Below the Waterline · Episode 14
You can know your numbers and still wonder what to change. Revenue, profitability, a page of weekly measures everyone reports on time. Ask why those numbers and the most common answer is "those are just the ones we track." In Episode 14, Dori Etter brings one question into that room, "What do we think that number will tell us?", and follows it into a founder-led company that was meeting its delivery promises about half the time.
In this episode you'll learn
- Why a leadership team can have very current numbers and a very stale conversation.
- The difference between leading and lagging indicators, and why it is about relationship, not timing.
- How a hypothesis gives a weekly number a job the team can participate in.
- What the Activity Scorecard and the Performance Dashboard each answer, and why both matter.
- What the founder contributes once managing by the numbers means more than receiving reports.
Listen now
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Why does a weekly scorecard stop helping?
If you have worked with EOS, you know the expectation: everyone should have a number. You define what someone is accountable for and find a measurable that shows whether they are fulfilling it. The leadership team reviews its scorecard every week. The idea is sound. You want people to know what they are responsible for, and you want to see how the business is doing while you can still influence the result.
The trouble starts when the number gets chosen. Annual planning had context. Quarterly priorities had context. Then the scorecard conversation narrows to what each person is going to report next week. What number can we give that seat? What do we already have in the system? What can we reasonably find every week?
Those practical questions matter, and you can answer all of them without ever establishing what the number will help you understand about the business.
"People understand the instruction to have a number," Dori says. "They just haven't necessarily developed the context that would help them choose one and interpret it."
So the team is left with a set of numbers that seemed reasonable when they were chosen. Everyone gets used to reporting them. You can tell whether they are on track. And the conversation goes dry, because nobody can see what discussing those numbers is helping them accomplish day to day. It is possible to have very current numbers and a very stale conversation.
What is the difference between leading and lagging indicators?
A lagging indicator tells you about a result that has already happened: revenue earned, profit achieved, the percentage of deliveries that shipped on time. Those numbers are valuable and you need them. In Alignment Architecture™, they live on the Performance Dashboard, which gives the team a picture of how well it has done and a place to begin asking what it would like to improve.
A leading indicator tracks something upstream that you believe will influence the later result. It lives on the Activity Scorecard, the weekly report, and it measures work the team can still act on while there is time to change the outcome.
The distinction is not about the calendar. People often ask: if we are counting last week's production, hasn't that already happened too? It has. What makes a measure a leading indicator is its relationship to what it is intended to influence.
"Putting a revenue number onto a weekly report doesn't turn it into a leading indicator," Dori says. "Calling an activity a leading indicator doesn't actually ensure that it will produce the result that you want."
That is why the episode is built around a hypothesis rather than a definition.
How does a hypothesis make a scorecard useful?
A hypothesis is a relationship you think might be true: if we do this action, we believe it will influence this result. Once it is stated, you have a reason to look at the activity and the result together, and people can bring what they know about the work into the conversation.
The familiar example is sales. A certain number of conversations creates opportunities, and some of those opportunities become revenue. Everyone can see that connection. The harder work is translating it: what is the equivalent in operations, or in finance, that would tell us something useful about the improvement we are trying to make?
Dori's question does that translation. What do we think this number will tell us? The answer gives you somewhere to go. You can explore what you are hoping to see, what actions might influence it, and how you will know whether the connection you expected is actually showing up.
What happened when one company connected production to sales?
In the episode, Dori describes a founder-led company that had always tracked profitability but had not developed a deeper set of operational numbers. A new director of operations needed time to get his arms around the business. One number stood out: the company was meeting its promised delivery dates about half the time.
Knowing that did not tell the production team what to change. When the team dug in, the production schedule was not connected to the sales projection. Last year's weekly sales numbers existed; they were not being used to decide what to make this week. Somebody supplied a quantity and production made it.
The hypothesis was specific: if we set production targets by product, connected to projected sales, and we meet those targets, we believe we will improve delivery time. That turned the production number into something purposeful, and it created two different questions for the weekly review. Did we meet the production targets? And did meeting those targets help us deliver on time?
On-time delivery moved from about 50 percent to somewhere around 80 to 90 percent. The part Dori cares about most is what happened next. The deliveries still late each week traced to one specific product that needed a different production timeline from the others. The team would never have found that by agreeing the shipping number needed to improve.
"We could produce the overall quantity we planned and still have the wrong mix of products," Dori says. "That's why the hypothesis needs to be specific."
What does the founder contribute to managing by the numbers?
Above the waterline, this episode is about building the measurement structure: the dashboard, the scorecard, and the connection between them. Below the waterline, something changes in what the founder asks of herself.
If managing by the numbers has mostly meant receiving reports, this asks you to participate in a different conversation. You bring your experience. The team brings what it sees. Together you develop an explanation you can both work with and examine against a result you want.
Because you built the business, the connections between one part and another seem obvious to you. Someone else can look at the same report without seeing them. Transferring that context is work, and it takes time: the operations director in the story needed months, not a meeting. The hypothesis is what makes the transfer possible, because nobody has to arrive knowing exactly which measure will be most useful. You can have a thoughtful reason for trying something and stay curious about what it teaches.
"I want numbers that help you and your team understand what to do next," Dori says, "with enough shared context to know why those numbers matter."
The Activity Scorecard and the Performance Dashboard are two parts of what Dori calls Performance Architecture. The third is the Strategic Scorecard, for longer-term milestones tied to the annual plan. Keeping those purposes clear tells you what to report, and how often. The weekly numbers are the most movable; the monthly results are steadier; the strategic numbers follow the plan. Treat the weekly report as a tool in the toolkit, not a fixed list you keep because you have always kept it.
Key quotes
"It's possible to have very current numbers and a very stale conversation."
"Putting a revenue number onto a weekly report doesn't turn it into a leading indicator."
"If you've been thinking of managing by the numbers, mainly it's just receiving reports. This asks you to participate in a different conversation."
Dori Etter, Below the Waterline, Episode 14.
Resources mentioned and related listening
The recorded invitation is The Missing Layer, linked below. These earlier episodes offer related listening; they were not named in this recording:
- Episode 12: Is It a Leadership Meeting, or Is Everyone Reporting to You?
- Episode 10: You Installed EOS and You're Still the Bottleneck. Here's Why.
- Episode 9: Why Your Team Pads Every Estimate (And Why They're Right)
About Dori Etter
Dori Etter is the founder of Inspired Income® and creator of Alignment Architecture™. She helps growth-stage founders work on both the operational structure and the identity and beliefs that shape how they lead. Below the Waterline explores the leadership work no one else talks about.
FAQ
What is the difference between a leading indicator and a lagging indicator?
A lagging indicator reports a result that has already happened, such as revenue or the percentage of orders delivered on time. A leading indicator measures work upstream that you believe will influence that result. The difference is the relationship between the two numbers, not when they were recorded.
Why isn't revenue on a weekly report a leading indicator?
Revenue is a result. Reporting it more often does not change what it tells you. A leading indicator has to be tied, through a stated hypothesis, to a result it is expected to influence.
What should go on a weekly business scorecard?
Measures of work the team can still act on this week, each connected to a result the business is trying to improve or protect right now. If nobody can say what a number will tell you, that is the conversation to have before deciding whether to keep it.
How often should scorecard numbers change?
The weekly measures are the most movable, because they follow the current hypothesis. Monthly results tend to stay. Strategic numbers are usually tied to the annual plan. Changing a weekly number because the hypothesis changed is a sign the scorecard is being used, not a sign something went wrong.
What is Performance Architecture?
In Alignment Architecture™, Performance Architecture is the three-part measurement structure: the weekly Activity Scorecard, the monthly Performance Dashboard, and the Strategic Scorecard for longer-term milestones. Each answers a different question at a different rhythm.
Take the next step
If the gap between sales information and the production plan sounded familiar, The Missing Layer is a place to begin. It introduces the Execution Blueprint and the Breakpoint Inspection, so you can see how information moves through your company and what people need as the work changes hands.
