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Which indicator would have warned you before the quarter went down?
By the time the financial number turns red, the problem is four months old.
Operational indicators that lead your financial result, with the lead time demonstrated on your own data and not asserted.
Leading indicator scorecardSend this page to whoever decides
What you receive
- The map of the causal chain between your operation and your result.
- The set of indicators with the evidence of lead time on your own data.
- The dictionary with definition, source and threshold for each one.
- The dashboard built and the review ritual written.
The proof that applies here
- Statistical process control and Six Sigma Black Belt.
- Eight years of monthly reviews in front of senior leadership, where the indicator had to hold up in front of a third party.
- Executive MBA, to close the chain on the financial result side.
How we solve it
The method, not the promise.
- The causal chain between operation and result gets reconstructed, with the owner of each link.
- The candidates get tested against your twenty four months of data and whatever does not lead gets dropped without mercy.
- Each survivor gets defined with its source, its frequency and its alarm threshold.
- The tracking gets built in the tools you already have, not in a new one.
- The ritual gets written: who looks at what, how often and what decision each threshold triggers.
Use this today, without hiring anyone
How to test whether an indicator really leads. It gets done with a spreadsheet and your own data, and it is what separates a leading indicator from one that sounds good.
- Pick a candidate operational indicator and your financial result. For example cycle time against margin, or rework against revenue.
- Put them side by side by month, twenty four months. No averages and no smoothing: the raw data.
- Now shift the operational one forward one month, then two, then three. In which of the three shifts do the curves look most alike? That is your real lead, and many times it is zero.
- Repeat it with the earlier period split into two halves. If the lead shows up in one half and not the other, it was not anticipation: it was coincidence.
The most common mistake in this exercise gets avoided by knowing this. A leading indicator published on a dashboard becomes a target and starts getting gamed. Before exposing it, decide who can move it and how you will notice.
This sounds like you if
- A quarter missed target without any indicator anticipating it.
- Your indicators confirm what already happened.
- The financial result becomes known when there is no margin left to correct it.
Before you hire
The first phase demonstrates, on your own data, how many periods of lead each indicator gives. If none leads, that finding is the deliverable, you pay only for that phase and you save yourself building a dashboard that was never going to warn you.
The lead time gets demonstrated on your own historical data before anything is built, with the number of periods of lead measured and published. If it is not demonstrated, the second phase is not charged.
Which of your operational indicators moved before the last time the result turned red?
If the problem is a different one