Five conditions to meet before tying incentives to customer feedback

In 2006, GE began building incentives around improved Net Promoter Scores in its businesses. Many other companies followed suit. Yet, few have gotten it right. In fact, we have heard many reports of gaming, exclusive focus on the scores and other problems. Several months ago, in my previous post on this topic, I described the challenges companies face when they tie incentives to customer feedback. This post will tackle "pre-conditions" to meet before you move forward. A future post will address some other best practices.

TIAA-CREF includes NPS in executive compensationInterest in tying incentives to NPS and other customer metrics continues. Since at least 2008, TIAA, the big insurance company, has included NPS improvement goals in senior executive compensation. In May 2010 Phones4U, a UK mobile phone retailer, announced a big increase in the weight of NPS in its frontline compensation (news article). The move received mixed reviews from sales staff.  Pep Boys, a US auto parts store chain, reports that NPS is an important part of their executive compensation system, and describes it in their proxy statement.

The obvious question:  How do you avoid the most serious pitfalls and risks?

Based on our experience, we believe five conditions need to be met before you link incentives to customer feedback:

1. Reliable metrics
2. Link to financial and strategic outcomes
3. Processes and tools for understanding root causes

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How and why the Net Promoter approach motivates front line employees

Most executives who hear about the Net Promoter system conclude that the reason it works is because it creates a clear outcome metric to which we can hold front line employees, supervisors, managers and executives accountable.  In fact, some of the NPS early adopters, most notably GE, focused most of their early efforts on creating a score, setting goals, and linking compensation and incentives to achieving goals for improving that score.

Daniel Pink, the author of Drive: The Surprising Truth About What Motivates Us (Amazon listing), references academic research that calls into question the model of behavior at work that relies on a simple "carrot and stick" approach to motivation. First, he shows that the typical reward-and-punish approach often fails to produce the required results, and often produces lower levels of achievement than no incentives at all.  Then he shows that a very different approach works much better.  This approach is highly consistent with the fundamental principles of the Net Promoter system, and may explain some of why it works so well in so many companies.

Pink reports on a simple and compelling model for motivating achievement in complex tasks (such as, say, figuring out how to really wow a customer in a service interaction).  It is built on three elements:

• Autonomy: People want to have control over their work.

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Hilton is still begging for scores!

Email begging for a 10 on Hilton's feedback surveyI swear that I truly don't have anything against Hilton as a company. Truly, I stay in many Hilton properties and I am deeply invested in their rewards program.

But Hilton continues to provide an ongoing stream of worst practice examples regarding customer feedback. I can't think of any company outside of automobile sales and service where I have run across more examples of bold, unabashed begging for scores.

Here's the latest, an email sent to a friend of the NPS Loyalty Forum who had stayed at a Hilton Garden Inn.

In case you missed some of the previous examples I had collected from various Hilton properties, here's a quick access list: 

• Begging for Scores at Hilton
• Follow-up survey invitation
• The dangers of tying compensation to customer feedback

Simple NPS visualization tool creates a wall of emoticons

Adam Dorrell is quite creative. He took the emoticons we developed at Bain for our clients and members of the NPS Loyalty Forum, and created a very simple web-based tool for generating simple JPG files for use in presentations.

NPS emoticon tool at Recommendi.comTo create a custom graphical representation of the "wall of faces" using our emoticons, all you need to do is enter your raw data (number of Promoters, Passives and Detractors). The tool generates a picture that you can save to your desktop or copy and paste right into your presentation. We ask only that you respect our trademarks and service marks for NPS, Net Promoter, Net Promoter Score, and the emoticons.

You can find the Recommendi emoticon tool here: NPS emoticon tool.

If you would like to download images of the Bain NPS emoticons, create an account here, log in, and go to the Member-only Downloads page.

Bain is also developing a simple PowerPoint add-in that will create native PowerPoint graphics using the emoticons. It should be available in a few weeks for registered site visitors.

FYI, Adam also offers a freemium-model-based NPS support system called Recommendi. I have no direct experience with it, but it looks interesting, especially for smaller companies.

Want loyalty leading behavior from your team? Show it

Every member of The Vanguard Group's management team must man the telephones. That's right, every executive in the company is licensed and trained so they can provide overflow capacity during periods of peak call volumes. While it's not an everyday occurrence, they call everyone to the phones pretty regularly during tax season or around market disruptions.

I don't know about you, but I'm pretty sure I would be "slightly" less capable than a seasoned rep at executing trades, setting up accounts, creating transfer orders and so on. So, without intending to demonstrate any lack of respect for the leaders at Vanguard, I guess I'd prefer a regular rep. Nevertheless, their approach, which they call "Swiss Army" (because, like in Switzerland, everyone must serve when called) is brilliant. Vanguard, which has grown to become the largest fund company, is a true loyalty leader, consistently earning higher NPS than their direct competitors and showing the profitable share gain that goes with NPS leadership.

Why is Swiss Army so cool?

• Adds capacity at the peak, reducing call wait times and improving responsiveness to customers

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