The absence of leadership buy-in is a major hurdle to the success of experience management teams. In a small poll last week, more than half of the respondents said the absence of leadership buy-in is the greatest cause of failed customer experience (CX) programs.
I believe employee experience (EX) and partner experience (PX) have the same hurdles as expressed in these comments from the poll:
- “Everything rises and falls with leadership.”
- “They all talk about the need, but the problem is commitment to mindset changes so that business is done in a different way.”
- “When the leadership is not onboard, none of the other components will come together.”
- “Different leaders buy-in with different definitions of exceptional experience strategies, priorities and alignment with operations.”
- “Companies work on things they assume are important to customers, but aren’t.”
- “Buy-in fails because they don’t actually listen to actual voice of customer.”
- “To be fair to executives, there are two extremes to CX proposals: unrealistic projections or ‘ROI doesn’t matter because it’s CX’.”
- One CEO commented: “Aligned incentives are equally important to leadership buy-in“. I agree!
Your executive team needs to see their own business incentives of CX, EX and PX. Consequently, you need to speak executives’ language of business incentives in ways that are personal to them.
This is a prerequisite to full leadership buy-in.
How to Motivate Executive Buy-In
Keep in mind that executives’ language is the criteria they’re evaluated by in the media and with investors. These evaluations emphasize financial ratios such as EPS, ROA, ARR, sales velocity, CAGR, and so on. (i.e. earnings per share, return on assets, annual recurring revenue, time from sales lead to cash received, cumulative average growth rate)
More immediately, executives are impassioned by what they can control directly: how finite precious resources are deployed to reduce risk and generate growth. Financial ratios are the result of executives’ decisions for these precious resources.
- Show them how much revenue is at-risk.
- Illustrate how much budget is being squandered.
You can do this quickly by asking what issue is at the top of customer service dispositioning reports, customer escalations, returned materials reports, churn reports, lost sales reports, negative word of mouth from social media monitoring, etc. Then estimate how much money was spent or squandered by this issue. Point out that this figure is just a glimpse at how much money could be put to better use for growth.
Why is this so effective to motivate executive buy-in? You’re personalizing the business case for CX, EX, and PX in terms of “executives’ money”. These figures are their budgets, bonuses, and enthusiasm from the media and investment community.
How to Maintain Executives’ Passion
Link CX+EX+PX management to financial ratios. Make sure your experience management efforts are aimed at these goals:
- Saving time or resources for customers and partners.
- Increasing share of wallet or speed of purchase or retention.
- Saving employees’ time or your company’s resources.
- Redeploying resources to higher productivity or higher value creation.
Your achievements in these areas affect financial ratios. Get help from someone in Finance in mapping your experience management achievements to EPS, ROA, ARR, sales velocity, CAGR, and more. When you report your plans and progress, always point out how your experience management strategy affects specific financial ratios.
Why is this so effective to maintain executives’ passion? You’re speaking executives’ language. Talk about financial ratios and operational efficiency much more than you talk about customer/employee/partner experience scores, indexes, and engagement metrics. This works best because:
- Financial ratios are the prize, whereas traditional CX, EX and PX metrics are your job-specific path to the prize.
- Executives care more about operational efficiency because it indicates:
- Wiser use of finite resources.
- Promise of greater growth potential.
- Enduring profitability.
- The root cause of the financial ratios, including revenue growth.
Establish urgency. The clearest way to illustrate urgency and gains is to focus first on your high-potential employees, partners, and customers. Who are you relying on most for growth this year and next year? What is the intended outcome they’re pursuing through their relationship with your brand?
Why is this so effective? Due to this reliance, you need to “hit the nail on the head” in meeting or exceeding the expectations of these high-potential groups. You want to be their undisputed first choice. If you prematurely try to be wonderful for every group, you’ll dilute the effect on CX, EX, and PX for your high-potential group. Excel with them first, and then apply your new habits to the other groups as your bandwidth allows.
For employee experience, find out what your high potential employees expect from the company. Why did these employees join your firm? What is their intended outcome from their relationship with your company? Discover their ultimate reason beyond money: a sense of fulfillment, career ladder, serving a cause, personal growth, or similar reasons. Discover two or three overall patterns in their answers. These overall patterns are called “intentional experience“.
As recommended above, you can track things you’re doing to save employees’ time, energy, and stress. Please note: these savings count most when they minimize gaps between employees’ realities versus their intentional experience. As shown in the RONA diagram, these savings can be traced to employee productivity and retention (lifetime value), which can be traced to various financial ratios.
For partner experience, follow this same pattern. Discover the ultimate outcomes that partners are pursuing through their relationship with your brand. Then, use that to define intentional partner experience. Initially, focus on excelling with your core-growth partners. Once you have established processes and habits for their needs, then expand your efforts to excel with other partners.
With intentional experience as your mutual pursuit, track what you’re doing that saves partners’ time and resources, along with what increases partners’ trust, retention, and what strategic use of their resources. Add to this your internal efficiencies in time and resources to serve partners. When you speak with executives, emphasize how these productivity and lifetime value gains relate to numerous financial ratios.
How to Align Incentives with Executive Buy-In
Align incentives for executives and teams alike by focusing on CX+EX+PX annuities, rewarding CX+EX+PX issue prevention, and emphasizing lifetime value. These are prerequisites to capturing at-risk revenue and squandered budget in ways that drive the highest performance in financial ratios.
1) Focus on CX+EX+PX annuities
“Customer experience annuities” is a phrase that I coined. It’s the ongoing gains from reallocating previously sunk costs to higher value opportunities.
- Sunk costs are that portion of budget that’s perpetually dedicated to remedying hassles experienced by customers, employees, and partners.
- When you resolve the root cause of their hassles, those issues will occur only randomly in the future.
- Therefore, you’re freeing-up previously sunk costs.
- Those freed-up resources can be shifted from value-rescuing to value-creating opportunities.
Why is this so effective? Nobody wants hassles. They drag down morale, reputation, time, profit, and opportunities. As you add more customers, employees, and partners quarterly and yearly, sunk costs for remedies multiply accordingly. Conversely, when you stem the tide of sunk costs, your gains are multiplied. Not only do you free-up budget, but those resources can now generate new value. This is much more sensible and appealing than trying to shift remedy centers into revenue centers.
How we did this: Each business unit and support function at Applied Materials (semiconductor equipment manufacturer, where I led customer experience transformation for many years) created their own CX annuities action plan. This started as a one-day workshop for each of 50+ groups worldwide. Cross-functional participants created plans for two key drivers of loyalty identified for their cut of our relationship survey data. Their action plans were based on root cause analysis (5 why’s technique) of each key driver.
Then they identified an internal metric to track the progress of their action plan. We called these internal metrics “Customer Focus Metrics”. They were true leading indicators of what customers would soon experience, and hence, how customers would soon rate us, recommend us, and buy from us. My team collected these action plans quarterly to publish a “green book” which the C-suite reviewed side-by-side with the financial black book and operational blue book in preparation for stock market analyst calls. Bonuses of directors-and-above, with a multiplier of 0.5 to 1.5, were based on their Customer Focus Metrics progress. This approach can be applied to employee experience and partner experience.
2) Reward CX+EX+PX issue prevention
“Right the first time” is embraced in customer service as FCR (first contact resolution). However, that’s usually after something has gone wrong! Right the first time (RFT) should be embraced both by non-customer-facing groups and by customer-facing groups. How should you define RFT? Get crystal-clear about customers’ intended outcomes. Then, revise groups’ charters, job descriptions, and performance standards correspondingly. Most importantly, revise recognition criteria to highlight the prevention of CX, EX, and PX issues. In addition, guide each group in your ecosystem to manage internal customer satisfaction within the context of external customers’ intended outcomes.
Why is this so effective? A prevention mindset elevates performance, embraces emerging opportunities freely, and improves morale, productivity, and retention. Anticipating what’s needed leads to innovations in solutions, processes, policies, and business models. You’re likely to avoid unnecessary costs when you imagine how customers (external and internal), employees, and partners will likely react to your decisions.
How we did this: We published criteria for team recognition categories for each new fiscal year. Teams of all kinds could submit their achievements in an online portal. Quarterly, a group of executives scored and provided constructive feedback on the submittals. Any number of teams who exceeded the threshold score received widespread recognition. By sharing these achievements and lessons learned in every possible employee communication channel, our whole company was influenced to adopt these lessons and a customer-centered prevention mindset. This is an approach with universal application to customer, partner, and employee experience.
3) Emphasize lifetime value
“Trustable leaders view each customer [and employee, and partner] like a tiny bundle of future cash flow with a memory,” as pointed out by Don Peppers and Martha Rogers and my last article: How Trust is the Basis for Value from Customer and Employee Experience. Lifetime value is your cumulative gains from customers, employees, and partners across the duration of your relationship with them.
Why is this so effective? Without a lifetime value mindset, you are likely to spend more to remedy issues and incent behaviors. Managers are likely to cut corners, thus placing a higher burden on customer touchpoints, retention, and acquisition. You can’t afford high turnover among customers, partners, or employees. Every constructive effort you’re investing in will yield much higher gains through a lifetime value mindset.
How you can do this: For customers (internal and external), partners, and employees, each group in your company can tally the occurrence of mis-steps as the denominator of their “Value Quotient“. In the numerator, tally each of your handoffs that occur without mis-steps. The Value Quotient rewards prevention of issues. It illustrates a realistic view of damage from shortcuts and mis-steps. It encourages CX annuities and lifetime value mindset.
How to Focus on Highest ROI
- Conduct key driver analysis (i.e. statistical correlation) to discover which issues have the strongest ties to loyalty.
- For actionability, conduct a Pareto analysis of the key driver’s sub-themes. This reveals the “Vital Few” actionable issues. Note that the “Useful Many” sub-themes are often referred to as “quick wins”. By definition, Useful Many quick wins fail to meaningfully “move the needle” in the key driver’s performance.
- To prevent the recurrence of the Vital Few issues, you’ll need cross-organizational collaboration. Accordingly, you’ll get things rolling by showing managers how much money (revenue or costs) is represented by those issues.
What if you don’t have all the money data? Use whatever you can access. Let your audience know your data’s parameters, and explain that this is the “tip of the iceberg”. The figures you have on hand for a Vital Few issue will likely be alarming. Your goal is to stimulate managers’ reactions such as “That can’t stand! We have to do something about this!”.
- Focus managers’ attention on the root causes of the Vital Few issues. Engage a cross-functional group in a 5 why’s analysis to rapidly identify the true root causes. Guide them in creating an action plan (i.e. single-page strategy) that addresses each root cause. Ask them to identify an internal metric that tracks their action plan progress.
Then find ways to give high visibility to these Customer Focus Metrics (or Employee Focus Metrics or Partner Focus Metrics, as defined above). For example, make these single-page strategies a standard agenda item in staff meetings and ops/business reviews. This visibility allows executives to be executive sponsors: removing roadblocks and giving accolades to speed progress. Monitor, recognize, and reward experience annuities, prevention of CX+EX+PX issues, and lifetime value growth.
Leadership Buy-in Follows the Money
Aligned incentives are equally important to leadership buy-in for the success of experience management. The most influential way to motivate executive buy-in for experience management is to show them how much of their money is at risk. Their attention is reinforced by expressing experience management gains as impressive contributions to financial ratios.
To sustain executives’ enthusiasm for CX+EX+PX, it’s essential to align incentives for your whole company, focus your experience management strategy on motivating managers company-wide to create CX annuities, prevent issues, and grow lifetime value.
This company-wide movement is necessary to achieve the vision you’ve established for capturing precious money that is at risk. It’s what’s needed to demonstrate CX+EX+PX’s impact on operational efficiency and financial ratios.
Following the money is the pivotal key to motivate executive buy-in to whole-hearted pursuit of customer, employee, and partner experience excellence.