In this guest post, Sigi Osagie explains why KPIs should provide a view of product management’s status and progress from several perspectives and reveal the organisational health of the function.
Contemplating what true product management success means is a valuable exercise. For starters, it may force some organisations and product leaders to realise that authentic and sustainable product management success isn’t the same thing as transient or singular product success.
Product leaders and managers often complain that their performance success is frequently hindered by difficult stakeholders, including senior executives in the organisation who don’t get it. Yet, in truth, many product management folks themselves need to recalibrate their conventional notions of what enduring performance accomplishment entails.
The Key Performance Indicators (KPIs) we commonly adopt are exactly what the phrase infers: they signify what we view as the key dimensions of performance and the measures we use to establish how well we are doing.
But how can your KPIs be truly useful or meaningful over the long term if the product management function itself lacks effectiveness, especially in its approach to functional performance?
For example, in McKinsey’s survey of over 5,000 product managers worldwide, at least 75% said their product management functions are substandard or non-existent.
Other studies indicate similar findings: too many product management functions just don’t get the performance thing.
What really goes on – above and beneath the surface
As shocking as it sounds, some product management functions don’t even measure their performance.
And for those that do, the principal KPIs typically concern the products, the customers or users, and the dollars – for example, customer acquisition cost; customer lifetime value; active users; user growth; product quality; recurring revenue; and revenue per user.
But where are the measures that indicate how well we are doing with building the competencies of our people – the folks who do the actual product management work?
What about the measures that tell us whether or not we are succeeding in serving our internal customers robustly, and collaborating with our internal suppliers cohesively, thus feeding a positive perception of the product management brand and its value-add?
And which measures tell us, for instance, whether or not the product management function is appropriately aligned to the corporate agenda or organisational goals; how fit-for-purpose our product management tools, systems and other enablers are; the rigour and agility of our functional process discipline; or the impacts of our products on the environment and their social value?
Take a look at the KPIs of your own product management department; if you had to establish your dream product management function, would these be your choice of performance measures to tell you how flawless it is or what’s really going on above and beneath the surface?
It’s worth taking some time to think about this deeply.
Performance measures should indicate actual performance relative to the vision or objectives pursued. So product management KPIs should incorporate the function’s performance responsibilities and its obligations to enterprise priorities, and balance operational and strategic perspectives.
Crucially, these requirements must be met beforehand when setting functional goals.
The link between objectives and performance measurement is fundamental. It’s pointless setting goals against which you can’t measure progress. And it’s senseless setting goals against which you can track performance but failing to do so effectively; perhaps because your KPIs are inappropriate.
A mirror that tells no lies
The term “KPI” is somewhat misunderstood and grossly overused. Everything that can be measured is now a KPI, whether or not the measurement is indeed a key one.
And we seem to have forgotten the wisdom in the statement often attributed to Einstein: “Not everything that matters can be measured and not everything that can be measured matters.”
In your product management arena do you measure what truly matters, or what is conventional or easy to measure?
Good KPIs are like a mirror that tells no lies – they should give you an accurate reflection of how you’re performing. But they can only be effective if they are appropriate.
Your KPIs should reveal the organisational health of your product management function and how well you are doing in the most important dimensions of performance. Focus on the few vital measures that illustrate functional contribution, capability and growth.
These may vary from organisation to organisation, as the key focus of each product management function will depend in part on its goals – which must relate to enterprise priorities – and the context.
Taking a balanced approach ensures the product management function doesn’t miss vital feedback in all the key dimensions of its 360-degree existence – including any unintended consequences.
Your KPIs should provide a view of product management’s status and progress from several perspectives, helping to ascertain the answers to crucial questions like:
- How well are we doing as regards contribution to organisational success?
- How do our internal customers and suppliers see us, and how well are we meeting their needs and harnessing their value contribution?
- How robust and efficient are our internal and external infrastructure, including our people capability and our supply base?
- How coherent is our product portfolio strategy, and how sound is our related investment – not just in dollar terms but also time, effort and attention?
- What aspects of our organisational existence must we improve in, especially to expand our functional effectiveness and ensure our activities and outcomes are optimal and ethical?
- How can we continue to grow our capabilities and improve our value-add to the enterprise, its customers, our employees and to society?
Don’t become a dinosaur
I reiterate the need for balance because many product leaders and managers still hold a myopic and insular view of what performance is.
As the product manager for a CPG product, for instance, your gross margin, customer retention and market share may all be awesome, but if you’re not managing, measuring or at least considering what happens to the plastic packaging at the end of the product usage/consumption, then, really, you’re asleep on the job. Time will catch up with you and you could become a dinosaur product manager.
The same thing applies if you’re the product manager for a software product with fantastic annual recurring revenue, but your software is increasingly exploited by despotic and repressive regimes to curtail human rights; or it’s used for fraudulent, malicious or other unethical practices.
Ditto if you’re the product owner for a fashion category that has attained a fabulous product-market fit, but your consumers don’t know that your supply chain involves child labour, slave wages or tons of waste.
And if you’re the chief product officer with many profitable products in your portfolio, but your leadership ethos doesn’t ignite your people’s passion and bring out the best in them, they’re not happy at work, they feel dissatisfied with their growth or stifled by the functional culture that is killing their mojo, then the dinosaur destiny beckons you too.
If you have any doubts, go out and do some benchmarking: see how world-class product management functions in high-performance organisations view their performance.
It’ll be a fruitful experience for you to absorb how they craft their destiny with distinction.
At the very least, it’ll save you from tunnel vision and help you appreciate that the world around you is changing.
Change your perspective, change your destiny
To avoid the same fate as the dinosaurs, you must refine your view of what product management performance entails to ensure your mirror always tells the full truth.
That refinement may need to encompass enlightening your organisation, especially the C-suite and other senior executives. Being the torchbearer is often part of bringing effectiveness into the performance dimension of product management.
There can be no definitive one-size-fits-all set of performance measures. However, effective performance measurement should imbibe considerations in non-traditional areas – aspects which portray a longer-term, holistic picture of the outputs and ramifications of your product management endeavours, and help prevent perilous blind spots. Examples might include talent management and bench strength; internal customer satisfaction; risk mitigation; environmental footprint; and social impacts.
Whatever KPIs you choose, remember that good performance measures don’t automatically give you performance success.
People often mistake performance measurement for performance management – two separate things. There is a hidden fallacy in the common interpretation of the notion that “what gets measured gets done”. Measuring performance, per se, will not give you performance success. Managing performance will. But you can’t manage performance without measuring it. Success comes from the appropriateness of the objectives and performance measures; what we do about what the KPIs tell us; and how effective we are in our ensuing actions.
As you digest these points in your mind and your heart, don’t forget that people are the heartbeat behind your performance outcomes. It is people who create performance, good or bad – including those who define product management objectives and KPIs that may or may not be appropriate.