What is the Key Performance Indicator (KPI) for Revenue Management?

I’ve been writing a lot about Revenue Management recently, and you can read part 1 and part 2 of my posts on it, as well as this one and this one.

And just to be clear, while I do try to “define” or clarify what I think Revenue Management is in those posts (and this one), this is a blog after all, and sometimes I’m just thinking out loud.

In the weeks and months to come, GRAPA will probably come up with a formal definition of Revenue Management, but in the mean time, I’m just trying to help people understand it as I find out more about it myself. If you’d like to participate in this discussion by commenting, all the better.

Why Are KPIs Important?

Before we really start talking about KPIs for Revenue Management, I just wanted to remind myself and everyone reading why KPIs are important - because KPIs are the objective measures we negotiate with management to measure if we are doing a good job or not.

At the end of the day, it doesn’t matter if you’re best friends with the CFO, everyone likes you, you get praised by top managers for all the good things you do – when it comes to budget time, if your KPIs don’t show how well you’re doing, your budget and headcount is going to be affected.

“Revenue At Risk?” Forensic Case Load? Isn’t That for Revenue Assurance?

I’ve talked before about how leakage is often not a very useful KPI for Revenue Assurance – and certainly I don’t think it is a useful KPI for Revenue Management, for many of the same reasons.

In that post, I proposed that “Revenue at Risk” or the RA team’s forensic case load were both better KPIs for Revenue Assurance, and depending on how you view Revenue Management, using these as a starting point is certainly going to be more useful than leakage.

But obviously if we’re not clear on what the definition of Revenue Management is, and I don’t claim to be any kind of expert, then KPIs can be difficult to pin down. Part of the problem is that if we knew the KPI, we could much more easily define Revenue Management based on that KPI!

KPIs for The “Operationally Responsible”

In part 1 of my post on Revenue Management, I tried to define it in terms of “operational responsibility.” But part of the reason I’m not sure about this anymore, is that the KPIs for an operational department are usually speed and accuracy – certainly that’s the case for postpaid billing.

In that environment, management just wants to know that the bills are sent out on time, and that those bills are, for the most part, free of errors (within an acceptable range).

So if we were to really run wild with this definition of Revenue Management being “operationally responsible,” it would be logical to say that their KPI in relation to the “revenue management” of billing operations, is the speed and accuracy of billing. Exactly like it was for the BOM/Billing Operations Manager of old who made sure things were done right the first time every time.

The thing is that, even with departments that fully embrace Revenue Management, I’m not sure this is true or accurate.

Speed and Accuracy?

I recently met a Billing Manager, who also had “Revenue Management” responsibilities. In that example he is probably responsible for the speed and accuracy of billing, but not necessarily because of his “Revenue Management” responsibilities.

He is probably making sure there is minimal revenue loss by doing things right the first time every time, but if he was just the billing manager, he would probably be doing that anyway.

This doesn’t necessarily mean “operational responsibility” isn’t a useful way of understanding Revenue Management, but it doesn’t clearly describe the KPIs involved.

Monitoring and Reporting

Which brings me to what I talked about in part 2 – thinking about Revenue Management as a monitoring and reporting function.

Even in this scenario, Revenue Management probably has “responsibility” for operational departments in scope, and are probably held accountable for problems. However their main role is exactly monitoring and reporting, just as the main role of Revenue Assurance is forensics.

In this situation, which is what I’ve actually seen more practical examples of from GRAPA members, Revenue Management may have to answer for issues within billing, mediation, interconnect, network etc. but they are not “operational” in actually being measured on whether service is delivered well, or on time.

Their main function sounds like it should be reporting on the “accuracy” (rather than speed) side of these operational department’s KPIs – ensuring revenue is accurately accounted for.

Getting Revenue Right, The Effectiveness of Reporting and Controls

At which point I have to start asking questions more than I have concrete answers to give.

Does this mean that the KPI for Revenue Management is the speed and accuracy of their reporting?

That they should be measured on how timely their data is in order for management to make decisions/changes? Should they be measured on how accurate their data is – not just if it is correctly reported, but if it effectively measures the revenue position of the telco?

And does this mean that, just like with Revenue Assurance, a good indicator for Revenue Management is “Revenue at Risk” – ie: the revenue not lost due to the controls/monitoring put in place?

Similar Objectives, Different Methods?

I suspect that answer to all those questions is a big firm yes. Because while Revenue Management and Revenue Assurance are fundamentally different ways to dealing with the same problem, the problem is still revenue risk, or leakage, or revenue loss or whatever you want to call it.

And the best way to measure this is not leakage, but Revenue at Risk.

But just as another key indicator for Revenue Assurance is the forensic case-load, because it measures how much and how fast Revenue Assurance is performing its primary function, so too the speed and accuracy of reporting would have to be a key indicator for Revenue Management.

If You Monitor, Are You Responsible?

I am starting to convince myself that Revenue Management is exactly about monitoring and reporting, and that the operational responsibility that can come with it is simply an indication of that posture, rather than the reason for it.

If you are in charge of monitoring how well something is going, more often than not you’re going to be in a position to try and make things better when you see a problem.

When Revenue Assurance leaves control monitoring to the operational team, that is because when that team responds to alarms, they are the ones who have to do something about it in order to prevent problems in their own systems/processes.

If Revenue Management is monitoring controls, then they are the ones responding and eventually pushing for corrections or policy changes.

I know this is a really wonky and geeky post, but it gets me excited – and that’s how you know I LOVE Revenue Management and Revenue Assurance.