Shifting your focus away from lagging indicators towards leading indicators can help professional services firms take better control of the future.

Does your Management Information (MI) system measure leading or lagging indicators?

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Five lagging indictaors

1. profit

This is a lagging indicator of how you managed the cost of your revenues last year;

2. Revenues

This is a lagging indicator of what customers did last year and says nothing about the future;

3. billable hours

This is a lagging indicator of what people did with their time last year;

4. write-offs

This is a lagging indicator of customer dissatisfaction in the past year (Note: It is NOT a sign of satisfaction);

5. Attrition rates

This is a lagging indicator of how content your people were last year;

 

Five leading indicators

1. new projects

Number of new projects opened - This is a leading indicator of future income;

2. billing days

Number of average days billing in lockup - This is a leading indicator of cash resource availability;

3. projects per client

Number of projects per client - This is a leading indicator of the level of cross-selling;

4. average fee 

Average fee per new project - This is a leading indicator of revenue growth;

5. realisation rates

Realisation rate (ratio of average fee billed to average worked rate) - This is a leading indicator of profitability.