Lagging and Leading KPIs

The use of KPIs in your Day Nursery, Pre-school or Out of School Club makes good business sense. All too often we hear of businesses using lagging rather than leading KPIs. In this blog I will explain the difference and outline why, to use KPI’s effectively you should have a mix of lagging and leading KPIs in your business.

The difference between lagging and leading Key Performance Indicators (KPIs) lies in what they measure and when they provide insight into performance:

1. Lagging KPIs

• Definition: These measure past performance and outcomes. They indicate how well a business or process has performed after an event has occurred.
• Use Case: They help assess whether strategic goals were achieved.
• Examples:
  • Revenue Growth – Shows how much revenue increased, but only after the reporting period ends.
  • Customer Retention Rate – Reflects how many customers stayed, but only after they’ve had the chance to leave.
  • Employee Turnover Rate – Measures staff who have already left, making it a retrospective measure.

2. Leading KPIs

• Definition: These are predictive indicators that suggest future performance. They help businesses take proactive action before final outcomes materialise.
• Use Case: They help in decision-making to influence future performance.
• Examples:
  • Website Traffic – A rise in visitors may indicate future sales growth.
  • Employee Engagement Levels – Higher engagement often predicts lower turnover.
  • Number of Sales Calls Made – More calls today may lead to increased sales next quarter.

Key Difference:

• Lagging KPIs confirm trends after the fact but can’t change the outcome.
• Leading KPIs act as early warning signs, allowing businesses to make adjustments before final results are seen.

So let’s try an experiment and ask ChatGPT to help us identify a set of Leading KPIs for the Nursery Manager of a Day Nursery. I have told Chat GPT that there is a 80% occupancy level for this 100 place, all year round nursery and why they matter.

Remember if you are not using ChatGPT as your personal assistant your competition are. We did a live on ChatGPT and using AI in Early Years. You can watch the recording here.

Here’s what the nice robot came back with:

Here are five leading KPIs for a Nursery Manager of a 100-place day nursery with an 80% occupancy rate:

1. Enquiry-to-Tour Conversion Rate

Formula: Number of booked toursTotal number of enquiries×100\frac{\text{Number of booked tours}}{\text{Total number of enquiries}} \times 100

Why it matters: A high conversion rate from enquiries to tours suggests strong interest and effective marketing, which can lead to increased occupancy.

2. Tour-to-Registration Conversion Rate

Formula: Number of registrationsTotal number of tours conducted×100\frac{\text{Number of registrations}}{\text{Total number of tours conducted}} \times 100

Why it matters: This KPI helps predict future occupancy levels based on how well nursery tours convert into registrations.

3. Average Weekly Sessions per Child

Formula: Total booked sessions per weekTotal number of enrolled children\frac{\text{Total booked sessions per week}}{\text{Total number of enrolled children}}

Why it matters: More sessions per child increase revenue and improve financial sustainability. Tracking trends can help in promoting additional session take-up.

4. Staff-to-Child Ratio Compliance (%)

Formula: Total hours in ratio complianceTotal operating hours×100\frac{\text{Total hours in ratio compliance}}{\text{Total operating hours}} \times 100

Why it matters: Ensuring compliance with staff-to-child ratios is crucial for quality care and regulatory adherence. A drop in this KPI could indicate potential staffing or retention issues.

5. Parent Satisfaction Score (Net Promoter Score – NPS)

Parent Satisfaction Score (NPS) Formula

NPS = % promoters – % detractors

How to Calculate:

1. Ask parents to rate their likelihood of recommending the nursery on a scale of 0 to 10.
2. Categorise responses:
   • Promoters (score 9-10) → Highly satisfied, likely to recommend.
   • Passives (score 7-8) → Neutral, unlikely to promote actively.
   • Detractors (score 0-6) → Dissatisfied, at risk of leaving or discouraging others.
3. Calculate:
   • % Promoters = (Number of Promoters ÷ Total Responses) × 100
   • % Detractors = (Number of Detractors ÷ Total Responses) × 100
   • NPS Score = % Promoters – % Detractors

Example Calculation:

• 50 responses:
  • 20 Promoters (9-10 ratings)
  • 20 Passives (7-8 ratings)
  • 10 Detractors (0-6 ratings)
• % Promoters = (20/50) × 100 = 40%
• % Detractors = (10/50) × 100 = 20%
• NPS Score = 40% – 20% = +20

A positive NPS score suggests good satisfaction, while a negative score highlights potential concerns.

Why it matters: Happy parents are more likely to recommend the nursery, leading to future enrolments. This score is an early indicator of retention and reputation.

So my advice is before you start a new financial year, sit down with your management and work out their KPIs for the year ahead. You’re future self will thank you.

If we can be of any assistance with any aspect of managing a team in your Day Nursery, please call us on 01527 909436.