My NetPromoter Problem
I'm going to do something somewhat sacriligeous. I'm going to take issue with part of the NetPromoter concept, which is the subject of this week's Inside 1to1 story. Yes, I think the concept is full of simple brilliance. And as I write this I'm wearing my Fred Reichheld Fan Club t-shirt. But here's my problem. Reichheld, as well as the folks at Satmetrix who have cornered the consulting market on NPS, are touting the index as part of the way marketing managers and executives should be compensated.
For example, if my NPS is 6.5 on Jan. 1, 2006, my bonus could be based on how far that index moves north when it comes time to tally up all the revenue and other performance indicators on Dec. 31, 2006. Looks good on paper. But customer-based satisfaction scores and loyalty performance indicators have too many drivers and too many variables to be an effective employee reward system. For example, I don't think the marketing executives at Dell should take a hit for the accounting problems that have caused bad publicity and therefore could negatively impact NPS. Team responsibility for the willingness to recommend a company's products is an innovative concept. It certainly has sparked a lot of debate. But if it was my bonus check, I'm not sure I'd like it.
As the executive in charge of our marketing, my bonus structure is dependent upon our Net Promoter scores, so I heartily agree that whenever you tie employee compensation to any metric it had better be thoughtfully and carefully considered. The right Net Promoter measurement will vary from company to company. Additionally, many companies' bonuses contain a mix of other operational and financial metrics as well as Net Promoter.
The reason that Net Promoter has taken off is that it is easy to understand and meaningful from top to bottom at companies. It is as a great rallying cry for organizations who desire to become more customer-focused. Customer loyalty is built upon every interaction that a customer has with your company, from marketing to accounting to sales and onward and I believe that every employee has to understand that what they do can positively or negatively impact the customer experience whether or not it falls within their specific functional silo. Loyalty leaders, and Net Promoter leaders like GE, understand customer experience happens everywhere and encourage customer focus amongst their teams. They also believe in providing continuous customer feedback to everyone with an ongoing loyalty program that improves NPS. With this program in place, compensation should be tied to customer feedback across an ENTIRE organization – not just in marketing and at the executive level. Every individual and department within a company can influence Net Promoter scores from finance to customer service. The worst thing that could happen to dampen enthusiasm for delivering excellence to the customer would be for employees to get discouraged when doing their individual best to impact Net Promoter scores yet have virtually no control over them. It is important that if compensation is going to be tied to Net Promoter that there be a program in place to define what employees can do to positively impact Net Promoter Scores.
My view is that if a company adopts the NP score it has got to be stubborn about having it apply, in one way or another, to everyone throughout the org. and not to give up when efforts arent closely followed by results. In my opinion, if near term results are the expectation, NP isnt the right measurement.
The score speaks loudest, I find, to people nearest to the front-lines. People understand what it means to promote something to people they care about. And I think thats the key. How many years did we try to get people to commit themselves to quality with marginal results? Quality as a motivator hasn't done the trick. At least not in the insurance arena - which is were I work.
Higher up the org ladder, supporting NP measurements such as employee NP, or Active Commitment Surveys performed interdepartmentally tell shareholders more about how how higher level managers and executives are supporting customer experience intitiatives. Maybe that's where he annual bonus should draw results from.
I'm accountable for our NPS just as other Sr. Execs at my co. and I too understand that things set in motion today wont pay dividends by year-end and so my annual bonus might not be all that it could be if I were, instead focused on generating other returns that will stand out in the short term. But maybe the annual bonus puts us in a spot where we dont actually do whats best for the customers. Maybe thats another lesson learned by using NPS.
So, I AM a fan of the NPS score as long as the company doesnt take it lightly and truly has a vision of longer-term success. To each her own I say and let the best vision, leadership, and measures win.
Recently, I attended a measurement conference in the Midwest where the presenter challenged the notion that Net Promoter is not the “ultimate metric” to measure financial growth and customer loyalty. The presenter shared that too many companies are encumbered on the process of measuring NPS instead of understanding the application of NPS within the context of their organization. In fact, the presenter shared that there are three “net effects” on a company’s financial performance: net promoter, net delighted and net committed.
Regardless if there are three or one “net effects” clearly, understanding the power that consumers have in today’s competitive landscape should drive more companies to measure the “net effect” and take action to improve service delivery for customers if the results are not in the customer’s favor.
I think you hit the NPS nail on the head, John. The reason that we would all have an issue with NPS being part of our bonus structure is that no single person or team has control over the entire customer experience and relationship. In fact, I would argue that what we should be incentivized on would be the things that result in the high net promoter score in the first place -- those are things that build stronger relationships with customers and result in a high net promoter score (as well as high top/bottom line revenue, greater share of customer, access to strategic data, etc.).