Long before satellites and GPS, sailors navigating their ships used the Northstar as a basic point of reference. The Northstar is unique in that it is very close to the north Pole. This closeness causes the Northstar to appear stationary in the night sky as the Earth rotates. The actual star is called Polaris. Sailors, by locating Polaris could establish true north. They use the angle between the horizon and the Northstar to determine their latitude. For example if Polaris is directly overhead then the ship is at the north pole. If Polaris sits on the horizon the observer is at the equator.
The consistent position of Polaris made it possible for ships to be navigated accurately, and, to make adjustments if the ship strayed from the latitude on which they wished to sail.
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In business the term ”Northstar” is used as a metaphor, in conjunction with Vision, Mission, Strategy and Objectives. In all these cases the Northstar is a metaphor for the final destination being sought. Checking current reality against the vision statement, the mission statement, the strategic decisions and objectives the company will know whether they are on track or not.
Checking progress against the company’s Northstar allows for course correction if progress is in the wrong direction or not at the pace that is desired.
While company executives do not stare at the night sky to determine whether they are on track or not, they do use a variety of measures to give them feedback on progress. Results, as a measure, are too late to allow for course correction. It is the equivalent of a ship arriving at the wrong port. It is too late to change the destination to arrive at the right place on time.
Results or any outcome measure that is too late to allow for corrections to be made is called a lagging measure or indicator. Lagging measures are ‘looking in the rearview mirror’ of business performance because they show where you have been or the results of past actions. So if you are in the wrong port you might want to consider what went wrong and how do we get to the right port in the future. While lagging measures have their value retrospectively and over time, they are not useful in making course corrections to ensure arriving at the right port.
Leading measures or indicators can guide your actions to ensure future success. If the ship is off track it can correct that through actions taken and the likelihood of reaching the right port is much greater. If lagging indicators or measures are looking in the rearview mirror, leading indicators help you steer to where you want to go. They help you look forward.
One way of understanding a leading measure is the possible reaction: “if we carry on like this, we are not going to meet our objective”. On the other hand, with the lagging measure your reaction might be: “we missed our objective by 15% how are we going to justify that?”
Obviously using leading measures during the course of work is preferable to relying on lagging measures.
In driving a car you have a number of instruments on the panel. One instrument will tell you how far you have travelled. That is a lagging measure which you can use as a leading indicator if you know the total distance you need to travel to get to your objective. If you know that 200 km is the total distance to your destination and you see that you have travelled 100 km, then you know that you have 100 kilometres to go. If you were measuring the time it has taken you to travel 100 km you can calculate how much longer you will have to travel to reach your destination. If you calculate that this will make you late for your appointment, you can then consider taking action, for example, accelerating your pace or asking WAZE to find you a faster route.
Another instrument tells you how much gas you have left in your tank. This is a leading indicator which can allow you to get more gas before you become stranded on the road.
Another instrument tells you how hot your engine is and, when in the safe zone, is a general indication that all is OK. An overheated engine can literally melt the pistons and cause the engine of the car to completely seize up. Keeping an eye on this leading indicator is an important thing for a driver to do.
A speedometer in the car can be both a leading and a lagging measure. If you are supposed to drive at 60 km/h and your speedometer indicates that you are driving at 80 km/h then you can take action to reduce your speed before having a traffic inspector pull you over. On the other hand it can simply be a lagging indicator of how fast you were travelling when the traffic inspector stopped you.
In project management leading measures or indicators are the most desirable. Running a project relying on whether milestones are reached or not (lagging indicators) is a sign of a non-managed project.
Most KPI’s are lagging measures and therefore the owner of the KPIs and their managers would be wise to think of leading indicators that would be useful and ensure that they are accurate.
Airplanes are subject to a number of conditions in the air that can take them off course.
Straight and level flights of an airplane are affected by changes in thrust, lift, drag and weight. Thrust is the power and speed you are flying. If a plane is flying against an airstream the pilot will adjust the power to keep the desired speed.
Weight is basically determined before takeoff by the weight of people, luggage, cargo, equipment and gas on the plane. While weight drags the plane down, lift is fundamental to flight. The density and speed of air flowing over the wings affect the lift. Finally, drag is the resistance and is the result of the airplane design, the airstream forces and changes in the positioning of flaps on the wings.
In practice a pilot mainly uses speed and the flaps to keep the plane flying straight and level. If you have ever driven a car or a motorcycle you’ll be aware that you are constantly changing acceleration and adjusting the steering. It is seldom that the steering wheel is being held in the same position even on a highway. For a pilot to fly a plane manually for say, 12 hours, requires an extreme degree of skill to keep the plane straight and level during that time. Thank goodness for automatic pilots.
The main external factors that work against being straight and level are airspeed, air stream, altitude and gas reduction as it flies.
Turbulence has an effect on lift because flying over mountains or different types of terrain or storms can cause the density of the air to change or be ‘bumpy’. It is a scary feeling for passengers when a plane goes through turbulence. While planes don’t crash because of turbulence it is certainly fearful for passengers.
During any long-distance flight an airplane is constantly off course and needs adjustment. Today the automatic pilot adjusts speed and lift hundreds of times a minute to keep the plane flying straight to its destination. If, on a long flight, say from New York to Manila, the direction was constantly one degree off course the airplane will end up 700 miles from its destination.
Consider then, the need for leading measures for your KPI’s and other objectives, to allow you to make adjustments to your actions, which are processes. Is the speed at which work is being completed and the quality being achieved en route to achieving your KPI’s, on track?
The question to ask is “How will I know that I am on track to achieving my KPI?”. The answer will be leading indicators.
A word of caution. Ben Horowitz in speaking to Andy Grove of Intel fame asked why it was that Lemon Lemon Rainbow rainbow jelly sugarCEO’s predict good results and seem surprised when they do not materialize. Andy answered:
“CEOs always act on leading indicators of good news, but only act on lagging indicators of bad news. In order to build anything great, you have to be an optimist, because by definition you are trying to do something that most people would consider impossible. Optimists most certainly do not listen to leading indicators of bad news.’
Grove, Andrew S.. High Output Management (p. xxviii). Knopf Doubleday Publishing Group. Kindle Edition.
So my final word is pay attention to leading indicators of bad news and appreciate that this might take some conscious effort. You want to be aware of current reality whether it is good news or not. Also recognize there will be a natural tendency to downplay leading indicators of bad news.
