There's a new excerpt up on our Excerpts blog. It's taken from Beat the Odds: Avoid Corporate Death and Build a Resilient Enterprise by Robert A. Rudzki.
Here's a brief excerpt:
The Hackett Group points out that the use of key performance indicators is not a choice between focusing on effectiveness and focusing on efficiency. The strategic advisory firm's research shows that "world-class firms use efficiency as a means to free up funds to invest in high-impact people and technology--not as an end unto itself."3 To say it another way, they use efficiency gains to fund adding additional resources to those activities (e.g., strategic themes), which can then drive fundamental business performance. Performance metrics are either leading indicators or lagging indicators of performance. Examples of leading indicators include the following:Here's a direct link to the excerpt: http://800ceoread.com/excerpts/archives/007619.html
Following are some conventional lagging indicators:
- Customer satisfaction
- Employee satisfaction and commitment
- Adherence to core values
- 360-degree feedback on leadership practices
- The number of supply chain alliances designed and implemented
Leading indicators give a clue to the likely future success of the organization. They indicate whether or not you are "building for the future," and can provide an early warning signal of future problems. For instance, persistent indications of customer dissatisfaction are an alarm bell about future order rates and revenues. Employee dissatisfaction can be a leading indicator of future key employee departures. Customer and employee indicators are among the strongest leading indicators of future performance. Lagging indicators are like looking in the rearview mirror. It's useful information about where you've been, but it's dangerous to steer by it. Financial performance, by its nature historical, is typically a lagging indicator.
- Last quarter's net income
- Last year's return on assets
- Last year's cash flow
- The number of purchase orders processed per employee
- The average cost to process an invoice