Author: Jurgen Appelo

Our team measures our monthly revenues.

Our team measures the size of our community.

Our team measures the number of Official Partners and much more.

Metrics, also known as key performance indicators (KPIs), are an essential tool for understanding progress and achieving goals in any organization. They help to identify areas that require improvement, provide insight into the effectiveness of different strategies, and allow for informed decision-making.

Five Types of Metrics

Five types of metrics are commonly used to evaluate business performance. Each of these metrics shines a light on a different aspect of organizational performance.

• Input metrics focus on the resources used to get some work done. For example, an input metric for a software development team could be the available team capacity or the number of bug reports received in a week.

• Process metrics, on the other hand, measure the efficiency and effectiveness of a particular work process. Examples of process metrics could be the time it takes to complete a specific task or the size of a queue of work-in-progress items.

• Output metrics measure the tangible results of a particular process. For example, in a software development team, an output metric could be the number of releases per week or the total number of features the team delivered.

• Outcome metrics are similar to output metrics, but they focus on the effects on stakeholders. For example, an outcome metric could be an increase in conversion rates or the percentage of users who started using a new feature.

• Impact metrics measure the long-term impact of a particular process on the business. For example, an impact metric could be a change in employee motivation or an increase in revenue that can be attributed to new feature development.

Leading versus Lagging

A critical concept in metrics is the difference between leading and lagging indicators. Leading indicators are metrics that provide insight into future performance. They are predictive in nature and can be used to identify potential problems before they occur. For example, when compared to customer satisfaction, a leading indicator could be the number of customer support tickets resolved within a specific time frame.

On the other hand, lagging indicators are metrics that provide insight into past performance. They are reactive and are used to evaluate the success or failure of a particular process or strategy. For example, when compared to weekly advertising expenses, a lagging indicator could be the number of sales generated by the ad campaigns.

A metric is only leading or lagging when compared to other metrics. Velocity and throughput (output metrics) are lagging compared to queue size and batch size (process metrics). But they are leading compared to failure rates and customer satisfaction (outcome metrics).

A metric is only leading or lagging when compared to other metrics.

Both leading and lagging indicators are essential in evaluating organizational performance. Leading indicators help organizations identify potential problems before they occur while lagging indicators provide insight into the success or failure of past strategies and processes. By measuring both, you gain a complete picture of your performance.

And that’s why our team measures the number of participants in community meetups, the happiness of team members, our monthly recurring revenue, and so on.

Metrics are an essential tool for organizational performance. Input metrics, process metrics, output metrics, outcome metrics, and impact metrics all play a role in this. Sometimes, they act as leading indicators; sometimes, they are used as lagging indicators. Either way, all can provide insight into the team's future and past performance.