KPIs, Goals, Strategic Plan and Why Should You Care?

As everyone knows, we announced on an all company call the outcomes of our Strategic Planning project with the Board of Managers of Middlebury Interactive and one of the immediate impacts on the company was the roll out of our goal-setting, performance management metrics.  Unless you are living in a cave (and even the ladies in the Customer Service 'cave' have told me they know the scoop ...) you know that your goals, set with your manager are due tomorrow (the 15th of August).

There was a ton of information on that All Company Call and now that all of you have gone through the process of setting your own goals, I thought it might be helpful to revisit the company wide goals as well as some of the strategic thinking behind them.  Some of you might not have any direct goal in one of the core areas, but everyone should know the overall company goals and have a good sense of the exciting year ahead as we roll out our growth acceleration strategy!

Like most every other company, our first set of goals are financial.  Ultimately, our success as a company is measured by the revenue we generate and whether or not we are profitable because that is what allows us to reach more students who will benefit from becoming linguistically competent and globally aware.  Of course, as you also know financial information on the company is also among the most sensitive and should never be shared beyond our teams. 

Our total revenue goal this year is a very aggressive $16.6 million figure.  But for the first time we are also breaking down for the board our revenue generation in a different way -- in four distinct categories.  The first is the revenue generated by K12, Inc's institutional business (the efforts that Chad Schaedler directs -- with great help from Matt Cooper and the Regional Sales teams, and the Inside Sales teams); the second is Middlebury Interactive Direct Sales (these efforts are led by Stacey Rainey's team -- Beth Gemmill in partner sales, Jason Fishbein's growing marketing team to drive consumer sales and support both K12 Institutional and MiddInteractive Direct, and our new initiative this fall with telesales from VT); the third is the revenue we get from the K12 Virtual Schools -- licensing fees and teaching; and the last is our Academy Business (MMLA led by Cynthia Patterson and Language Clubs -- sold by both K12 and MiddInteractive Direct and any other new sources of revenue that involve synchronous or in-person instruction).  When you break the numbers out this way you see some interesting things:  the growth rates, size and profitability of each of these revenue generation engines are quite different.  I think many folks would be surprised to know that broken down into these four categories, the Academies are the largest source of revenue -- they were last year and they should be again this fiscal year.  However, the MiddInteractive Direct sales are the fastest growing.

In addition to growing revenue we also measure profitability -- in our case through a measure called EBITDA (Earnings Before Interest, Taxes, Debt and Amortization).  This past year (FY13) for the first time the company had a positive EBITDA number.  And next year, that number will grow to nearly $1 million.  However, it is important to note that less aggressive growth would have resulted in a LARGER EBITDA number this year.  This was the most significant decision our Board made in the strategic planning process. 

Our Board is as excited as management about the pace of growth in the market.  Specifically, bricks & mortar schools are embracing digital solutions at a rapid pace, or as a recent Digital Learning Now headline declared:  Blended Learning is Going Mainstream!  We have enormous opportunities as schools use our fabulous content in new ways:  many (certainly the Virtual Academies) will continue to use our courses fully online with an online teacher to fulfill World Language requirements.  But we are also seeing a huge boom in schools using our content in classrooms (what has loosely been called 'blended' learning):  Our courses replace all their curriculum (textbook & supplemental) or our courses provide PART of their content:  supplemental.  And in many cases, brick and mortar schools may use our courses in multiple implementation modes:  a few students taking Chinese in a lab setting -- fully online with a virtual teacher, the French teacher using our course to replace a dated textbook while the Spanish teacher just pulls videos to use during class and assigns specific parts of the course to students to do as homework.  But, as team members in almost every part of our business know this growth and the use of our products in new ways requires a lot of investment and resources:  in course development, customer facing resources, and operations.  That is why the board approved what you will hear senior leaders call our "Acceleration" strategy.  With that vote of confidence and investment, they also (appropriately) asked us to become more formal in reporting our progress.  We have always given the board a monthly view of our finances and our progress against the budget as well as raising key strategic issues for their review.  Now, we have greatly formalized that process -- in what we call our KPIs (Key Performance Indicators).

The other three areas of measurement in the KPIs are:  Reach, Student Performance, and Operational. 

Reach is an attempt to insure that we achieve the invigorating goal that one of our board members expressed:  We want to OWN the K-12 World Language Market.  Certainly we have worthy competitors but we know we have the best product, the best team, the best pedagogy.  We are tracking a few indicators of reach:  Brand Awareness -- particularly among key customer groups (superintendents, principals, world language teachers & specialists), Social Media activity and Press Exposure.  If you have a twitter account and you aren't yet following #MiddInteractive you should!  And if you use Facebook and you haven't 'liked' the Middlebury Interactive Languages page please do!  Lastly, some of you may be aware of the Social Media influence measurement called Klout.  Most of the senior leadership team is engaged in an intense competition to have the highest Klout score -- and our tech-savvy interns are setting the bar pretty high.  (In case you are wondering, my Klout score is 61)  Over the course of the year I hope you will be excited by the increased awareness we are driving in our core market -- please share any anecdotal information about encounters with our brand.

Student Performance is a pretty simple concept that we all understand.  But measuring it is a much more involved activity -- requiring different systems for data collection and analysis as well as dedicated focus.  With Aline's arrival on September 1st we will definitely have that focus!  And Dana Laursen has already done exciting work with our pilot schools, our independent academic evaluator Johns Hopkins University, and in insuring we continue to not only strive for, but measure and verify exemplary student learning. 

Lastly, all of this growth, acceleration and measurement/focus requires significant attention to our Operations.  Again, it is really hard to separate out operations from everything we do.  And I'd be shocked if every employee doesn't have some operational goals in their individual plan .... Those we will initially be reporting to the board on are:  Customer Satisfaction, Uptime and Technology Interruption Analysis.

I hope this helps you circle back to the broader goals of the company and to embrace the challenges and excitement of the Fiscal Year (14 -- July 2013 - June 2014) ahead of us.  We are seeing the results of our acceleration strategy on a daily basis and we need everyone's energy & commitment to their team & individual goals to exceed our lofty expectations for the year!