Here’s a riddle: If business life is so complicated, and it is, why does management pretend that measuring it is so simple? More to the point, why does management feel attracted to ludicrously simplistic performance measures that purport to be the only measure you will ever need! Even when the measures have been found badly wanting.
You know the ones I mean. Recent measures like Reicheld’s Net Promoter Score, which has been found by recent academic studies to be an inadequate indicator of business performance. Management should have been careful when Reicheld’s previous studies on the Loyalty Effect was shown by Insead Business School customer management professor Werner Reinartz not to hold water. Or other recent measures like Peppers & Rodgers Return on Customer (ROC) that London Business School marketing metrics guru Tim Ambler showed to be a mixed-up measure with serious methodological problems. Yet both of these flawed measures still find adherents amongst those that should know better.
In these increasingly complicated and complex times, there is no alternative to understanding the different levers that drive value creation and to measuring each of the key ones. That may mean using NPS or ROC, but only after understanding their limitations as measures and only as part of a balanced scorecard of measures, never, I repeat, NEVER, as the only one. That is like driving a Porsche 917 round the LeMans circuit in the middle of the night with nothing more than a compass to guide you!
What do you think? Does management only need a single measure? Or is business life a bit more complicated that that?
Post a comment and get the conversation going.
Graham Hill
Independent CRM Consultant
Interim CRM Manager
