Leading vs Lagging Indicators – What’s the Fuss?

Manufacturing organisations rely heavily on KPIs to understand performance. The challenge is that most KPIs in the sector are lagging indicators - they tell us what has already happened. While important, lagging indicators provide limited opportunity to influence performance in real time. To steer operations proactively, leaders also need leading indicators. These measures help predict future performance, strengthen processes and guide timely decision-making.

Understanding Lagging Indicators

Lagging indicators report performance after the fact. They show whether targets were achieved and provide a snapshot of results. Common examples include:

• Accident or incident rates

• Defect levels

• On-time delivery performance

• Output or sales achieved

These measures are essential for assessing whether the organisation is “winning or losing”. However, they are backward-looking and often reveal problems too late to influence the outcome.Relying solely on lagging indicators leaves leaders reacting to events rather than preventing them.

Why Leading Indicators Matter

Leading indicators are proactive measures that predict future outcomes. They focus on the inputs, processes and behaviours that drive results. By tracking leading indicators, leaders can:

• Identify risks early

• Make timely adjustments

• Strengthen processes before issues arise

• Influence behaviours that support performance

Take Safety as an example:

• Lagging indicators: accident rates, incident severity, response times

• Leading indicators: PPE adherence, safety inspections completed, action closure from risk assessments, completion of safety training

Improving the leading indicators strengthens the process — and ultimately improves the lagging results.

Applying Leading Indicators Across Your KPI Framework

For every lagging KPI - whether linked to Safety, Quality, Delivery, Cost or People — there are potential leading indicators worth measuring.Identifying the right leading indicators may require:

• Experimentation

• Testing

• A few PDCA cycles

But the effort is worthwhile. With strong leading indicators in place, leaders become more:

• Proactive

• Purposeful

• Systematic

• Behaviour-focused

They gain earlier warning of risks, more insight into process stability and greater ability to influence culture in day-to-day work.

How Leading and Lagging Indicators Work Together

Leading and lagging indicators are interdependent.

• Leading indicators help you steer actions toward your goals.

• Lagging indicators confirm whether you have achieved those goals — the “Check” in PDCA.

Using both creates a balanced, evidence-based approach to performance improvement. It helps organisations:

• Address challenges proactively

• Make informed decisions

• Learn from past performance

• Build more stable, consistent operations

How Manufacturers Network Can Help

We have extensive experience developing and applying both leading and lagging indicators across manufacturing environments in diverse sectors.This gives us a unique understanding of:

• Which leading indicators truly predict performance

• How to design measurement systems that drive behaviour

• How to align indicators with operational and strategic priorities

If you want to strengthen your KPI framework and expand your use of leading versus lagging indicators, we can help.

Conclusion

Lagging indicators show what happened. Leading indicators show what will happen.Using both gives leaders a clearer, more proactive and more powerful way to drive performance.When organisations understand and apply the right mix of measures, they strengthen behaviours, stabilise processes and achieve more predictable results.