What's Your KPI?
What's working and what's not working at your company? A good way to find out is trending your business through Key Performance Indicators.
- By Keith Lubner
- August 20, 2008
All channel-related businesses need to have mechanisms in place to measure their channels. Those companies that succeed are the ones that have very specific, measurable criteria of which they can, at any point in time, determine the health of a particular channel.
All companies track certain pieces of data relevant to their own operations. Typically, the metrics revolve around the financial data associated with the company, such as revenue. This is a given. However, the truly astute firms put together an entire cadre of metrics to measure their business. We call these items Key Performance Indicators, or KPIs for short. And, the really, really good firms put together KPIs that are specific to their channels. Let's discuss what those metrics may be:
I know several resellers who I would consider "visionaries" when it comes to keeping a pulse on their business. These resellers manage each vendor relationship as if each were a separate business unit. What is being measured? Gross profit and Net profit are obvious metrics, but these companies also track details such as:
- Marketing expenses
- Cost of goods
- Administration costs
And they measure each of these items for each product line separately. For each product that the reseller represents, the reseller tracks these ancillary items.
A KPI is nothing unless there is an associated goal to it as well. So, each one of the metrics has a goal and is measured against the goal. During company meetings, management reviews the KPIs and if a metric is starting to trend in the wrong direction, management will notice it and be able to make quick adjustments before things get out of hand.
Conversely, if a metric is trending in a good direction, management will be able to figure out why and then make sure that nothing causes the company to deviate from its success. All of these items are then surfaced into a concise, to-the-point "dashboard." The key is measuring each product line!
High growth vendors have a focus on KPIs as well. AVG is one such entity that does a fantastic job of tracking its KPIs.
The same principles can be applied to the services components of the business -- actual billable hours versus target billable hours; actual utilization rates versus target utilization rates; and so on. When the numbers are in front of you on plain paper, it's hard not to be accountable!
The tricky part is figuring out exactly what KPIs you want to track for your channels. I've seen companies go "hog wild" in creating and tracking KPIs. They have so many indicators that they get paralysis by analysis. I would recommend you choose five key indicators to concentrate on for each line of business. This will give you just enough information to see the trends. You always can drill down in a particular area if you need more information.
The point of KPIs is that they help you manage your business better, which in turn drives growth. Successful companies have KPIs in place. The not so successful companies, don't.
Keith Lubner is managing partner of Channel Consulting Corp., a N.J.-based global consulting organization focused on channel strategy, design, enablement, outsourcing and training for growing companies.