I stumbled upon a great article from Marius Ursache - Why You Are Tracking the Wrong Metrics For the Wrong Purpose. Kind of common sense, but this is the power of good articles: they are well structured and make sense, so they tend to seem obvious.
The article shortly clarifies metrics vs. indicators vs. KPIs; then differentiates between vanity, lagging, leading (decision) metrics, and coincident (benchmarking) metrics; and lastly, it proposes a practical seven-step recipe to success. Please do read.
Process, Result and Proxy metrics
I use the terms Process metric and Result indicator. They overlap with the concepts of leading and lagging metrics in the article.
Result indicators are similar to lagging indicators. They are the final objective. They are the Why you do it.
Process indicators are the What - they tell you what you do. They measure actions: number of calls, tickets, nails, and emails.
Proxy metrics are used as a substitute, when we lack relevant data.
Marius Ursache uses the concept of Coincidental metrics for a subset of proxy metrics. The concept of coincidental metrics gives me a sense of causality; whereas proxy only describes correlation.
The relation between Process and Result
Process metrics, as well as vanity metrics, have an important proxy role. Result indicators (or lagging) have long-term strategic relevance, but we still need to measure what we do to get there. We might need one or several years to achieve our strategic objectives. To this end, we implement an action plan, and we use Process metrics to measure actions and intermediate results. E.g. the number of sales calls is not an end-Result indicator. It isn't even an objective, since the number of calls correlates better with the cost of sales rather than with sales! But it is a good sales Process indicator; and, in most situations, it is a reasonable proxy for sales.
The distinction between Process and Result
Knowing which metric/indicator measures results, and which measures the process, is important in order to maintain the strategic focus. Begin with the end in mind, as Stephen Covey put it. Yes, it is important to measure process metrics, but we often forget that they are not the final objective, and limit ourselves to measuring only the process. Sometimes because we don't have relevant data yet. Sometimes because the relevant data doesn't look good to stakeholders. E.g. when we have poor revenues or poor sales, we tend to report the number of offers and presentations, and that we received "a lot of interest".
This is in fact when a process metric becomes a vanity metric: when you forget why you measure it.
In this regard, I liked the clarification of metric vs. indicator vs. KPI. Always have in mind WHY you measure something. This is also why these concepts are fluid: depending on the context and the audience, a metric becomes an indicator or even a KPI.
But also the type of metric is contextual. Sometimes a metric is Vanity, sometimes it is a Process indicator; and in the context of a very specific sub-process, it can even be considered a personal Result KPI. E.g. the number of users is mentioned as a Vanity metric in the article, but it can be a proxy or intermediate metric for Results such as the number of paid subscriptions, or for service quality level - showing the value that users find in our product.
Set measurable targets for the team
The team should be aware of the general strategic objectives, i.e. which are the actual Result indicators, even if they should be given practical intermediate targets.
This matches the seniority level of the team. The capacity to understand and implement a long-term strategy correlates with the seniority level. Junior staff might have a hard time following Result indicators. They need to receive personal targets, which in the larger strategic context are merely Process indicators; but for them, they constitute personal Result KPIs.
I believe in the power of shared vision, as well as in the importance of educating people. The team might need to report on the number of calls and meetings; but, in time, they will start understanding that logging calls is only a short-term Process goal, rather than a final Result.
I liked the seven-steps at the end, which I visualize of course as a system thinking diagram, a causal loop. It matches my own theory of:
Objectives << Results indicators << Process metrics.
Of course, management acts on Processes, in order to improve them, in order to achieve better Results. Teams implement the Process. Indicators measure the impact of the improvements.
In a larger context, this integrates into the traditional strategic planning approach:
Vision / Mission << Goals / Objectives << Strategy << Action plan << Resources.