System Design

KPIs - Lag vs Lead Measures

KPIs have proven themselves as a way to ensure we stay on track and actually achieve our goals, be it at a business level (i.e. How many new clients are we getting each day?) or a personal level ( i.e. how many hours of exercise am I doing each week? ). As I read through Cal Newport’s Deep Work he distinguishes between lead and lag measures, a big enough distinction that warrants keeping in mind while designing any KPI.

Lag measures are more in line with what we want to achieve ( i.e. business profitability or exam scores ), but they are only observed after the correct decisions are made. This lag makes them less useful for driving decisions, as they only inform us on the quality of past decisions.

Lead measures are usually less aligned with what we care about, but provide us with earlier information about what we care about, even if it isn’t always perfect information.

In order to practice building good lag and lead measures, I have started building a few examples. In all these examples, the Lagged Measures are what I mostly care about, but the Lead Measures allow me to consistently build towards that goal, even if they don’t perfectly reflect it.

Goal Lagged Measure Lead Measure
Becoming healthier Overall tiredness during the day Quality of the food I am eating
Better grades Exam scores Time it takes to correctly complete homework
Sucessfully launching a startup Monthly revenue Number of new clients every week
Social welfare Population satisfaction Wealth gini coefficient
Financial security Passive income Active income

Which other examples should I add?