Lagging indicators is a concept used a lot in the economic world. For the donor experience executive, it is important to know that most donor experience goals are lagging indicators as well. Lagging indicators confirm long-term trends, but they do not predict them.
In the economic world, some examples of lag indicators are unemployment, corporate profits and labor cost per unit of output. Interest rates are another good lagging economic indicator; rates change after severe market changes.
In a donor experience sense, increasing revenue, year over year or month over month, is a lagging indicator. In a digital nonprofit business, increasing the number of unique visitors to your website is a lagging indicator.
Goals that are lagging indicators are the result but certainly not a predictor of the result. Well written strategies are usually leading indicators. Lagging indicators always report the outcome but it is too late to do anything about it. Strategy (leading indicators) should predict the goal, i.e. the outcome.
Lagging indicators are metrics that measure end-state objectives or desired outcomes. They include all financial metrics. Nonprofit and public sector enterprises have additional nonfinancial lagging indicators that measure desired outcomes, such as students who graduate, incidence of crime and lives lost to terrorism. Leading indicators are a defined set of metrics that are predictive of financial or other desired outcomes. Source: Gartner
Donor experience goals (and SMART goals) should always proceed developing strategy. The clarity of the end result, even if it is a lag indicator, cannot be overstated. Strategy, absent a clear goal, is usually useless. Unfortunately, for leaders building a digital donor experience, it is easy to get distracted with a strategy, without know why (i.e. the real donor experience) is important. Having a clear goal clarifies why the strategy is important.
What are some example of lead indicators?
- number of visits to major gift donor prospects made this month
- number of major donors who attended our cultivation event and will be added to our prospect list
- total number of potential grant funders researched
It is very important to involve and consult with as many people as you can in framing and understanding the donor experience goal. At the end of the day, however, it is leadership’s responsibility to make the final decision on what the goals are and to inform the relevant people the decision that has been made.
Goals can be set at all levels. Certain goals set at the department or location level should tie out to overall digital donor experience goals. Others may be specific to a department or location and may not tie out to the overall nonprofit goal. It is important to not focus on too many goals at one time.
Donor experience goals should be specific and using the SMART goal framework helps give the goal the focus that is much needed so that a goal doesn’t sound like a vague generality. Being inspirational but not effective is a real challenge. If the goal can’t become SMART it may be more like a vision or mission statement.
One of the best books on this topic is “The Four Disciplines of Execution” written by Chris McChesney, Sean Covey, and Jim Huling . More information is available on this site.
Here are the key ideas:
- Most goals are lagging indicators.
- Use the SMART goal framework to make sure the goal is focused on clear outcomes.
- Gaining consensus is helpful but make a decision as a leader.