Is Sales Pipeline a Leading Indicator or a Lagging Indicator?

Is Sales Pipeline a Leading Indicator or a Lagging Indicator?
April 16, 2015

Many companies classify pipeline as a leading indicator for success. But in some sales organizations, pipeline and forecast reviews are thought of as “storytime,” or wishful thinking on what might close this month or quarter. For these organizations, pipeline on its own is a lagging indicator, because it doesn’t accurately reflect reality or help drive better performance. It’s a look back at activity without confidence in the future.

Is Pipeline a Leading Indicator or a Lagging Indicator?

And that’s what lagging indicators are: a look in the rearview mirror. The most common lagging indicators are sales results—either a rep closed a deal or they didn’t. And by the time you know if anything was sold, it’s too late to do anything about it.

Leading indicators, on the other hand, give you information to drive future results. Knowledge and behavior are two good leading indicators, and you need measures in place to track them. Do your sales reps have the skills to sell (knowledge) and are your sales reps doing the activities that are going to fill the pipeline, move deals along, and ultimately close business (behavior)?

If you don’t have a clear view of how a rep will move an opportunity forward from whatever stage it’s in, pipeline is a lagging indicator. It shows what they’ve done to date, and involves looking back at where they’ve been. However, when you combine pipeline with the leading indicators of knowledge and behavior, you have a more forward-looking view.

You have to have a balance between leading and lagging indicators. You need the reality check. You need to understand past performance in order to weight your forecast and predict revenue. But you also need leading indicators to drive forward progress on any specific account or opportunity.

Understanding and measuring rep knowledge and behavior gives you confidence in your pipeline and helps you improve performance. Without this insight, pipeline is nothing but a lagging indicator.