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The Dark Side of Using NPS as a Performance Management Tool

Blog post by on November 28, 2013 7 Comments

Let’s leave aside the theoretical aspects and arguments related to the suitability of using NPS. Instead, let’s consider the implications of using NPS as a performance management tool rather than simply as an indicator which tells us who well we are doing, as an organisation, in building meaningful relationships with customers.

Every human activity produces both things that we want – “goods” – and things we don’t want – “bads”.

- Garrett Hardin, Filters Against Folly

It occurs to me that when we use NPS as a performance management tool we act on the people in the organisation, we act on customers, we alter the balance of power between the multiple parties. And we inject high does of fear and greed into the rich tapestry of human interactions.

This is how we end up generating the “bads” – the dark side of using NPS as a performance management tool. Let’s get specify and look at the dark side. What shows up?

  1. Customer facing employees (sales, service) and their managers game the system to generate high NPS scores;
  2. Some customers are either ‘bribed’ and-or ‘pressured’ to give high scores;

  3. Some customers, especially the more powerful ones in B2B, exercise their new-found power to extract concessions – free ‘products’, more discounts, credits, special treatment – from the sales reps and account managers; and

  4. Some sales reps and account managers ‘give away’ more than they need to’ in order to play safe and assure high NPS scores. This ‘giving away’ tends to be in the region of services which do not directly impact on the revenue figures and commission cheque of the sale rep.

I leave you to decide whether the “goods” generated by using NPS as a performance management tool outweigh the “bads” that I have shared with you. I do assure you that points 3 and 4 above are not just theoretical – this behaviour is occurring.

Next time you are planning an intervention in the rich web of human relationships get together a diverse group of people, including those who are likely to be impacted, and explore this question: what is likely to happen – today and over the course of time – after we make this intervention?

Republished with author's permission from original post.

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Categories: ! BlogCustomer ExperienceEmployee EngagementPerformance MetricsVoice of Customer
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7 Responses to The Dark Side of Using NPS as a Performance Management Tool

  1. Maz Iqbal November 29, 2013 at 12:28 pm #

    Hello Michael,

    The point of my post is not on the merits of using one number or not. Rather, my intention is to draw attention to what shows up when you use NPS as performance management metric.

    In particular, my point is that the gaming happens both within the organisation. And by customers – especially B2B customers. Knowing the importance of NPS scores on the lives of the sales-account managers, some B2B customers have gotten ‘smart’ and are extracting ‘extras’ in exchange for giving high scores.

    This is probably not what the designers-implementers of NPS had in mind. The very act of using NPS as a performance management tools pollutes NPS as a accurate-reliable indicator of the state of customer relationships.

    Maz

  2. Michael Lowenstein November 29, 2013 at 1:09 pm #

    ….that the negatives of the ‘one number’ thesis and metric substantially outweigh the positives, and have serious granular actionability issues: http://www.customerthink.com/blog/emerging_chinks_and_dents_in_the_universal_application_and_institutionalization_armor_of_popula And, methods of ‘gaming the system’ is just one of the multiple challenges.

  3. Michael Lowenstein November 29, 2013 at 1:42 pm #

    ….and the fact that recommendation scores can be used to reward or punish, makes an already questionable metric even more questionable.

  4. Bob Thompson November 29, 2013 at 2:41 pm #

    I don’t think the issue of metric validity and metric gameability are related.

    Any metric used to reward (or punish) employees can and probably will be gamed. By employees or customers. Especially if the rewards and penalties are too severe.

    B2B customers have learned that the end of the quarter is a great time to negotiate price, because reps are trying to make their quota, which impacts compensation. If compensation is driven to an excessive extent by NPS or any other customer sat/loyalty metric, then as Maz notes it won’t be long before that becomes just another part of the “deal.”

    So how is a company to get unbiased feedback info, when the parties involved have a stake in the outcome?

  5. Michael Lowenstein November 29, 2013 at 7:51 pm #

    ….to help assure that any performance metric applied is as objective as possible. For example, in a B2B customer loyalty research tracking study, results obtained from just before the close of a staff sales and/or service bonus incentive compensation period – such as at the end of a quarter, or the conclusion of a calendar or fiscal year – can be isolated to see if they are different (i.e. much higher or lower), or within defined statistical boundaries, that is within a normal bell curve.

    Another example, of course, is the culture of the enterprise itself. Customer-centric companies understand that the research isn’t about punishment or reward, but about reaching and sustaining value delivery and experience excellence. If a lax organization does business in such a way that encourages, or allows, either customers or employees to abuse what should be a useful evaluative tool, all parties lose.

  6. Raymond Mommers November 30, 2013 at 9:07 am #

    I agree with Bob that any metric used can be used as tool by the business to push the supplier.

    Therefore a framework should be used in which the expectation and the experience should be measured. Especially the feedback of the end-users and not the business/account manager is important. As the customer experience is based on expectations (with different points of input) versus the service delivered (also based on different dimensions of the service) it results in customer satisfaction. And customer satisfaction results in WOM and Loyalty.

    It is therefore not just the feedback of the end-users an any metric but also how you involve your end-users in the development and during the usage.

  7. Guest November 30, 2013 at 8:14 pm #

    Well, duh, and first of all, make sure the respondents’ identities (both that of the enterprise itself and the individual respondent) remain anonymous — and that they know that!!

    And, by the way, I don’t care that it’s B2B and that it’s never been done that way. HELLO!!!! It’s time to put some old methods to the test and remember what research is for – to learn, and from that learning to think (and subsequently, to act) better, not to substitute metrics – indeed, especially not one single metric – for managerial skill, wisdom and judgment!

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