Put Your Money Where Your CUSTOMER’S Mouth Is: Linking Executive Comp to VOC Metrics


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IF you accept the following premises

  • incentives motivate behavior
  • customer loyalty or delight with their recent experience is good for business

THEN the conclusion is inescapable that a company’s leadership should have incentives tied to strengthening the customer relationship/experience (QED or quod erat demonstrandum in geometry-speak).

There are those who will say that incentives do not need to be financial. While this technically is correct, let’s get real: “atta boys/girls”, an extra day off, a reserved parking spot or group hug isn’t going to cut it with executives in corporate America. Sorry, but you are not going to satisfy the appetite of carnivores by throwing them tofu and happy faces.

Now come the real objections: it is too difficult, costly and complex to design, implement and manage such a program. This reminds me of listening to Bush The Jr. telling the country “it’s hard work” being president. Point taken. But the fact that doing something isn’t easy is not an excuse for ducking the challenge. In fact, “hard work” would seem to be inherent in the nature of something considered a challenge, such as being president or delighting customers.

Designing, implementing and managing a best-practices Voice of the Customer (VOC) program to capture and evaluate customer perceptions and experiences is “hard work.” Linking VOC to executive comp is even more difficult, while driving such a variable compensation regime throughout the larger organization presents even bigger hurdles. Linking any performance metrics to variable comp creates a minefield of issues: What are the measurements? Are they accurate? How do the goals get set? Are there sufficient resources for improvement? Do people feel empowered?

The issues multiply dramatically, moreover, once you move from seemingly “objective” measures – such as sales and profits or the time and headcount required to complete some process – to “subjective” customer perceptions –such as measures of loyalty, evaluations of a recent experience or performance ratings. Plans using survey-based measures need to recognize issues regarding the nature of the customer population and the representativeness of the sample, sampling error and confidence level (not to mention other types of error), mode of data collection (and possible mode effects), weighting and a host of concerns that are inherent in survey research. Reliance on social media, comment cards or other unstructured forms of customer feedback in comp programs raises even more alarms.
These caveats notwithstanding, we come full circle to the original theorem: IF you think incentives drive behavior and you want loyal, delighted customers, THEN VOC metrics should be part of the leadership’s variable comp plan. (I’ve limited my comments to senior management only because the challenges grow exponentially when considering all employees, but the logic of the same IF/THEN theorem applies.)

While the complexity of the challenges can’t possibly be addressed in a blog, here are a few overarching issues when considering a variable comp program linked to VOC metrics for executives.
• Business objectives are paramount: the metrics and goals must be inherently connected to business objectives, and the metrics need to be validated as driving the desired objectives.
• Be wary of unintended consequences: unintended consequences are a natural corollary of any incentive plan, so be watchful. Two primary pitfalls: poorly developed metrics or misaligned performance goals motivating management to do things that are not in the interest of the business or pit managers in conflict and, alas, gaming the system (AKA, cheating). Since “Anything worth having is worth cheating for” (W.C. Fields), the measurement program needs to minimize the risk of manipulating the numbers for personal gain.
• Don’t breed risk aversion or deter innovation: be careful of the possible need for “carve outs” or other ways of avoiding incentives that quash new ideas and risk taking.
• Communications is essential: while seemingly trite, over-index on frequent, open, honest communications and complete transparency – especially with regards to how the VOC metrics are collected and calculated.
• Common corporate goals: even senior managers might gripe about their lack of authority or span of influence to affect change. The program needs to drive corporate objectives and foster a culture of shared success; so even if you elect to use some individualized VOC metrics, be sure also to have common metrics for everyone.
• Take action and model behavior: measurement doesn’t improve performance without action, so be prepared to invest in supporting efforts to improve – after all, the second statement in the original theorem asserts that improvement in VOC scores are good for the business, so these are sound investments.
• And go slow: compensation is not an arena for a “ready, fire, aim” approach – test your metrics, establish a baseline, set and track against “soft” goals before linking to actual compensation.

Yes, it is easier not to do any of this. But if you accept the premises, it’s hard to avoid the conclusion. Of course, you can try giving out gold stars and candy.

Republished with author's permission from original post.

Howard Lax, Ph.D.

Supporting better informed decision making with technology, research and strategy. With a focus on CX/VoC/NPS, Employee Engagement and emotion analytics, Howard's domain is the application of marketing information and SaaS platforms to solve business problems and activating CX programs to drive business objectives.


  1. I think it speaks volumes as to the leadership in our country that if we want executives to do what is best for the organization that so richly rewards them just for being there, that we have to put a comp on the obvious. In other words, they won’t care about VOC unless with a) make them or b) comp them.

    That is a sad state of affairs, but consistent with what I have seen over the years. I understand the concepts, I just think the soul of this article mirrors what I have seen. That being, the majority of our senior leaders in large organizations have a one muskateer aura to them…that would be “all for me and me for me…”. Amen.

  2. Perhaps it is a sad commentary on all of us that we respond to incentives. While I hear you loud and clear, is this really any different than any other form of incentive compensation? The issue is far more poignant for execs, in that they are paid far better than the rank-and-file to begin with – but isn't incentive comp, by definition, designed to "incent” people to accomplish certain goals? And isn't it almost always the case that those goals are part of the job description, whether it is for the field technician, store clerk, call center manager or CEO?

    I think it is important to separate out the magnitude of exec compensation – both base and variable – from the underlying issue: incenting executives to achieve specified goals. I suspect that if exec pay was far more modest to begin with, you – and many other people – might take less exception with the idea of variable comp based on performance. But I think it is important to recognize that the amount of compensation really is a different issue than the structure of the comp plan.

  3. Valid points and I agree. Here’s where I probably did not clarify well. I’ve been in the corporate world, or on the fringe, for about twenty years. I am not an idealist kid coming out school with absolute moral values that I try to inject into the world around me. I network at the VP and Director levels with major internal stakeholders.

    The foundation for my sentiments is not the money. Let be more clear. We worked in a very complex matrix environment that drove our customers away from us because of the complexity of doing business with us (that is outside the 2006 – 2009 economic matter). We employed the 5 why technique to get to root cause of what drives unnecessary customer interactions and barrels of non value added activity.

    As I went through this with my managers, we would get to the last why, that would be…oh let’s say,..lack of controls at a key process point that resulted in erroneous billings. That would seem to be the root, but is wasn’t. The root really was, and I felt I could not vocalize this to the team, that at the executive level no one had enforced the need to employ systems thinking…connecting all of the dots, like dominos, within an organization. What drives the one muskateer view is that as I engaged at the higher levels it became clear that it was every divisional exec for himself.

    All too frequently I would watch one of these execs, many times, trim costs in their area by dumping some work, unnanounced in another. Moreover, these things would increase the degree of frustration for the customer and lower satisfacton scores with verbatims that led us directly to the root. Even in the face of the, these execs would move on. It was someone else’s problem. .But that may be to your point to. Comp them so they will care. But that to me is like paying someone not to abuse their family pet.

    So, what I think I am really saying is that the C-Level leaders of large organizations need to drive the importance of incorporating the impact on the customer experience without incenting people to do it. It needs to be deeply entrenched in the culture. An automatic if you will. When we base everything on how we are rewarded and not on doing the right thing, I believe human nature takes over and people turn in to one muskateers. It’s more about being aware of how all the parts interact and ultimately impact the customer that is the focus of my comment and I don’t think we need to be providing comps to execs for doing what is best for the organization. It is NOT about the money. It’s really about leaders vs managers.

    But that is a long and complex topic. Thanks for the response.

  4. I 100% agree with you that "it needs to be deeply entrenched in the culture.” The question is how best to weave the focus on the customer into the fabric of the corporation, to make VOC part of the firm's DNA? How do we make it, as you put it, "an automatic?”

    There certainly seem to be legendary examples of companies where this is the case. What I hear about Zappos and Nordstrom's suggests they are good examples. But I don't know enough about these firms to say if they just have a corporate Zen or if they also have an executive (and general) comp plan that incents/encourages/rewards/recognizes such a focus on the customer.

    Perhaps I have become too cynical about human nature. In my heart, I still believe that "from each according to their ability, to each according to their needs” sounds like a great way to organize society. The problem, of course, is that this makes great philosophy, but lousy economics. People – including, perhaps especially, those who already are the most highly rewarded for their work – are highly motivated by self-interest. While perhaps not a glowing endorsement of human behavior, the profit-motive, in general, trumps the social, egalitarian-motive.

    I must admit that you have exposed a mixed sentiment, perhaps a weakness of certainty in me. I still believe that people should do the "right” thing simply because it is right and is a reward in itself. But I know that this works only insofar as someone recognizes this "reward” as sufficient motivation. Perhaps the variable comp incentive is "additional” motivation just in case.


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