In the Balanced Scorecard concept developed by Dr. Kaplan and Dr. Nortern, they advocate the used of a balanced scorecard approach in managing the business or performance. One the of the the key concept is the lead and lad indicator. They believed that an indicator has the function of being a lead and a lag to each others.
What is a lead indicator?
It is a set of measures that used to reflect the result of an activity. If the activity is a stand alone, then the result of the activity has no influence to other activity. In this case, the indicator itself has no relationship with the rest. However, if the result of an activity trigger another activity or influence the result of another one, then this indicator has a cause and effect relationship with each others. When this indictor cause changes to another indicator, then this indicator is a lead indicator.
What is a Lag Indicator?
Similar to the lead indicator, it is a set of measures that used to reflect the result of an activity. However, this activity normally is the final and end of an activity chain. In another word, it is an activity that decide the final outcome of a chain of activities. The measures used in this activity is the indication of consequences of all and it is termed as a Lag Indicator. In the cause and effective relationship, it is the effect of all the rest of the inter-related activities
Below is an example of indicator. Can you identify them which is lead and which is lag indicator?
- market share
- sales revenue
- brand image
- advertising and promotion budget
- new marketing sales
- Productivity index
- delivery cycle time
- customer satisfaction
- quality rejects
- machine downtime
- development cost
- vendor failure
- customer complaints
- new product launching
- profit margin