Today’s corporate world it’s all about execution, if you
can then you are in the market if you cannot there is someone else. Often
companies face challenges and the quarterly results they announce makes the
markets move with them or sometime against them.
Infosys for that matter has shared almost 10 quarterly
results today which are pretty poor and markets beat down the stock price to a
bear trap. On the other hand we have TCS as a company in the same sector who is
performing really great.
Now the question arises is the management looking at the
right performance indicators to accomplish their set goal. We classify these
indicators into two broad categories, Lagging and Leading. The lagging
indicators are the ones we see after the activity is performed … it’s an output
and easy to measure but difficult to control… and leading indicators are the
one which are measured before doing the activity it’s an input and difficult to
measure but easy to control.
Let’s take weight loss as an example to understand this
better … Lagging indicator that is easy to measure is your weight that you can
see standing on the weighing scale. By measuring this daily will only tell you
what your weight is and not tell you what you are doing to control it.
The following Leading indicators will help us influence the
goal we want to accomplish
1. Calories Intake 2. Calories burned
These 2 indicators
are the ones we need to focus and control upon to accomplish the goal.
Similarly the companies should switch to measuring more of
leading indicators instead of looking at the lagging indicators on their
scorecard. The age old powerful tool is a Balance Scorecard and its
implementation in the right way will help the management take decisions on time
to accomplish the desired goal and be a market leader.
