Home
Articles
Lead Indicators

Managers usually make their decisions based on metrics, which can easily be measured and has an established system for measurement. Metrics which are important for high corporate performance, but hard to measure are not systematically followed. As a result, financial indicators, which are today’s reflection of past decisions, are over-weighted whereas indicators necessary for shaping the future are not given enough importance.

Consequently, many investors, even board members (!!!), belatedly realize the fact that their companies are facing important problems. Research on this subject reveal that management should concentrate on lead indicators as well as business results. For instance, decrease in customer satisfaction today may be an indication of tomorrow’s bigger losses. If market share in new products is below overall market share, this might indicate the result of insufficient resource allocation for innovation, which is an indicator of future market share loss.

The beginning of important corporate problems is failing to see change and/or being unresponsive. For example, Xerox which made the first important developments in personal computers, failed to notice the importance of this new technology and could not benefit from these developments, endangering even its own existence. For this reason, inability to understand the underlying success factors in the marketplace and being unresponsive to new developments thinking that they are transient is a risky proposition.

Instead of listening to customer complaints and/or demands, giving an explanation on why customers are wrong should be perceived as an important lead indicator for future threats. Management’s focus on one subject (like sales) and neglecting investments in infrastructural systems important for the whole business can also be perceived as a danger signal.

Another important problem is the management of the company with an inappropriate vision and/or lack of full acceptance of the vision among the management team which results in ineffective implementation. Especially when entering new markets, an important source of problems for many companies is implementing the current success formula in the existing markets to the new markets without thoroughly analyzing and understanding the requirements for the new market. Many companies in Turkey, who made this mistake, lost their existing markets as well.

When implementation methodologies are not evaluated and stress-tested on a regular basis, risks may reach uncontrollable levels. For example, many managers, in the Turkish banking sector maintained profitability by taking open positions. However, as they failed to realize the changes in the market sentiment, the banking industry faced serious losses. Few, who have been applying stress tests to their systems were able to recover from this crises period with strengthening their relative positions.
Managers emotional commitment to their past decisions and/or projects and making over investments ignoring performance measures might become a potential problem. If there is a disposition within the company, where differing ideas and voices are discoureaged then alarm signals might be flashing. In a transparent and fact-based system, this problem can easily be conquered without getting bigger.

Another point to watch, especially in successful companies, is extreme confidence and despising others. Managers neglecting competitors, suppliers, and the distribution channels might be making enemies rather than collaborators. Therefore, measuring all stakeholders’ satisfaction independently and ensuring the use of this measurement for evaluation by the board of directors, enables the utilization of an important lead indicator as an input for decision-making.

Therefore, we should manage our businesses by placing as much importance on lead indicators like perception, satisfaction, learning, innovation, which are relatively hard to measure, as we palce on financial results. This will help us in taking prevenive measures against risks and better manage our companies.

Dr. Argüden
yarguden@arge.com


Ethical Leadership for the Future
People focus more on corporate actions after the ethics scandals at the end of 20th and...
From Global Crisis to Global Governance
The mortgage crises that started in the US in 2008 soon turned into a global crisis....
Responsible Boards – Action Plan for a Sustainable Future
A sustainable global economy is one that combines long-term profitability with ethical behavior, social justice, and...
Right Reward for Right Performance
Aligning Executive Compensation with Good Governance Dr. Yılmaz Argüden1 “Price is what you pay. Value is...
Is More Regulation the Right Recipe for Better Governance
Increasing regulation of corporate governance is becoming a new trend in many jurisdictions. Yet good governance...
Rio+20 was a Bust
World leaders from government, the business world, NGOs and academia gathered at the UN’s Rio+20 summit....
Why Boards Need More Women
Diversity on boards is critical to sustaining performance. Broadening the composition of the board increases the...
Global Boards Help Make Companies Global
For organizations to endure, they must strike a balance between risks and rewards, short-term objectives and...
Attitude is everything: The case for Turkiye
Recent local elections have been a wake up call for numerous European leaders such as Angela...
Diversity at the Head Table
PDF olarak indirmek için tıklayın.
Measuring the effectiveness of corporate governance
Trust is the foundation of sustainable development. As the world continues to get smaller, our mutual...
ARGE Corporate Governance Model©
PDF olarak indirmek için tıklayın.
Consensual Delegation of Sovereignty
Thanks to changes in IMF voting, countries such as China, Mexico, and Türkiye now have a...
The Power of Inclusion
Editor’s note: When US President Barack Obama landed in Ankara on Monday, April 6, 2009, it...
From Global Crises to Global Governance
In a perspective from Turkiye, top business strategist and civic leader Yilmaz Argüden explores how global...
Opportunity from Crisis: Obama’s Chance for Real Global Leadership
In a perspective from Turkiye, top business strategist and civic leader Yilmaz Argüden argues that Barack...
Europe’s Dilemma: Values vs Interests and Protectionism vs Leadership
For decades European development has been guided by a number of key values: human rights, democracy,...
Digital Transformation and the Board’s Role
Digital players are threatening the traditional sectors and their business models and most of the executives...
Board And Innovation
Innovation is one of the most important issues in global business environment, nowadays. Innovation involves creation...
Legislating History
Recently various Parliaments throughout the world started to get in the business of legislating history!! Generally...
US – Turkish Cooperation Based on Shared Values
Since 9/11, the US unilateralism has been widely interpreted as a projection of hard power to...
Shaping The Future
The choices we make today shape not only the current results, but also the future. However,...
Water and Global Governance
The 5th World Water Forum has convened in Istanbul. Water is life. Everywhere and every day we need it. Water...
The Missing Political Debate
The US presidential elections have profound implications not just for the US, but also for the...
Lead Indicators
Managers usually make their decisions based on metrics, which can easily be measured and has an...
Family Businesses
Happy families are all alike, but each unhappy family has reasons of its own. Leo Tolstoy...
European Union and Turkiye in 2020
“The future belongs to those who believe in the beauty of their dreams.” Eleanor Roosevelt Let...
Civil Society in Support of University
“Only the educated are free” Epictetus That the importance of education increases further everyday is beyond...
Democratization of Capital
“You cannot escape the responsibility of tomorrow by escaping today.” Abraham Lincoln In today’s world only...
Second Career
“Life consists not in holding good cards but in playing those you hold well.” Joel Billings...
Center of Attraction
“It is not in the stars to hold our destiny, but in ourselves.” William Shakespeare To...
Going Beyond the Borders
“The shell must break before the bird can fly.” Lord Alfred Tennyson The greatest obstacle to...
Galatasaray and Education of a Nation
“Winning is not everything, but the will to win is everthing.” Vince Lombardi Education of a...
Corporate Governance
“The best way to create trust in an organization is to open all doors – from...
Those Who Fail to Share, Will Be Shared Out
“Dünyada görmek istediğin değişimi, önce kendinde gerçekleştirmelisin.” Mahatma Gandhi Unprecedent improvements in information and communication technologies,...
Representative Democracy to Participatory Democracy
“A journey of a thousand miles begins with a single step.” Confucius Decisions that are not...
Reform in Patent Legislation
“Change starts when someone sees the next step.” William Drayton Developed countries are adamant about extending...
Leaders Magazine Interview
LEADERS Magazine Interview Questions for: Dr. Yılmaz Argüden Chairman ARGE Consulting, Istanbul Senior Advisor and Representative...
Managing Diversity
Ladies and Gentlemen, It is a great pleasure and honor for me to address you to...
World Leadership by Example: Challenge for EU
The potential of EU for the leadership of the world was the subject of the largest...
Education for Sustainable Global Governance
Vision: The world will be a more stable and innovative place to live for the human...
Global Fault Line
Humanity’s search for truth and curiosity to reach further locations have been an ever lasting ambition....
Turkish-American relations and TAİK
Turkish-U.S. Business Council (TAİK) Chairman Dr. Yılmaz Argüden answered our questions concerning Turkish-American relations and the...
Global NATO
The most important role of government is to provide security and maintain stability. Significant changes occurred...