Employee engagement metrics: lagging and leading indicators

Last updated: 17 April 2024

When running a business, you rely on indicators to tell you how you’re performing.

Key indicators can forewarn you of poor performance, drive your team to achieve more and increase your competitiveness (when used in the right way).

Lagging indicators reflect on performance

Lagging indicators won’t predict what’s going to happen, but they’re perfect for understanding what has happened. They can tell you if you’ve accomplished your goals and help you to examine your outputs.

Examples of lagging indicators:

• Profits
• Revenue
• Expenses
• Customer growth

In terms of employee engagement, the measure of engagement itself is a lagging indicator, because you’re documenting your employees’ state of mind over a period of time that’s passed.

Other indicators include:

• Retention
• Employee turnover
• Successful hires

All provide insight into company culture and the health of your employer brand (as it stands).

Leading indicators predict the future

Leading indicators can be thought of as drivers.

They make you identify the processes and variables that will help you achieve a goal faster or in a better way. So, improving these processes will increase the chances of reaching your goal.

These indicators are often used by business leaders to proactively mitigate risk and negative impacts; catching minor problems early to prevent them from becoming major problems later.

Leading indicators will help you to improve employee engagement moving forward.

They can preempt outcomes, so if you can track employee attendance at a company social event (for instance) then you have forewarning of good or poor engagement - depending on the proportion of your workforce who turn up.

That’s one only example, other examples of leading indicators are:

• Productivity levels
• Low morale, pessimism or lack of enthusiasm
• Whether employees offer constructive feedback/suggestions
• Extent of participation in training or reward programmes
• Time spent interacting with colleagues in-person or online

Leading indicators can help you quickly identify individuals who are disengaged or even feeling isolated.

One of the biggest challenges of working from home is a lack of social interaction. Are you providing enough opportunities for your team to socialise in-person and online?

Lagging indicators reflect on performance past and present. Leading indicators are used to predict the future.

When to use leading and lagging indicators

Knowing when to use each type of indicator is essential.

Broadly, if you have a high degree of confidence in what you need to do to improve employee engagement, you’ll likely benefit from using leading indicators.

However, if you’re uncertain about the influences on your engagement, then you won’t be able to confidently identify your leading indicators.

If you take over a new workforce via an acquisition, for instance, you won’t initially know what motivates them. As every organisation is different, leading indicators that work for one team may not always translate to another.

Conversely, leading indicators can also stifle innovation. Because they tell you what you should be doing, they stop out-of-the-box thinking and experimentation.

If you want to try new things to improve your engagement and culture, then it’s best to leave your leading indicators for another time.

Building the right culture

Understanding the use of leading and lagging indicators is easier when seen in action.

NIIT Technologies is an Indian company that targets the Fortune 1000 with IT cost-saving services. To remain competitive, the company fosters a positive culture that hinges on its vision of “New Ideas, More Value”.

It needs its employees to constantly think about service improvements for customers. Education, workshops, internal communications and contests are used to achieve this. The engagement with these projects are leading indicators for NIIT.

NIIT launched a content called IGNITE to encourage each department to submit new service ideas. Over 2,000 ideas were generated, sparking a second contest that measured the number of new ideas that were implemented.

Following this, each department voted on the ideas with the greatest value potential for customers.

Because of the contests and workshops, the number of ‘New Idea’ campaigns has increased by 400% since implementation. The number of new ideas developed by the team (a lagging indicator) has grown from 8% to 20%.

When looking at your workplace culture, start by identifying core values.

Acting on your indicators

Once you’ve identified leading and lagging indicators to track your employee engagement, you must then act on the insights.

If you discover that job satisfaction is falling (through surveys, retention, absenteeism and so forth) you must then look at the influences on this that you can control.

You can look at your workforce’s skills and workload, for example, to understand if they are being over or under-utilised. Management might be another area to consider. Because, as the saying goes, people don’t leave bad jobs, they leave bad bosses.

Assess your work environment and if people regularly complain about certain areas like the kitchen. Do they often work overtime or dislike the set working hours?

Finally, look at your pay, benefits and bonus packages, as remuneration ties closely with employee engagement. Ensure you give appropriate raises, performance-based rewards and bonuses.

Striking the right balance

Most organisations will use a mix of lagging and leading indicators at different times and in different contexts.

The ratio of each metric largely depends on each use case and department. One department’s lagging indicator might be another one’s leading indicator.

A marketing department might see a new sales lead as proof that their campaign has worked (a lagging indicator for their team). However, the sales team will use this as a leading indicator, working towards closing a deal.

Take your time

It’s worth taking the time to identify your leading and lagging indicators. You’ll gain a holistic view of your organisation by measuring both.

You can quantify your employee engagement now, predict it in the future and address the factors that influence it.

Give yourself a goal to achieve, a realistic timeline to get there and waypoints along the way to know you’re on track.

The secret to engagement

An employee share scheme can supercharge engagement. And tap into that sense of purpose and belonging that employees crave.

By offering them shares in the business you're giving them the chance to contribute towards (and make the most of) its future success.

All evidence we've found shows that when an employee owns even a fraction of equity in a business they’re more inclined to contribute to the success of that business. We call this The Ownership Effect.

But don't just take our word for it, read what our customers have to say.

Book a free consultation to find out more about sharing equity and its positive impact on engagement and retention.

Meet with Vestd