What Are Leading & Lagging Indicators on a HR Strategy Map?

Human resource strategy mapping is a visual representation of how HR activities link to and add value to strategic business goals. Incorporating leading and lagging indicators on a strategy map allows HR to assess how well its activities align with strategic business goals. Leading and lagging indicators allow HR to compare input to output, establishing a cause and effect connection between HR procedures and goals. This creates an effective performance management system for HR and the business as a whole.

HR strategy maps include four standard sections, each of which represents a key HR input or outcome that relates to a strategic business objective. The process of constructing a strategy map works in a top-down fashion, from a financial section to a customer section, then a systems or internal process section and finally an employee talent and technology section. Assume, for example, a small business’ strategic objectives include increasing profitability by 20 percent, reducing customer service problems by 30 percent, improving internal communications and creating a business website. HR strategy mapping could link to strategic objectives by focusing on reducing turnover, holding additional customer service training, establishing business communications protocols and forming a website development team.

Leading indicators on an HR strategy map are input-oriented elements that measure progress toward specific HR goals. These focus the actions HR takes on a daily basis to ensure the business achieves its long-term financial objectives. Leading indicators can serve as evidence HR is meeting expectations or act as a warning sign that HR activities require modification to ensure HR objectives remain in line with those of the business. Persistently high turnover rates can, for example, indicate a need to modify or increase employee engagement efforts while reaching goals in reducing customer service problems can tell HR it’s time to switch from active to occasional refresher training.

Lagging indicators on an HR strategy map are output-oriented measurements that mostly focus on a business’s bottom line. Examples include sales revenues, the cost of goods sold and gross profit margins. Lagging indicators account for the delay that occurs between an action and the result of that action. To assess the business’s actual performance against an HR strategy map, HR might, for example, evaluate lagging indicators such as sales per employee, absenteeism rates and average customer service calls per day.

Strategy mapping and leading and lagging indicators are useless without a method for evaluating how closely the business and HR goals are aligned. A balanced scorecard composed of leading and lagging indicators provides a quantitative overview of HR’s performance and its contributions to business objectives. A balanced scorecard can, for example, include leading and lagging indicators such as turnover, average length of employment, average number of customer service calls per day, first-call resolution statistics, sales revenues per day and average sales per employee.