ITPEC IP October 2024 Question 80
There are two (2) indicators for evaluating the achievement of strategic goals. These are leading indicators that evaluate the means for achieving the goals, and result indicators that evaluate the degree of goal achievement. If a strategic goal is “acquire new customers,” which of the following is an appropriate leading indicator?
Explanation
Number of visits to prospective customers — a leading indicator measures the activity that produces the goal, and visits come before new customers are won.
For the goal "acquire new customers", the result indicators measure how far customers were actually acquired (new contracts, growth in customers, the resulting sales). The means of achieving it is sales activity towards prospects, so the count of visits to prospective customers is the leading indicator: it can be managed directly and signals future results before they appear.
Answer (d)
Why not others:
- •(a) Sales increase amount — a financial outcome that follows customer acquisition, a result indicator
- •(b) New contract acquisition ratio — measures how many new contracts were actually won, i.e. the degree of goal achievement
- •(c) Total customer increase ratio — measures the growth of the customer base, again the outcome itself
Key rule: In a balanced scorecard, leading indicators (performance drivers) track the controllable activities that cause results, while result indicators (lagging indicators, KGIs) confirm the outcome afterwards.
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