Measure and Report What Matters to Management
One in four channel chiefs struggle to demonstrate the value of their partner programs to senior executives; a large part of that challenge is getting on the same page in terms of language and metrics.
By Larry Walsh
In his revolutionary book, “Measure What Matters,” venture investor John Doerr lays out the case of OKRs – objectives and key results – as the means for making solid choices in where to invest time, money, and effort. If an activity doesn’t contribute to meeting the objective and producing key results, Dorr says you should reject it in favor of a more productive pursuit.
Few in the channel community would argue with that principle. We should all focus on the tasks and objectives that will produce meaningful results. Most channel operational, enablement, and marketing programs start with the intent of stimulating partner performance that results in higher revenue. The channel community has a raft of key performance indicators that show the value of both programs and partners.
The problem is that these KPIs fall short in convincing senior management and, in particular, chief financial officers (CFOs). On the average, about one in four channel chiefs polled for the latest 2112 Channel Chief Outlook report said they struggle to demonstrate the value of channel programs and partners. Other channel chiefs say they frequently feel pushback from senior executives who don’t see or appreciate channel contributions.
I recently led a roundtable discussion on this topic at the Baptie Club 50 retreat, a biannual retreat of senior channel executives of which I’m a member and moderator. Channel chiefs participating in the roundtable talked about real and artificial metrics used in channel programs. Too often, they concurred, channel professionals confuse tactical metrics with strategic metrics that matter to their senior management.
What should channel chiefs report to their management? The answer was obvious: what matters to management and stakeholders (investors). Those metrics, they concluded, were almost all fiscal in nature.
If you want to get senior management’s attention and appreciation for channel programs, focus on the financials.
- Annual and quarterly revenue generated by channel partners
- Average (or range) of margin on channel partner sales
- Productivity per partner measured in dollars
- Annual and quarterly growth of partner sales
- Sales opportunities (pipeline) opened by channel partners
- Sales close/conversion rate (based on the pipeline) of channel partners
- Cost of channel sales vs. direct sales
- Product sales, by segment, through and by partners
- New account acquisition by partners
- Recurring revenue generated by or attributable to partners
- Account retention attributable to partners
Apparently, the identified metrics are a combination of trailing and forward-looking indicators that reflect past and potential contributions to revenue and profitability, as well as the cost of doing business. Given that the CXO conversation mirrors the profit-loss statement, channel chiefs recognized the benefit of building and maintaining a virtual P&L for channel programs. (Listen to one of our podcasts to hear how Riverbed maintains its virtual channel P&L.)
But what about those artificial or imaginary metrics? The channel chiefs identified several “good to know” data points such as the number of channel partners trained and certified, log–ins and portal activity, webinar attendance, joint business plans filed, and marketing resources consumed. Those metrics and activities are important, but only if they’re tied back to a relatable data point. For instance, an increase in training participation by partners is significant only when it’s tied to revenue performance.
Through an iterative process of identifying and listing the metrics that matter to the CFO and fiscal stakeholders that set the corporate agenda, the channel chiefs realized that the measures that matter are those that demonstrate a direct contribution to an organization’s goals. Showing meaningful impact and contribution requires channel chiefs to speak in the language of the C-suite and measure what matters to the CXOs.
As Doerr says, measuring what matters can help make the C-suite and Wall Street appreciate the channel and remove the anxiety and pressure channel chiefs often feel in their need to demonstrate channel value.
Larry Walsh is the CEO of The 2112 Group, a business strategy and research firm servicing the IT channel community. He’s also the publisher of Channelnomics, the leading source of channel news and trend analysis. Follow Larry on Twitter at @lmwalsh2112 and subscribe to his podcast, Pod2112, on iTunes, Google Play, Spotify, and other leading podcast sources. You can always e-mail Larry directly at [email protected].