The leading indicator is the secret to a robust pipeline

Leading indicators are the key metrics that make pipeline projects robust. They allow you to prevent problems, stay proactive, and predict risk and issues on your project.

As the person with responsibility for project management, you might find yourself spending more time herding cats than in understanding how your projects perform. You might even find yourself labelled as ‘the postman’. You’re the postman because you seem to be the courier for other people’s messages, rather than the go-to person with critical knowledge about the project!

This is why you need lead and lag indicators. Using both will give you the critical information to promote you from postman to project manager.

Even if you do have metrics, research shows that you’re probably only using one type.

In a paper in Insight, the journal of the International Council on Systems Engineering, the authors stated that ‘lagging indicators are widely used, but leading indicators are not. However, both types of indicators are important in providing project performance information’.

Now you know why this is so important, let’s dive in.

What are leading and lagging indicators?

Leading and lagging indicators are the pair of measures that help you understand how your project is performing. The first one to wrap your head around is lagging indicators.

Lagging indicators come first: They tell you how your project has performed. They can also be called lag metrics, or trailing indicators. The reason that they come first is because you can only create a good predictive indicator once you know how past projects have performed.

Leading indicators are predictive, which is why they’re sometimes called ‘headlights’: They help you to predict what is likely to happen in your current project.

Of the two types of indicators, project managers often have a handle on the lag, but forget the lead. Ironically, it’s your set of leading indicators that turn your project management skill into a super power.

Examples of lagging indicators

Lagging indicators are how people report on project performance at its conclusion. Your lagging indicators will vary from someone else’s. But to get you started, here are some good examples:

• profit
• expenses
• staff availability
• success of project delivery; the classic ‘budget, scope, time’ trifecta
• pipeline uptime
• % of post-inspection rework
• safety profiles, such as the number of accidents.

Examples of leading indicators

Leading indicators help you to improve your outcomes during a project. This is why they link into your continuous improvement cycle, and are process-focused. Some good examples include:

• the number of checklists completed
• the hazard severity ratings in your risk assessments
• the number of inspections carried out
• % of compliance versus project requirements, discovered at audit
• % of subcontractor turnover
• the number and % of deadlines missed by suppliers

You can see that the leading indicators allow you to manage risks. Whereas lagging indicators help you design the next project more effectively.

Design project indicators that enable you to act

That old saying, ‘you can’t improve what you don’t measure’ is particularly true when it comes to project metrics. But there is a fine line between creating effective measures and agonising about getting them perfect.

Perfect leading indicators do not exist.

According to the Campbell Institute’s Practical Guide to Leading Indicators: Metrics, case studies & strategies, ‘it is important for leading indicators to actively monitor the state’ of the system, so that ‘detailed information can be quickly acted upon’. It suggests that the best leading metrics are ‘actionable, achievable, meaningful, transparent, easy to communicate, valid, useful, and timely’.

Regardless of how you decide to approach your leading and lagging metrics, one key rule applies: Design metrics that enable you to take action.

For lagging metrics, action is making changes to your next project, up-front. For leading metrics, it’s being able to take immediate action during a project to prevent foreseeable problems.

How to classify your leading indicators so that you get the right information quickly

One of the simplest ways of doing this is to consider:

1. operations-based indicators (e.g. plant, processes)
2. project-based indicators (e.g. budget, timing, rework)
3. behavioural indicators (e.g. supervision, absenteeism).

A three-step categorisation will give you a birds-eye view of your project.

Using a clear system like this allows you to take action quickly because you’ll know exactly where the action needs to take place.

Which type of project indicator is most important?

Smart project managers know that leading and lagging metrics are equally important. But this doesn’t help if your company or upstream management doesn’t see it the same way. Even if you’re only required to report on lagging metrics, make it a practise of your own to keep track of your leading indicators.

The Australian Constructors Association suggests that you can build a business case for leading indicators, based on risk avoidance and risk minimisation. Their model, while established for safety management, is easily adapted. It allows up-stream management to understand where processes are at risk of failing, so that you can prevent downstream consequences.

Here are some ways that you can make the business case work for you:

• Discuss leading metrics with the team. Make sure that you can identify every area of performance, because it allows you to set or revise project goals and objectives.
• Define the measurement parameters for your chosen leading indicators.
• Set your target performance level, and use it as a benchmark.
• Work with others in the team to determine the best way to collect and assess data. Then, continuously compare performance against your benchmark.
• Decide on the best reporting cycle, and report on your leading indicators to the project team consistently with that time cycle. If you have toolbox meetings every Monday, you might include the leading metrics in agendas for those meetings.

In Summary

Using both leading and lagging indicators will improve your projects’ outcomes. While both types of indicators are important, it’s the leading indicators that will prevent problems, because they help you take action early when you spot a potential problem.

Getting your indicators right will take time. It’s a continuous improvement activity, and that means that it will improve outcomes for the entire business. It will give you the ability to drive projects effectively, rather than simply reporting on what has already taken place.

And when that happens, you become the project superstar, rather than just the postman.

Download our Leading vs Lagging Indicators Checklist

Use our Leading Vs Lagging Indicators Checklist to guide you through establishing and maintaining your most effective indicators. It’s a single, A4 page, and it’s free: Download now.