright, dazzling goal to reach for, it lives on the other side of a whirling maelstrom of random variables.
The amount of blood, sweat, and tears you put into your novel will probably affect how well it sells in the long run, but not by any amount that you can estimate in advance.
Unless you’re a writer with a very predictable existing fan-base, the amount of money you make from book sales is not a direct measure of how much “book” you’re producing, or how much time you’re spending on skill-building.
What this means is that when you’re evaluating your efforts, you may look at your goal and see that, gasp, you haven’t reached $100,000 in sales yet. You’re not even close. You must be doing something wrong. Maybe you’re not working hard enough.
That’s a slight exaggeration, but even on a smaller scale, the delayed and non-deterministic nature of a lag indicator can make the process of setting and reviewing goals really discouraging. In some cases that mental toll can be enough to halt progress entirely.
Focusing on lag indicators doesn’t give you the credit you’ve earned, and it doesn’t provide immediate feedback on the tactics you’re using to get work done, which are both important components of creating a productive and satisfying work cycle.
I propose a shift, just a slight one.
Keep your Lag indicators. That’s right, go ahead and keep them. Track your follow count every day, if you want. Manage a detailed spreadsheet of every sale that goes through your shop, every new signup to your Patreon.
But don’t set goals for them. Don’t say, to yourself or to anyone else, I want to hit 10,000 YouTube Subscribers this year, or, my goal is to win an award for my short stories.
These goals are literally out of control. They are out of your control. Instead, use these indicators as a compass.
Ask yourself which lead indicators will push that lag indicator in the direction you want it to go. Measure your lead indicators. Treasure your lead indicators. Put all your efforts here, where they matter.
Challenge yourself to meet goals that are in your zone of control and celebrate those victories. You’ve earned it.
Then, if you are curious, you can return your attention to the slow, slightly-randomized results that are spit back by the churning void. See how your lag indicators have been affected by your lead indicators.
Keep your goals close, and keep them predictable. Use this cycle of action and assessment to drive predictable movement on the things you care about.
Enjoy the journey. Enjoy the work. Be who you were meant to be.
