Net Promoter Score: Should staff bonuses be tied to NPS?by
There are reasons for and against linking NPS to employee compensation. So what are the pros and cons?
Measuring customer satisfaction and identifying “pain points” for improvement is common practice at nearly all best-in-class companies. While there’s no question about the importance of customer experience (CX) and employee (EX) too, there is a debate about WHICH metric is best and HOW to apply it within organisations.
The Wallstreet Journal recently published an interesting article about Net Promoter Score and whether or not it is misleading. I really like the topic and so, I wrote about my own views after reading it.
To summarise: I believe that Net Promoter Score is a valuable leading indicator of customer loyalty. I also believe that drivers of NPS are important to measure too, such as Level of Effort, Customer Satisfaction (C-Sat), Customer Sentiments and more. These key performance indicators (KPIs) coupled with NPS (“how likely customers are willing to recommend a company’s product and services”) allow managers to make the most informed business decisions on a strategic and tactical level.
The Wall Street Journal article shares different opinions about NPS and financial correlations. Despite the debate, it is interesting to see the upward trend of how many companies are referencing NPS at investor meetings.
While no one has 100% proven that NPS is a driver of revenue, I believe that measuring customer satisfaction is a useful indicator of risk and future behaviours, whether it be cancellations, bad press on social media and review sites, etc. Thus, it is critical that every company, no matter what size or industry, focuses on customer experience metrics. I encourage all brands to use Voice of Customer (VOC) insights as it really helps to minimise loss of business, loss of customer trust, etc.
So, given all this, should NPS scores therefore be tied to employee bonuses?
The topic is controversial, as there are valid reasons for and against it. I’ve summarised feedback from my blog readers so you can form your own opinion. There’s no one right or wrong answer.
Six advantages of linking NPS to employee compensation:
- Drives employee accountability to deliver customer excellence. Employees at all levels take customer satisfaction more seriously when they have “skin in the game.”
- Creates a customer-obsessed culture. It’s a proven tactic.
- Sends a message to employees that customer loyalty matters. It demonstrates that the company is “walking the CX talk” and not just saying the words in a mission statement.
- Measures customer perceptions in a meaningful way and everyone contributes to it, more than traditional methods like “share of eyeball.” NPS is good for benchmarking purposes too.
- Serves as an employee motivator. Incentives drive behavior.
- Leads to faster employee follow up with customers. Helps drive “closed loop” compliance.
Six reasons against it - the flip side:
- Data can be unreliable. People inevitably learn to influence the numbers and beg for high scores, thereby corrupting the system. It defeats the purpose when employees bribe customers for a high satisfaction rating.
- Employee Satisfaction Matters More. If employees are happy and loyal, then customer satisfaction will inevitably happen.
- Net Promoter Score is too limiting. NPS does not include key drivers of WHY customers will or will not recommend a company.
- Surveys aren’t always administrated fairly. Bias is a concern. There’re companies that don’t police the data or have an impartial client advocate leading the survey process.
- Incentivizing leads employees becoming too concerned with the score. It creates an environment where they focus on the numbers instead of delighting customers.
- Creates an unfriendly work environment when it’s unclear WHO’S responsible for a detractor (and promoter) score. The value of a score and customer comments gets lost in “blame” and “glory” games.
I have worked in organisations where NPS scores were tied to executives and my CX teams’ objectives and paychecks. I’ve also been at companies where ALL employees were held accountable for CX metrics.
While I understand both sides of the debate, my opinion is that the pros of linking NPS to EVERYONE’S compensation outweigh the cons, with a few considerations.
Key factors for NPS and employee success
- Company leaders must communicate and educate employees about why and how the NPS score is calculated, so they understand it is a credible metric and trust the process. Employee buy-in goes a long way.
- Reinforce that everyone owns the customer experience (CX) just like other financial results. Keep the drumbeat going so employees put customers first, even when their boss isn’t looking. I recommend including CX topics on every meeting agenda. Celebrate the good scores (promoters) and problem solve (detractors) to reduce churn, as I discuss in my other article: building a customer-centric culture.
- Use a third party or unbiased internal team to conduct surveys across the customer journey to eliminate questions about validity and unfairness.
Ultimately, my opinion is yes, NPS scores should be tied to employee bonuses. It is the only way to make everyone in the company care about customer excellence and OWN it, not just say it. I have worked in organisations where CX metrics were tied to leadership objectives and not frontline teams. That approach did not drive a customer-centric culture or employee accountability. Detractor scores declined when customer satisfaction goals became a shared objective across EVERY department. I have a lot of stories to share about this topic.
Contact me if you want more information and mentorship.
Stacy is known for expertise in designing & implementing successful Customer-Centric programs that differentiate Business (B2B) and Consumer (B2C) brands beyond price. Over the years, she’s been coaching individuals and leading teams to deploy best in class methodologies & closed-loop processes. She’s currently Head of Customer...