Determining Leading and Lagging

SMRP GUIDELINE 3.
0
3.0 DETERMINING LEADING AND LAGGING
INDICATORS
Published on April 16, 2009
Guidelines provide additional information or further clarification of component terms used in

SMRP Best Practice Metrics. This guideline is used as an aid for determining whether an
indicator is leading or lagging. This guideline is not intended to be a thorough prescription, but
rather an explanation of how to determine, define and use leading and lagging indicators from
a SMRP Best Practice Metrics standpoint.
DEFINITION
Lagging Indicator
An indicator that measures performance after the business or process result starts to follow a
particular pattern or trend. Lagging indicators confirm long-term trends, but do not predict
them.
Leading Indicator
An indicator that measures performance before the business or process result starts to follow a
particular pattern or trend. Leading indicators can sometimes be used to predict changes and
trends.
PURPOSE
The purpose of leading and lagging indicators is to measure the performance of the
maintenance and reliability process. Leading and lagging indicators provide information so that
positive trends can be reinforced and unfavorable trends can be corrected.
DISCUSSION OF LEADING AND LAGGING INDICATORS

The purpose of running a business is to create shareholder value by providing a distinct product
or service. Creating value starts with the needs of the customer and continues through
producing a quality product and delivering it on time at a competitive price. The maintenance
function is a key stakeholder in this value stream; however, maintenance as a function cannot
achieve this alone.
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The maintenance and reliability process represents the collection of all stakeholder tasks
required to support the manufacturing or service function. The output of a healthy maintenance
and reliability process is optimal asset reliability at optimal cost, which contributes to maximum
shareholder value. The maintenance and reliability process is a supply chain. If a step in the
process is skipped or performed at a substandard level, the process fails to maximize its
contribution.
There are three sets of measurable components that make up the maintenance and reliability
process.
1. Management processes and behaviors (mission and vision, people skills)
2. Operational execution (operations, design and maintenance)
3. Manufacturing performance (availability, quality, cost and benefits)
Each component is a process on its own which can be measured using both leading and lagging
indicators. These indicators are used to determine the quality of each process. In this context,
the components of the maintenance and reliability process can be both leading and lagging
indicators, depending on where in the process the indicators are used. There is a cause and
effect relationship between leading and lagging; the action being measured will cause a
resulting action or effect which is also being measured. This means that a given measure could
be both a lagging measure for a previous cause in the chain and a leading measure for a
following effect. There are a series of causes and effects in the chain until the final lagging
measures are reached.
Figure 1 illustrates the concept of an indicator being both leading and lagging, depending on
the application of the metric. Preventive maintenance (PM) compliance is used to measure how
much PM work was completed as scheduled. In this case, it is a lagging indicator or result of
how much PM work is completed when viewed in the context of work execution. When viewed
as an indicator of equipment reliability, however, PM compliance is a leading indicator of the
reliability process. The higher an organization’s PM compliance, the more likely this will lead to
improved equipment reliability. Similarly, improved equipment reliability will lead to reduced
maintenance cost, which is a lagging indicator of the overall maintenance process.
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Figure 1. Leading and Lagging Indicator Mapping
When considering a leading measure, it is beneficial to express it in terms of what it is a leading

measure for (e.g., What is the lagging measure that will be affected?)
Figure 2 depicts the relationship between the different maintenance and reliability processes
components, their alignment with the SMRP Body of Knowledge (BoK) and the concept of
leading and lagging indicators. The final result of a behavior and process component is a
lagging indicator; however, it can be a leading indicator for the operational execution
component. In this context, the lagging indicators of one component can also be viewed as the
leading indicators of another dependent component.
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Figure 2. Components of the Maintenance and Reliability Process
Examples of leading and lagging Indicators and their relationship with the SMRP Best Practice
metrics are provided in Table 1. The metrics are categorized in accordance with the SMRP Body
of Knowledge.
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Table 1. Leading and Lagging Indicators
Behaviors & Operational Manufacturing

Processes Execution Performance
BoK – Business Management
Maintenance Margin (COGS) Lagging
Maintenance Unit Cost Lagging
Maintenance Cost per RAV Lagging
BoK – Manufacturing Process Reliability
OEE Lagging
Availability Lagging
Total Operating Time Lagging
BoK – Equipment Reliability
Systems Covered by Criticality Analysis Lagging Leading Leading
Scheduled Downtime Lagging Lagging
Unscheduled Downtime Lagging Lagging
MTBF Lagging Leading
BoK – Organization & Leadership
Rework Lagging Leading Leading
Maintenance Training - $ Lagging Leading Leading
Maintenance Training - MHRs Lagging Leading Leading
BoK – Work Management
Corrective Maintenance Hours Lagging Leading
Preventive Maintenance Hours Lagging Leading
Condition Based Maintenance Hours Lagging Leading
Planned Work Lagging Leading Leading
Reactive Work Lagging Lagging Leading
Proactive Work Lagging Lagging Leading
Schedule Compliance Hours Leading Leading
Schedule Compliance Work Orders Leading Leading
Standing Work Orders Leading Leading
Work Order Aging Lagging Leading Leading
Planned Backlog Lagging Leading Leading
CONCLUSION
The use of leading and lagging indicators is an important component of the maintenance and
reliability process. Leading indicators measure the process and are used to predict changes and
trends. Lagging indicators measure results and confirm long-term trends. Whether an indicator
is a leading or lagging indicator depends on where in the process the indicator is applied. A
lagging indicator of one process component can be a leading indicator of another process
component. Whether leading or lagging, performance indicators should be used confirm process
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performance. These indicators help build on successes and can lead to improvement where
unfavorable trends exist.
REFERENCES
Agrium . (2004). Agrium planner ratios and planning and scheduling metrics (rev 5). Calgary,
Alberta: Olver, R.
Life Cycle Engineering. (n.d.). Me and my key performance indicators–lagging and leading.
Maintenance Excellence News (8).
Mather, D. (n.d.). Techniques for applying leading or lagging metrics immediately! Retrieved
from http://www.reliabilityweb.com
Rostykus, W. and Egbert, J. (2005). Key measures for successful improvement. Occupational
Health & Safety. 74(1).
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SMRP GUIDELINE 3.

Guidelines provide additional information or further clarification of component terms used in

DISCUSSION OF LEADING AND LAGGING INDICATORS

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When considering a leading measure, it is beneficial to express it in terms of what it is a leading

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Behaviors & Operational Manufacturing

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