“What separates the product managers from the product leaders?” — Aspiring Product Leaders
I’ve lost track of how often aspiring product leaders have asked me this question. There are various paths towards product leadership, such as:
- Telling great stories and making them come alive
- Influencing great outcomes for the business
- And most often overlooked: accountability
No, I am not advocating for direct P&L accountability for product managers here. I am referring to product KPI accountability. Owning the success lifecycle of a product is something product managers need to do. Few product managers, and even product leaders have true accountability for KPIs.
I am advocating for a shift from tracking to instead owning and driving.
We’ll discuss the need for KPI accountability and then also give you a list of best product manager KPIs.
What is KPI accountability?
KPI accountability means product managers are accountable for driving a KPI. This refers to a product KPI — such as a conversion rate or feature usage rate. The following conditions are prerequisites for KPI accountability:
✅ Organisation-wide goals and objectives with well defined KPIs
✅ Agreement on product strategy
✅ A product roadmap (learn how to create a product roadmap)
✅ Goals for the product and product team
Why should product managers be accountable?
Nothing ventured, nothing gained?
Product teams are an expensive investment. As with any investment, you should expect an ROI.
Scenario: A team comprising of 5 engineers and a product manager works on a particular product for a year. In that time you would expect them to make significant improvement in that product’s value. This would lead to some kind of measurable upside.
The product manager in this instance is the “leader” directing the engineers. The team owns outcome the business is trying to achieve. They do this by deciding what gets built. Responsibility over this engineering output, makes the product manager a resource custodian. The PM is thus responsible for value creation.
In an earlier article, “what is a product manager“, I wrote about a product manager’s role in creating value. It is counterintuitive to not hold the Product manager accountable in this scenario. If business value is not measurable, why would you continue to invest in a particular team? Question the purpose of any team if the outcome is not measurable.
What are the benefits of accountability?
There are several benefits to keeping product managers accountable for KPIs:
- Ensures the highest value initiatives get prioritised above all
- Focuses the team on value creation. Instead of focusing on delivery of features (potentially without upside)
- Revenue upside if KPIs are aligned to commercial drivers
How should KPIs be determined?
Common KPI mistakes
The product leader in conjunction with the product manager determines the KPI. It is vital to use the correct KPI, and additionally avoid these common pitfalls:
❌ Lack of empowerment: There is no point in setting a KPI that a product manager cannot drive. The KPI is incorrect when it has no relation to what the product manager does or lack of resourcing to drive the KPI.
❌ Layered KPIs: Sometimes a KPI may seem related to the focus area of a product manager. But upon closer examination, the KPI has too many underlying variables.
❌ Lagging indicator: For change to register on the charts a big shift is needed. These kind of KPIs often have various underlying factors that influence them. These indicators may be great long term measures but they are unsuitable for the short term.
❌ Averages: Outliers influence averages, making them inaccurate. Using medians paints a better picture.
❌ Stakeholder dependencies: Avoid KPIs that depend on stakeholders without reciprocal KPIs. E.g. App sessions could be a KPI for a product manager. If app sessions depend on app installs, it requires the marketing team to have the same KPI.
KPI best practices
✅ Use leading indicators: Align KPIs to commercial drivers that drive revenue.
✅ Set targets: KPI’s without targets don’t lead to accountability. Leverage your data to determine targets. Where possible benchmark against similar products or features within the same business. The product leader and product manager should agree on targets.
✅ Set complementary KPIs: Ensure KPIs set for the product team complement each other. KPIs should drive each other towards a unified goal.
Should KPIs impact Product Manager compensation?
Incentivise your Product Managers
I am a firm believer that KPI accountability should come with some sort of compensation. KPI targets should be one (not the only) part of a product manager’s bonus plan, along with other goals.
Additionally you can set stretch targets for KPIs that result in a bigger bonus payout.
How should product managers be held accountable?
KPI accountability is not about blame
KPI accountability is not about blame. They should incentivise the product team to work smarter.
Couple KPIs to a product team’s goals. Your annual employee review process should factor KPIs and goals into the mix.
The idea behind KPI accountability is not to find a product manager to blame when things go south. Instead it ensures product managers are prioritising the best value initiatives.
MEOW KPI framework for Product Managers
MEOW is a “super framework” for KPI accountability.
✅ Mature Product Organisation
Ensure the product team has a level of maturity, demonstrated by the following:
- Well-defined strategy
- Data instrumentation so they can actually track the KPIs
- Operational cadence with clear processes
✅ Empowered
- Empower the product team to solve problems. They need to have free hand within the remit of the product strategy to drive initiatives.
- Ensure the product team can influence resourcing levels (e.g. engineers, designers etc)
✅ Organisation-wide
- The rest of the organisation understands and supports the product team’s KPIs.
- There are complementing KPIs and goals in the organisation
- KPIs & Goals are visible to everyone
✅ Wow (The Team)
- Make your KPIs ambitious enough to make the team go “wow!”
- Incentivise them to get a second “wow!”
What are the best KPIs for Product Managers?
The answer with Product Management is always – it depends! However I’ve compiled a comprehensive list of good KPIs for Product Managers and whether they apply to an industry or not.
Good KPIs for Product Managers
| KPI | Definition | Marketplace | SaaS | Ecommerce | Publishing |
|---|---|---|---|---|---|
| Monthly Active Users (MAU) | The number of monthly users who carry out a certain number of actions on the product (as defined by the business). | ||||
| Median Revenue Per User (MRPU) | The median revenue over a defined period generated by users. | ||||
| Customer Lifetime Value (CLTV) | The revenue generated by customers over their lifetime. CLTV = (Revenue * Average Customer Lifetime). | ||||
| Repeat Rate | How often users come back to the product (i.e. frequency of usage). Use with caution as this is a lagging metric. | ||||
| Completion Rate or Conversion Rate | % of Users that complete a task | ||||
| % of Paying Users | % of Users that are actively paying for a product | ||||
| Median Time to Complete | The median time taken to complete a specific task | ||||
| % of MAUs referring Users | The % of Monthly Active Users that refer other users |
Bad KPIs for Product Manager
As we have good KPIs, we also have some bad or at the very least questionable KPIs for Product Managers. These are the KPIs you should avoid using for measuring Product Manager effectiveness. If you do there’s a strong chance you’re setting them up for failure. Avoid these unless you’re dead certain Product Managers can actually impact such KPIs.
| KPI | Definition | Why its bad |
|---|---|---|
| Average Anything | Any KPI where you’re measuring an average | Averages are misleading because they are influenced by outliers and do not paint the correct picture. Imagine a bank where the average customer includes Elon Musk. The average bank balance would be highly exaggerated whereas the median would exclude Elon’s bank balance and more representative of real customers. |
| Symptomatic Metrics | Any metric that is a symptom of a broader set of problems | When a metric has far too many underlying factors or variables, there’s no effective way of knowing how the problem should be addressed to move the needle. |
| Sessions (or Organic Traffic) | Sessions on its own is a vanity metric and not a measure of success. When used in the context of websites it most often refers to traffic. | Consider using MAUs (as defined above) if you want to measure product management. Sessions or traffic, more often than not should be a marketing KPI. Product Managers can do very little to influence the traffic on a page because factors such as SEO come into play. Additionally Product Managers are not content writers and ultimately not responsible for the quality of content on a page that actually influences traffic. |
| Bounce Rate | Users who land on a page and leave without interacting with the page | Symptomatic Metric Bounce rate is influenced by a huge number of factors such as: User Experience, User Intention Alignment, Quality of Content, Server Response Time etc. More often than not a high bounce rate is a combination of all of these. |
| Churn rate | The % of customers that churn in a given time period | Symptomatic Metric Churn rate is influenced by a huge number of factors such as: User Experience, Quality of Customer Service, Price etc. |
| Customer Acquisition Cost | The marketing cost of acquiring one customer. | If the definition didn’t give it away, then I’ll spell it out. This is a marketing metric! Product Managers have zero control over this. |
| Net Promoter Score (NPS) | A measure of customer loyalty and satisfaction | Symptomatic Metric NPS is influenced by a huge number of factors and also by how and when you collect NPS. As a health check, NPS is a good metric to keep an eye on. However, its influencing variables include (but aren’t limited to): User Experience, Customer Service, Value Proposition, Competition, Brand Values, Pricing etc. To drive NPS positively, various departments need to work together and address the underlying problems. |
In Summary
KPIs are not only a great way to measure the effectiveness of Product Managers (and Product Management in general) but also for incentivising them with bonuses. Set KPIs carefully for Product Managers to get the best outcome. Use the MEOW framework to sanity check the KPIs.
And when in doubt about the KPIs you plan on using, remember, the Product Manager needs to have direct influence over the underlying drivers of that KPI.
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