How Much is Your Chair Worth?

Working in finance has had its perks — and one of them was receiving good advice that no one ever follows: “Do not to become full of yourself after enjoying some success.” To drive this piece of advice home, more experienced folks would often ask someone who was being overconfident, “How much is your chair worth?”

Let me elaborate.

Say, you’re a trader on Wall Street. You suspect the stock market is about to fall and you call your clients to tell them to sell their position. You also short the market from your own trading book. The stock exchange tanks and you make a hefty sum for the institution you work for, your clients, and probably even yourself when bonus time comes around. At this point in the story, you start believing you did great and deserve all the credit.

You shouldn’t.

Let’s assume you were the one who came up with the idea.

You may or may not have been the one who convinced all those clients to pick up the phone when you called them. They answered your call because you were working for Morgan Stanley or some other large organization. Moreover, you were definitely not the one who put up the capital the bank allowed you to trade. You didn’t develop the technology to analyse your investments, you didn’t work on clearing the trades, and you didn’t bear any of the risk if things went poorly.

So you did your job well, but so would any other intelligent person that had been sitting on your chair. Only part of the credit belongs to the person; a good part of it belongs to the chair one is sitting on, i.e., the organization one is employed in.

Now, there are always cases where people add much more value than was expected. Similarly, some people add no value whatsoever — everything they achieve is thanks to the institution that employs them and the team they’re working with. They can execute and they’re not slackers, but someone else could have performed more or less the same.

The above situation tends to occur in the growth profession as well. While in finance and trading, it’s relatively easy to measure individual performance, in growth, it’s considerably harder. There are so many things that affect the performance of a growth team as it’s much more of a team sport.

It’s common to see a person in growth joining a team that is developing a promising new product. The product may be amazing and have strong market potential. The person then rides the wave of the team, doing the bare minimum. Next thing you know, that person is giving presentations on how he or she did it, and peers in the industry start to think he or she is a genius. Anyone reading this blog will probably have a similar case in mind.

So, how should an organization address the value a growth manager brings? How do you separate the value added by engineering, analytics, finance, HR, and all the other teams involved, as well as the strength of the product itself, from what the growth team does?

To answer this, we first have to define the main pillars a growth team is focused on. They vary in every organization, so I’ll follow a general structure.

Screen Shot 2016-04-21 at 2.40.08 PM.png

A growth professional should be evaluated on how well he/she performs on each of these pillars. Nobody is great at all key pillars (as far as I know), but these are the main items to look at:

  • Infrastructure
  • Processes
  • Capital Allocation
  • Product/Design
  • Growth Strategy
  1. Infrastructure

The growth person (not hacker) is responsible for putting together the infrastructure necessary to get the job done. There are specific information systems that need to be in place in order to make good capital allocation, design, and product decisions. I plan to write a post on a modern growth infrastructure set-up (a great one for a mobile gaming company). For now, the questions are:

  • Have you put the required information system in place?
  • Is it functional enough to become adopted by the growth team and the extended organization ?
  • Can you depend on it to make significant business decisions?

If the answer is yes, then this person has added value. You get bad grades when saying things like:

  • I can’t build this, I’m not an engineer (you don’t need to be, you need to know how things work and pick the right services)
  • The dashboard doesn’t work (it’s your job to fix it)
  • The data is not clear (it’s your job to clear it up or make a decision by taking data uncertainty into account)
  1. Processes

I come from a background that didn’t value processes and disregarded their importance. After working for institutions that scaled into larger teams, I’ve come to regard the existence of good processes as the main factor between successful and unsuccessful growth teams. User acquisition is a grind and having the right processes makes it easier to go through the motions and reduce its weight.

Be sure to ask your growth person to come up with the suitable processes that ensure that:

  • There’s a good process for testing
  • Things can get done in a scalable way
  • We’re learning from our mistakes and improving
  • We’re not wasting resources
  • We are being scientific whenever we can
  • We’re documenting what worked and what didn’t

If yes, then great. If you’re operating like a lonely cowboy against the Dalton brothers of testing and campaign management, then nope.

  1. Capital Allocation

Capital Allocation is the part where, in my opinion, most people fail, and that’s because it’s the most arduous. There are a lot of biases that come into place with allocation capital; hence, there is a lot of room for error. The level of optimization required is granular, demanding a level of grit and attention to detail that most people lack. Moreover, it depends on someone’s discipline to follow through with every process. Finally, you need to be willing to critique yourself and admit you were wrong. Add to that all the fraud that exists in advertising, and you’ll see how you can lose a lot of money if you aren’t careful. The good side is that this part of the job should the easiest to judge.

  • Was the money spent in an ROI positive way?
  • Did we explore as many different avenues as possible?
  • Did we optimize the campaigns well enough?

The above requires a solid infrastructure. If you’re lacking it, then a good rule of thumb is: if you can’t track it, then it’s probably ROI negative.

  1. 4. Product/ Design

The growth team is responsible for the flow of users. The focus could start from the top of the funnel all the way down to user churn, and hopefully, into re-engagement. You can affect the experience of a user past installation or registration by improving retention. How does the Top of the funnel targeting tie-in with current in-app developments? This is an important element.

For some companies, this is the focus of the product team itself. For others, it’s the job of the growth team. Depending on how deep the responsibility goes, there are some key KPI’s that the team should be judged upon. Common metrics are:

  • Retention Metrics
  • Re-engagement Metrics
  • Vitality Factor

Product and design feature changes usually involve a large cross-functional team decision. The growth professional is evaluated on the amount of buy-in he/she is able to get from others involved and how well he/she is able to communicate and cooperate with them. If you’re a blocker, you might as well let the product team handle this.

  1. 5. Growth Strategy

Finally, the growth manager should have a master plan in mind on how the company or the product is going to grow. He or she should be able to model this growth plan and spell out the key metrics that would affect growth. The growth manager should then be able to successfully explain the model to everyone else and evangelize focus on key areas that will affect the key metrics as those are targeted by the model. What we expect here are:

  • A growth model explained in one equation
  • Focus on the correct few metrics that matter
  • A plan to affect each component of the equation
  • A clear layout of the processes and the infrastructure that affect the equation

The above five factors should come into consideration when evaluating the overall performance of a growth person. If the institution has already provided infrastructure and a great product, then it boils down to capital allocation, processes and growth strategy to figure out if he/she has an impact.

The Ultimate Test

Now, if you are still not convinced how well your growth team has performed, there is an extreme way to figure it out. You can run an A/B test where you compare the version of the app you currently have to an older version of the app. This is much easier to do for a website and much harder for an app. It might also confuse your users (if you have a very social app), so you probably have to be careful on how you implement it.

I’d love to hear what you think about this post. Feel free to send me your comments and opinions at: growthtales at gmail.com.

If you liked this blog, you will love our Sonic Game:

One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.