Leading vs Lagging Indicators: Examples and When to Use Each

Leading Indicators Examples: What Could Happen Next?

Leading indicators focus on activities, behaviours, capacity, or conditions that may affect a later result. Because they appear earlier, they can give managers more time to intervene.

Some useful leading indicators examples include:

• Sales: Qualified pipeline value or product demonstrations completed.
• Customer service: First-response time or unresolved ticket backlog.
• Operations: Preventive maintenance completion.
• Procurement: Strategic supplier reviews completed on schedule.
• People: Role-specific training completion.

However, there is an important catch. An indicator is not useful simply because it appears early.

For example, a company could track the number of sales calls made each week. But if additional calls do not generate more qualified opportunities or revenue, the metric creates activity rather than insight. So, leaders need to ask a more useful question: does this measure actually help us anticipate the result we care about?

Lagging Indicators Examples: What Actually Happened?

Lagging indicators answer a different question: what result did we achieve?

Revenue, profit margin, customer churn, employee turnover, accident frequency, and project completion variance are familiar examples. Because these measures record completed outcomes, they are often easier to verify and compare over time.

Take finance as an example. Operating margin tells leaders how efficiently the business converted revenue into operating profit during a completed period. Cash flow shows what happened to liquidity. These measures are essential for understanding business performance, even though managers cannot go back and change the period they describe.

That is also why understanding key financial metrics matters. Historical results help leaders compare actual performance against budgets, targets, and previous periods. However, they become more actionable when paired with measures that show what may happen next.

Leading and Lagging Indicators: How Do They Work Together?

This is where the distinction becomes especially practical. Rather than choosing one type over the other, businesses can connect them around the same objective.

Imagine a procurement team trying to reduce supply disruption. Supplier risk assessments could provide an early indication of potential problems, while disruption-related downtime could show the eventual operational impact.

The same logic applies when selecting procurement performance measures. Teams need to connect supplier activity with the outcomes the organisation actually cares about. Otherwise, they may end up reporting dozens of KPIs without knowing which ones deserve management attention.

What Does Research Tell Us?

There is another reason to connect early and outcome measures: the relationship between them should be tested rather than assumed.

According to the study Leading and Lagging Indicators of Occupational Health and Safety: The Moderating Role of Safety Leadership, which examined 3,578 employees across 66 workplaces, researchers found an empirical relationship between leading and lagging safety indicators. The study also found that middle-management safety leadership played a moderating role in that relationship.

Why does this matter for business leaders? Because it highlights the importance of looking beyond the label attached to a KPI. A measure should earn its place on a dashboard by helping managers understand or influence an outcome.

Consider facilities management. A team might track inspections and planned maintenance as early measures. Later, it can compare those figures with equipment downtime, repair costs, or service interruptions.

Over time, reviewing facilities management KPIs in this way helps teams see which activities genuinely contribute to stronger operational performance. In other words, measurement becomes a learning process rather than simply a reporting exercise.

When Should You Use Each Type?

So, when should a business use leading vs lagging indicators?

Use leading measures when there is still an opportunity to influence the result. They are particularly valuable when managers need early warnings or want to understand whether teams are completing the activities expected to drive performance.

Use lagging measures when you need to confirm results. They work well for accountability, benchmarking, financial reporting, target assessment, and strategic reviews.

In most cases, however, the strongest KPI framework uses both. A customer retention strategy, for example, could track onboarding completion and unresolved complaints early. It could then measure renewal rates and customer churn later.

Managers who want to develop this approach more systematically can use a KPI optimisation course to strengthen KPI selection, target setting, performance analysis, and the connection between measurement and management decisions.

How Can You Build a Better KPI Set?

Start with the outcome rather than the data already available. What does the business actually want to improve? Once that is clear, work backwards.

A practical process is:

1. Define the commercial or operational outcome.
2. Choose a lagging KPI that clearly measures that result.
3. Identify one or two activities that could influence it earlier.
4. Assign responsibility for each measure.
5. Track whether changes in those activities are followed by changes in the outcome.
6. Remove or replace KPIs that repeatedly fail to support decisions.

This process matters because dashboards can easily become overcrowded. More data does not automatically create better visibility. What leaders need is a clear connection between action and outcome.

That is ultimately the strength of leading vs lagging indicators. They help managers answer three practical questions at once: Where are we heading? What can we still influence? And did our previous decisions actually work?

Conclusion

Good performance management needs both an early view and a final result. Leading indicators help managers identify changes while there is still time to respond. Lagging indicators then show whether those actions translated into measurable business outcomes.

For modern leadership teams, leading vs lagging indicators are most valuable when they are connected rather than viewed separately. That connection makes dashboards more useful for operational decisions, resource allocation, accountability, and strategic review. More importantly, it shifts performance measurement from simply reporting numbers to understanding what those numbers are telling the business to do next.