A Leading indicator helps us get a sense of where we are going in terms of future outcomes. Classic examples of a Leading indicators are things like sales pipeline activity -- calls made, appointments set, emails sent, etc. Each of these activities, if done reasonably well, *lead* to a future activity and hopefully a positive outcome.
A Lagging indicator is a measure of an outcome. An example of a Lagging Indicator is "Sales" or "Receipts".
Of course, one person's Lagging Indicator may be another person's Leading Indicator -- so perspective matters. Here is an example:
Let's say we have an organization with three indicators:
- Sales & Marketing Activity "points" -- some measure of pre-sales activity.
- Sales in Dollars -- actual sales booked.
- Service Tickets -- service related activity which takes place post-sale.
The Sales & Activity metric will be a Leading indicator.
Sales is a Lagging Indicator. However, from the perspective of the "Service/Operations" team, the Sales metric is a Leading indicator of how many service related tickets they can anticipate.
Service Tickets is a Lagging indicator recording how much demand was placed on the service team. Depending on the contract arrangements, Service Ticket count may be a Leading indicator towards profitability.
In encourage work, you have the ability to mark each KPI as either Leading or Lagging indicator. This field is does not drive any specific behavior -- it is merely here to help you think about the kinds of things you are measuring and to help make sure you are measuring things that matter.