One question that I continue to get from many company leaders is whether or not product managers should be given P&L responsibility for their products.
The origin of this question comes from the days when companies had a portfolio of products where each product represented one or more SKU’s. Think consumer packaged goods. In this world, each product manager would worry about the cost structure of their product, the marketing plan, sales forecasts, contribution and profitability. This is still what many people out there think of as a product manager.
Of course, in the technology world, it is rarely this model. More often, we have multiple product managers and their product teams working on different components of a larger shared service (think SaaS companies or major consumer internet services) or apps or devices.
In today’s model, many leaders struggle to understand how to hold a product manager and his product team accountable for P&L when each team just has one component of a larger product.
The short answer is that if P&L are the KPI’s that the leaders want the team to focus on, then that’s what we do.
However, profit and loss are rarely the KPI’s that product teams care about, or even the primary KPI’s. Today, product teams are given a prioritized business scorecard (see http://svpg.com/the-product-scorecard/) that enumerates the particular areas of business focus for each product team. It may include profitability, but it more likely will focus on increasing growth, or reducing churn rate, or driving up engagement, or driving revenue, or any number of other possible goals.
Among many other differences between technology products and consumer packaged goods products, with software-based services, the marginal cost of providing the service to another customer is often near zero, so unless you’re working on devices such as consumer electronics, you probably won’t have too many production related KPI’s.
In any case, leadership decides what the priorities are for each team, and the teams work to deliver on those objectives.
Note that because so many teams are working on interrelated components, and often working on similar KPI’s, and because each team wants to know whether they are responsible for improvements or problems (referred to as “attribution”), a key tool in our arsenal used to isolate the contributions of a specific team is an A/B test (see http://www.svpg.com/product-discovery-with-live-data-prototypes/).