Board members are often inundated with reports—filled with charts, tables and dashboards—that give detailed insights into an organisation’s performance. These reports help directors understand the organisation’s recent experience and performance, but they often fall short in showing where the organisation is heading. Knowing the past is important, but having a clear sense of what’s coming next is critical for strategic oversight.

Beyond historical data: the role of monitoring progress

Boards typically carry out three key functions: setting direction, delegating authority and monitoring progress:

1. Setting direction is formalised through the approval of the organisation’s strategic plan.
2. Delegating authority happens when the board appoints a CEO or executive leader to execute that plan.
3. Monitoring progress is the step that ensures the board continues to oversee the organisation’s journey towards achieving its strategic goals.

While boards often excel in the first two of these, monitoring progress can sometimes be neglected. A common challenge lies in determining which metrics to use to measure progress towards the organisation’s goals effectively.

The challenge of non-profit metrics

In some sectors, particularly the not-for-profit sector, tracking progress can be especially challenging. Non-profits may struggle to find equivalent measures to those used by public or private companies, for whom stock prices, shareholder value and financial returns provide clear indicators of success. Often, CEOs of non-profits aren’t evaluated with the same performance-linked metrics, further complicating the issue.

However, the importance of monitoring progress remains universal across all sectors. The phrase “what gets measured gets managed” is as relevant for non-profits as it is for any business. The key is to ensure the board is measuring the right things: outcomes that align with the company’s strategic priorities and that matter to both the organisation and its stakeholders.

The difference between leading and lagging indicators

Many of the metrics boards rely on are lagging indicators, which reflect what has already happened. These indicators, such as profits, revenue, or customer numbers, are useful for assessing past performance. Lagging indicators answer the question: did we accomplish our goals?

But to truly guide an organisation towards future success, boards need to focus on leading indicators. Leading indicators provide insight into future performance, which helps the board to plan ahead. While lagging indicators look back, leading indicators offer a forward-looking view, answering the question: what’s likely to happen next?

For instance, in the business world, leading indicators might include factors such as customer satisfaction, market growth or new product development. In a non-profit context, metrics like donor engagement can serve as leading indicators for future donation growth.

Choosing the right leading indicators

Identifying the right leading indicators requires thoughtful consideration of the organisation’s specific goals. Leading indicators should correlate with the outcomes the organisation hopes to achieve. For example, if the goal is to increase customer purchases, potential leading indicators might include the number of new products that will be developed, the level of discounts that will be offered, or the number of promotional campaigns that will be run.

In a non-profit scenario, the principle is the same. Donor engagement, for example, can be tracked to predict future donation levels. Donor engagement can be assessed through looking at the number of events donors attend or the amount of time they spend volunteering. It could also consider how engaged they are with the non-profit’s communications, both over email and on social media.

By focusing on factors that influence future outcomes, organisations can make informed decisions and adjust their strategies proactively.

Achieving balance: combining leading and lagging indicators

For effective oversight, a board must have access to a balanced framework that incorporates both leading and lagging indicators. Lagging indicators provide the concrete results of past efforts: they are final and unchangeable once measured. These indicators help the board evaluate whether goals were met, but do not offer the chance to adjust course.

On the other hand, leading indicators measure activities that are still within the organisation’s control. They provide the board with the opportunity to influence outcomes by responding to trends before the outcomes become final results. Too much focus on lagging indicators can mean missed opportunities for improvement, while the right balance of leading and lagging indicators allows boards to stay agile and responsive.

By regularly reviewing both types of indicators, the board can ensure that it has a complete picture of the organisation’s current performance and a clear understanding of what needs to be done to improve it in the future.

In conclusion, a successful board doesn’t just look at where the organisation has been, it anticipates what lies ahead. By focusing on a combination of leading and lagging indicators, boards can move beyond simply evaluating past results to actively shaping future success. With this balanced approach, boards can navigate the complexities of governance more effectively, ensuring that their organisations are positioned for both present and future growth.

Further resources

The Nonprofit Donor Engagement Guide – Salesforce

15 Leading Performance Indicators That Many Businesses Overlook – Forbes

What’s the Difference Between a Lagging and Leading Indicator? – Forbes