How do you find "leading" metrics? I think everyone will agree that in the business scorecard there should be a balanced set of lagging and leading metrics. Business experts are exercising in explaining the difference (I'm not an exception, the last attempt is using a golf metaphor). But the main mystery remains unsolved - how do we find those excellent leading metrics? In this article (http://www.bscdesigner.com/find-leading-measures.htm) I shared my thoughts. My method is about a mix of calculations, social research methods, scientific measurement and conducting tests under artificial conditions (a/b tests in simple words). I cannot say that it works for me in 100% of the cases, but at least it is a good starting point for me and my clients. I'm interested in the opinion of the group members about the suggested approach, and I'm interested even more in learning the best practices about finding leading measures that work for you.

1. LEADING MEASURES
SPECIFIC RECOMMENDATIONS TO FIND THEM
Based on
http://www.bscdesigner.com/find-leading-measures.htm
By Aleksey Savkin

2. LEADING LAGGING
THE DIFFERENCE BETWEEN LAGGING
AND LEADING MEASURES

3. BSC DESIGNER
THE DIFFERENCE BETWEEN LAGGING
AND LEADING MEASURES
• Knowing the score or the distance between
the ball and the cap is easy (lagging measure)

4. BSC DESIGNER
THE DIFFERENCE BETWEEN LAGGING
AND LEADING MEASURES
• Knowing the score or the distance between
the ball and the cap is easy (lagging measure)
• Knowing and controlling the parameters of
golf swing that lead to an excellent score are
hard (leading measures)

5. MEASUREMENT TOOLKIT

6. BSC DESIGNER
THE NATURE OF MEASUREMENT
• Before we were talking about such steps as
observation and quantification that one needs
to follow in order to come up with a metric,

7. BSC DESIGNER
THE NATURE OF MEASUREMENT
• Before we were talking about such steps as
observation and quantification that one needs
to follow in order to come up with a metric,
• In the business world most of the measures
are actually simple calculations.

8. BSC DESIGNER
THE NATURE OF MEASUREMENT
• Before we were talking [1] about such steps
as observation and quantification that one
needs to follow in order to come up with a
metric,
• In the business world most of the measures
are actually simple calculations.
• Still in the business we often forget about
scientific nature of measurement and replace
it with simple calculations.

9. BSC DESIGNER
THE NATURE OF MEASUREMENT
• The measurement is probably as old
as science itself

10. BSC DESIGNER
THE NATURE OF MEASUREMENT
• The measurement is probably as old
as science itself,
• still in the business we often forget about
scientific nature of measurement and replace
it with simple calculations.

11. BSC DESIGNER
THE NATURE OF MEASUREMENT
• Scientific research implies a certain level
of uncertainty about a subject of the research
and the goal of measurement is to reduce the
uncertainty.

12. BSC DESIGNER
THE NATURE OF MEASUREMENT
• Scientific research implies a certain level
of uncertainty about a subject of the research
and the goal of measurement is to reduce the
uncertainty.
• If we have a look at business measures from
this point of view then we will be
really disappointed.

13. BSC DESIGNER
THE NATURE OF MEASUREMENT
• Scientific research implies a certain level
of uncertainty about a subject of the research
and the goal of measurement is to reduce the
uncertainty.
• If we have a look at business measures from this
point of view then we will be really disappointed.
• The majority of “measures” are actually
calculations [2] or are based on the information
obtained directly from the subject of the
research.

14. BSC DESIGNER
[2] “How to
Measure
Anything: Finding
the Value of
Intangibles in
Business”
• Douglas W. Hubbard, “How to Measure Anything: Finding
the Value of Intangibles in Business”, 2007, Wiley; 1 edition

15. BSC DESIGNER
AN EMPLOYEE TURNOVER EXAMPLE
• An HR manager calculates turnover by dividing
the number of employees who left the
company over a period by the average
number of employees that were in the
company during this period.

16. BSC DESIGNER
MEASUREMENT VS. CALCULATION
• All of the variables are available in the
company’s ERP system and are simply divided.

17. BSC DESIGNER
MEASUREMENT VS. CALCULATION
• All of the variables are available in the
company’s ERP system and are simply divided.
• We could call it Big Data,

18. BSC DESIGNER
MEASUREMENT VS. CALCULATION
• All of the variables are available in the
company’s ERP system and are simply divided.
• We could call it Big Data,
• But the idea is as simple as running two
database queries to get two variables and
divide one by another.

19. BSC DESIGNER
MEASUREMENT VS. CALCULATION
• There is nothing bad about calculating
something that might be insightful for HR,

20. BSC DESIGNER
MEASUREMENT VS. CALCULATION
• There is nothing bad about calculating
something that might be insightful for HR,
• But let’s not call it measurement, as it is just a
calculation.

21. BSC DESIGNER
SOCIAL SCIENCE MEASUREMENTS
• The idea is to ask the persons that are in the
focus group (the subject of the research) to
share their opinion about something.

22. BSC DESIGNER
SOCIAL SCIENCE MEASUREMENTS
• The idea is to ask the persons that are in the
focus group (the subject of the research) to
share their opinion about something.
• One supposes that well formulated questions
will minimize the risk of receiving wrong
information and making wrong conclusions as
a result.

23. BSC DESIGNER
SOCIAL SCIENCE MEASUREMENTS
• The idea is to ask the persons that are in the
focus group (the subject of the research) to share
their opinion about something.
• One supposes that well formulated questions will
minimize the risk of receiving wrong information
and making wrong conclusions as a result.
• It is not a calculation, but still we are doing only
what social scientists can do – ask people directly
about their opinion.

24. BSC DESIGNER
TRADITIONAL SCIENTIFIC MEASUREMENT
• Traditional scientific measurement method is
about observation.

25. BSC DESIGNER
TRADITIONAL SCIENTIFIC MEASUREMENT
• Traditional scientific measurement method is
about observation.
• They observe, they come up with hypothesis,
and they test them to see if one worked or
not.

26. BSC DESIGNER
TRADITIONAL SCIENTIFIC MEASUREMENT
• Traditional scientific measurement method is
about observation.
• They observe, they come up with hypothesis,
and they test them to see if one worked or
not.
• It is always about the reduction of uncertainty
and almost never about precise calculations.

27. DIFFERENT WAYS TO FIND
MEASURES

28. BSC DESIGNER
DIFFERENT WAYS TO FIND MEASURES
Source: www.bscdesigner.com
Measure Why use
Calculations
Not a measurement, but still…
We can "calculate." It is not a
measurement, but still it gives us a number
1 2
+ /

29. BSC DESIGNER
DIFFERENT WAYS TO FIND MEASURES
Source: www.bscdesigner.com
Measure Why use
Calculations
Not a measurement, but still…
We can "calculate." It is not a
measurement, but still it gives us a number
Surveys
Social science measurements
We can communicate with the subject of
the research (with our customers, prospects
or employees), for example via surveys
1 2
+ /
✓
✓ X
✓

30. BSC DESIGNER
DIFFERENT WAYS TO FIND MEASURES
Source: www.bscdesigner.com
Measure Why use
Calculations
Not a measurement, but still…
We can "calculate." It is not a
measurement, but still it gives us a number
Surveys
Social science measurements
We can communicate with the subject of
the research (with our customers, prospects
or employees), for example via surveys
Observe and conclude
Traditional scientific measurement
We can observe and do conclusions (we
are not limited to observing our own
business only or the present day only)
1 2
+ /
✓
✓ X
✓

31. BSC DESIGNER
DIFFERENT WAYS TO FIND MEASURES
Source: www.bscdesigner.com
Measure Why use
Calculations
Not a measurement, but still…
We can "calculate." It is not a
measurement, but still it gives us a number
Surveys
Social science measurements
We can communicate with the subject of
the research (with our customers, prospects
or employees), for example via surveys
Observe and conclude
Traditional scientific measurement
We can observe and do conclusions (we
are not limited to observing our own
business only or the present day only)
Artificially created conditions
Traditional scientific measurement
We can formulate a hypothesis and test it
under artificially created conditions
1 2
+ /
b
a
✓
✓ X
✓

32. BSC DESIGNER
DIFFERENT WAYS TO FIND MEASURES
• A practical conclusion from the ideas
described above is that we always have
several measurement options.

33. BSC DESIGNER
DIFFERENT WAYS TO FIND MEASURES
1. We can “calculate.” It is not a measurement,
but still it gives us a number

34. BSC DESIGNER
DIFFERENT WAYS TO FIND MEASURES
1. We can “calculate.” It is not a measurement,
but still it gives us a number
2. We can communicate with the subject of the
research (with our customers, prospects or
employees), for example via surveys

35. BSC DESIGNER
DIFFERENT WAYS TO FIND MEASURES
3. We can observe and do conclusions (we are
not limited to observing our own business
only or the present day only)

36. BSC DESIGNER
DIFFERENT WAYS TO FIND MEASURES
3. We can observe and do conclusions (we are
not limited to observing our own business
only or the present day only)
4. We can formulate a hypothesis and test it
under artificially created conditions

37. BSC DESIGNER
CALCULATIONS
• We could calculate satisfaction rate by
calculating the number of repeat purchases.

38. BSC DESIGNER
CALCULATIONS
• We could calculate satisfaction rate by
calculating the number of repeat purchases.
• This is not a measurement, it is a calculation

39. BSC DESIGNER
CALCULATIONS
• We could calculate satisfaction rate by
calculating the number of repeat purchases.
• This is not a measurement, it is a calculation
• but it still reduces the level of uncertainty
about the subject in the sense that it allows
managers to see the problem from a different
perspective.

40. BSC DESIGNER
CALCULATIONS
• With calculations we could normally generate
excellent lagging measures, but not leading
ones

41. BSC DESIGNER
CALCULATIONS
• With calculations we could normally generate
excellent lagging measures, but not leading
ones
• We suppose that satisfied customers are those
who make repeat purchases within 2 months.

42. BSC DESIGNER
CALCULATIONS
• With calculations we could normally generate
excellent lagging measures, but not leading
ones
• We suppose that satisfied customers are those
who make repeat purchases within 2 months.
• But we have no idea about what leads them
to a repeat purchase.

43. BSC DESIGNER
SURVEYS
• We could calculate some customer activity by
taking some variables

44. BSC DESIGNER
SURVEYS
• We could calculate some customer activity by
taking some variables
• But sometimes it is easier to conduct a survey
by asking customers about their preferences
and decisions.

45. BSC DESIGNER
SURVEYS
• We could calculate some customer activity by
taking some variables
• But sometimes it is easier to conduct a survey
by asking customers about their preferences
and decisions.
• the procedure of measurement is easier itself,
but the formulation of survey questions is
always a challenging task.

46. BSC DESIGNER
OBSERVE AND CONCLUDE
• We just observe what they do and make
appropriate conclusions.

47. BSC DESIGNER
OBSERVE AND CONCLUDE
• We just observe what they do and make
appropriate conclusions.
• You might install a special script on the
website that will show you the most clickable
zones.

48. BSC DESIGNER
OBSERVE AND CONCLUDE
• We just observe what they do and make
appropriate conclusions.
• You might install a special script on the
website that will show you the most clickable
zones.
• You can observe the process of customer
choice in the physical shop.

49. BSC DESIGNER
ARTIFICIALLY CREATED CONDITIONS
• A measurement by observation as described
above might be as difficult as finding black
holes in the space by tracking light behavior.

50. BSC DESIGNER
ARTIFICIALLY CREATED CONDITIONS
• A measurement by observation as described
above might be as difficult as finding black
holes in the space by tracking light behavior.
• We are not pretending to do a space science
in the business, and we can artificially create
some conditions and see what will happen.

51. BSC DESIGNER
ARTIFICIALLY CREATED CONDITIONS
• Instead of asking customers for their opinion,
or silently observing their behavior,

52. BSC DESIGNER
ARTIFICIALLY CREATED CONDITIONS
• Instead of asking customers for their opinion,
or silently observing their behavior,
• One could create two options and see which
one works better.

53. BSC DESIGNER
ARTIFICIALLY CREATED CONDITIONS
• These two measurement methods actually
give us more opportunities to find
excellent leading measures.

54. BSC DESIGNER
ARTIFICIALLY CREATED CONDITIONS
• These two measurement methods actually
give us more opportunities to find
excellent leading measures.
• Under artificially created conditions you can
test business hypotheses and get closer to the
drivers of performance excellence.

55. ALL THESE APPROACHES MIGHT
GIVE CONTRADICTORY RESULTS

56. BSC DESIGNER
THE DIFFERENCE BETWEEN VARIOUS
TYPES OF MEASUREMENTMeasurement Results
Calculation
Information from CRM system is calculated. 70% of customers buy while
balls.
Survey
Survey was conducted. Customers prefer white balls because they like the
white color 60% more than the black one.
Source: www.bscdesigner.com What change will lead to more sales?

57. BSC DESIGNER
THE DIFFERENCE BETWEEN VARIOUS
TYPES OF MEASUREMENTMeasurement Results
Calculation
Information from CRM system is calculated. 70% of customers buy while
balls.
Source: www.bscdesigner.com What change will lead to more sales?

58. BSC DESIGNER
THE DIFFERENCE BETWEEN VARIOUS
TYPES OF MEASUREMENTMeasurement Results
Calculation
Information from CRM system is calculated. 70% of customers buy while
balls.
Survey
Survey was conducted. Customers prefer white balls because they like the
white color 60% more than the black one.
Source: www.bscdesigner.com What change will lead to more sales?

59. BSC DESIGNER
THE DIFFERENCE BETWEEN VARIOUS
TYPES OF MEASUREMENTMeasurement Results
Calculation
Information from CRM system is calculated. 70% of customers buy while
balls.
Survey
Survey was conducted. Customers prefer white balls because they like the
white color 60% more than the black one.
Observation 1
Observation was done within a company's own sales history. 20% of
customers who buy white balls buy a black one during the next 6 months.
Source: www.bscdesigner.com What change will lead to more sales?

60. BSC DESIGNER
THE DIFFERENCE BETWEEN VARIOUS
TYPES OF MEASUREMENTMeasurement Results
Calculation
Information from CRM system is calculated. 70% of customers buy while
balls.
Survey
Survey was conducted. Customers prefer white balls because they like the
white color 60% more than the black one.
Observation 1
Observation was done within a company's own sales history. 20% of
customers who buy white balls buy a black one during the next 6 months.
Observation 2
Observation was done in competitor's business. In ABC company they have
balls of 4 colors and they all are equally popular.
Source: www.bscdesigner.com What change will lead to more sales?

61. BSC DESIGNER
THE DIFFERENCE BETWEEN VARIOUS
TYPES OF MEASUREMENTMeasurement Results
Calculation
Information from CRM system is calculated. 70% of customers buy while
balls.
Survey
Survey was conducted. Customers prefer white balls because they like the
white color 60% more than the black one.
Observation 1
Observation was done within a company's own sales history. 20% of
customers who buy white balls buy a black one during the next 6 months.
Observation 2
Observation was done in competitor's business. In ABC company they have
balls of 4 colors and they all are equally popular.
Artificial
Condition 1
Hypothesis of price perception was tested. When black balls are 10% more
expensive than white balls, then 60% of customers buy black balls.
Source: www.bscdesigner.com What change will lead to more sales?

62. BSC DESIGNER
THE DIFFERENCE BETWEEN VARIOUS
TYPES OF MEASUREMENTMeasurement Results
Calculation
Information from CRM system is calculated. 70% of customers buy while
balls.
Survey
Survey was conducted. Customers prefer white balls because they like the
white color 60% more than the black one.
Observation 1
Observation was done within a company's own sales history. 20% of
customers who buy white balls buy a black one during the next 6 months.
Observation 2
Observation was done in competitor's business. In ABC company they have
balls of 4 colors and they all are equally popular.
Artificial
Condition 1
Hypothesis of price perception was tested. When black balls are 10% more
expensive than white balls, then 60% of customers buy black balls.
Artificial
Condition 2
Hypothesis of a bundle was tested. When a white ball is bundled with a
white hat 75% of customers buy the bundle.
Source: www.bscdesigner.com What change will lead to more sales?

63. BSC DESIGNER
ALL THESE APPROACHES MIGHT
GIVE CONTRADICTORY RESULTS
• It is not a real business case, but I think you do
agree that we are faced with situations like
this very often:

64. BSC DESIGNER
ALL THESE APPROACHES MIGHT
GIVE CONTRADICTORY RESULTS
• Our CRM system gives us a number, but we
don’t know how we can change it.

65. BSC DESIGNER
ALL THESE APPROACHES MIGHT
GIVE CONTRADICTORY RESULTS
• Our CRM system gives us a number, but we
don’t know how we can change it.
• We do some survey and sometimes we get
some ideas, but they might not be coherent
with real customers’ actions.

66. BSC DESIGNER
ALL THESE APPROACHES MIGHT
GIVE CONTRADICTORY RESULTS
• We obverse and do some conclusion about
what might work

67. BSC DESIGNER
ALL THESE APPROACHES MIGHT
GIVE CONTRADICTORY RESULTS
• We obverse and do some conclusion about
what might work
• We try various options and it appeared that
something unmentioned works better

68. BSC DESIGNER
ALL THESE APPROACHES MIGHT
GIVE CONTRADICTORY RESULTS
• It is obviously that the company needs to do
some more tests or conduct more specific
surveys to understand the challenge better.

69. BSC DESIGNER
ALL THESE APPROACHES MIGHT
GIVE CONTRADICTORY RESULTS
• It is obviously that the company needs to do
some more tests or conduct more specific
surveys to understand the challenge better.
• Finding leading metrics is actually about
finding a solution that works.

70. FINDING EXCELLENT LEADING
MEASURES

71. BSC DESIGNER
HOW TO FIND A BETTER LEADING
MEASURE
• We need to have a balance between various
measurement methods.

72. BSC DESIGNER
HOW TO FIND A BETTER LEADING
MEASURE
• We need to have a balance between various
measurement methods.
• We need to combine the results of
calculations, the survey results, the results
of observations and the results of tests under
artificial conditions.

73. BSC DESIGNER
SAFETY RULES NEED TO BE FOLLOWED
• Have your business context in mind. We don’t
want to measure something just because we
can measure it.

74. BSC DESIGNER
SAFETY RULES NEED TO BE FOLLOWED
• Have your business context in mind. We don’t
want to measure something just because we
can measure it.
• Don’t believe people who tell you that it is
impossible to measure, as it is possible to
quantify and measure anything [2].

75. BSC DESIGNER
SAFETY RULES NEED TO BE FOLLOWED
• If you cannot quantify something then you
need to decompile the subject into
measurable pieces

76. BSC DESIGNER
SAFETY RULES NEED TO BE FOLLOWED
• If you cannot quantify something then you
need to decompile the subject into
measurable pieces
• Combine various measurement and research
methods like calculations, surveys,
observations and a/b tests.

77. BSC DESIGNER
• [1] Aleksey Savkin, The difference
between quantification, measure,
metric, and KPI, January 2014,
BSCDesigner.com
• [2] Douglas W. Hubbard, “How to
Measure Anything: Finding the
Value of Intangibles in
Business”, 2007, Wiley; 1 edition
RESOURCES

78. BSC DESIGNER
MORE ABOUT THE BALANCED SCORECARD
Find more insightful
articles about the
Balanced Scorecard
in ”Articles” section at
www.bscdesigner.com
BSC DESIGNER

79. BSC DESIGNER
THANK YOU!
Feel free to send us your questions using the contact form at
www.bscdesigner.com