Product Managers – How Do You Measure Their Success?

Product Managers are as different as the products and services that they manage.  However, they are all evaluated based upon their results.

Key Metrics

The first time I managed a profit center as a Product Line Manager I was informed that only three numbers would determine if I succeeded or failed.

The metrics were to meet or exceed:

• Top Line
• Bottom Line
• Expense budget

Let’s take a look at each of these metrics.

Top Line

Most businesses judge their success by the revenue that they generate and hopefully collect. I agree that setting a reasonable revenue budget and achieving it is good planning.

I remember one year I was asked to grow my business 100%.  I achieved 106%.  My expectation was congratulations for exceeding a stretch goal.  Instead, a very senior corporate executive sent word to me, “Is that all you can do?”  I guess my budget was too reasonable.

Bottom Line

Each dollar of revenue is expected to spin off a pre-determined net margin or bottom line. Each incremental dollar of revenue should create a sufficient margin to warrant placing the capital at risk.

Consider two scenarios:

1. 105% of top line and 95% of bottom line achieved OR
2. 95% of top line and 105% of bottom line achieved

The lesson I learned was that is was better to make your bottom line or profit goal versus making the top line. Scenario 2 was the better outcome.

Expenses

In some ways, expenses was the easiest metric to achieve.  Fixed and variable expenses when totaled equal total expenses.

“Correct” planning allows us to know what our fixed expenses should be. The wildcard is the variable expenses.  Of course, if revenue is up the variable expenses should be on plan or potentially higher yielding total expenses at or potentially above plan.  If revenues are down the expectation is that variable expenses and consequently total expenses should be down.

The Takeaway

On average, we work 250 days per year and our success or failure can be boiled down to three simple metrics. I have never forgotten those lessons from almost 20 years ago.

That is what I am thinking.  How about you?

1. Can a product manager really be judged on just these three metrics?
2. How have you been judged as a product manager?
3. How do you evaluate your product managers?