Metrics That Matter: Choosing the Right KPIs for Each Alliance
This month’s Collaborative Connection Monthly (CCM) webinar and roundtable explored one of those evergreen topics that is easier said than done: selecting the right metrics for your alliance and measuring them over time. Louis Rinfret, PhD, and Michael Roch, CA-AM, the leaders of alliance management software platform company allianceboard, have spent the last several years devising a diverse set of KPIs to track a wide variety of strategic alliances and helping clients monitor them on an ongoing basis. In their presentation, “Measuring Sticks: Which Metrics Matter, and What They Mean,” the two featured CCM guests broke down the different categories of metrics and the situations for which they are appropriate.
But in order to identify the right KPIs for every collaboration, it’s essential to understand that “your metrics are going to be dependent on what you’re trying to do,” according to Rinfret, allianceboard’s founder and CEO. “The first question is, what really matters? Metrics are a way to focus people’s attention on what’s important and what’s really going to move the needle. This question of linking the metrics to strategic goals of the organization is critical.”
Designed Metrics for Desired Outcomes
Roch, the company’s chief commercial officer, outlined three types of metrics: 1) those related to measuring specific outcomes, such as codevelopment of a prototype or innovation-related investment for R&D initiatives, or the level of influence exerted by a partner in generating revenue and opportunities in the context of cosell relationships; 2) KPIs highlighting the activities associated with an alliance; and 3) measures that illustrate alignment with partners. Where the former can differ from alliance to alliance, the latter two, which can encompass decision making, risk management, execution, and relationship quality, among other elements, are the same across the board, regardless of the alliance’s purpose.
“[Activities and alignment measures] go to your alliance management practice within the company that you operate [in],” said Roch.
Roch named several specific metrics in each of these categories. Outcome-related KPIs depend on what the alliance is trying to achieve, and a collaboration is generally trying to do one of five things: 1) innovate faster, 2) reduce costs, 3) grow revenues, 4) break into new markets, or 5) do good for the environment and society. Innovation could be measured by crystallizing the time it takes to develop a prototype, for example, while tracking the costs avoided by partnering could illustrate how an alliance achieved bottom-line savings. Counting how many times a partner introduced an opportunity helps measure partner-assisted revenue growth, while ESG alliances might necessitate keeping score on the “proportion of objectives achieved” in that relationship, according to Roch.
“Again, it depends on what you are trying to achieve with your alliance,” Roch said. “When you have many alliances, each with a slightly different purpose, you look at the specific measures for the specific alliance purpose.”
Relationships Measured in Healthy Opportunities
Drilling down into the specific activity and relationship measures, Roch recommended segmenting KPIs into two subgroups: 1) relationship health and 2) opportunities to engage the partner in new ways. For the former, alliance managers might want to consider tracking how often their companies issue health checks, not just the insights that come from the health checks themselves.
“Are we complying with our own agreement that we reached with our partner? How is the alliance health tracking over time?” said Roch.
On the opportunity side, Roch reminded the audience that if an alliance is truly strategic, the current initiative is just one component of a multilayered value proposition.
“How am I looking after my partner for additional opportunities, and how is that being reciprocated?” he said.
A Hive of Activity KPIs
Later in the presentation, Roch segmented activity metrics into three more subcategories: 1) decision making, 2) risk management, 3) and execution, both in terms of quality and efficiency. The first entails charting things like how long it takes to resolve issues and how many escalations alliance managers prevented from landing in JSC meetings. Risk management metrics account for how the alliance team mitigated risks, not just the risks themselves that were headed off. Finally, execution can be measured by tallying the number of individual goals achieved, how many of those were realized despite working with a less-than-optimal number of resources, and how fast they were reached, for example. Non-revenue-generating alliances might be measured by the learnings that were implemented along the way, Roch added.
Start from the Top and Avoid “Vanity”
It’s not enough to align metrics to the right category; alliance managers have to get senior management to explicitly agree to the KPIs that will be used to illustrate the success of the partnership.
“If you design this process in isolation it might look great, but if you don’t have the buy-in of your key stakeholders, then there’s not going to be much value to your metrics,” said Rinfret, before cautioning the audience against formulating “vanity metrics,” “numbers that people look at but are not actionable [and] don’t serve any purpose.”
Rinfret also stressed the importance of appointing an owner for each metric, someone who is responsible for charting the progress (or lack thereof) toward it in monthly and quarterly meetings. Roch added that while outcome measures might be owned by other divisions within the company, the relationship/activity pieces are in alliance management’s purview, and it’s in everybody’s interest to track them, especially the alliance manager’s.
“That’s also how you elevate the visibility and the importance of alliance management in the organization,” said Roch.