There is a debate raging across the Net Promoter community about whether to link Net Promoter Score (NPS) to management and front-line compensation. There are good arguments pro and con. The pro group (which includes some notable firms such as GE) argues that if customer loyalty is to be taken seriously, then the NPS metric must be measured rigorously and hardwired into bonus calculations. After all, most bonuses today are determined by short-term financial results. If these financial incentives aren't balanced by NPS, we will be forever trapped in a cycle of bad profits and declining growth. Moreover, any CEO who extols customer loyalty as a top priority, yet fails to hold employees financially accountable for earning superior loyalty, is sending a loud signal that loyalty is nice but not vital.
That's a powerful argument, but the con side's rebuttal is equally forceful. In many businesses, they say, the instant a hard link is established between NPS and bonuses, managers and employees will inevitably learn to game and manipulate the numbers, thereby corrupting the system. The reliability of the metric will decline, and so too will the lessons and insights that can be derived from the stream of NPS data. Look at what the car dealers have done to satisfaction scores. What is to stop the sales rep in any business-to-business venture from pleading for a higher Net Promoter Score from his customers, bribing them with favors, or even threatening them with retribution?
Some people in the con camp add that companies with a long history of embracing loyalty as a core value have no need to link it to compensation. They argue that many of a company's core values (being honest, supporting the team, putting customers first, and so on) aren't linked to compensation in this direct manner. Why should loyalty be any different?
Some firms would like to establish a link between NPS and compensation as soon as their processes for gathering reliable feedback have evolved to include an appropriate set of safeguards against gaming and manipulation. In the meantime, they try to derive as many benefits from NPS as they can while avoiding the hard link. Yet there remains that nagging question: Will we ever develop a robust and reliable system until we put it under the pressure of real accountability for results--complete with direct links to pay and promotion?
This is indeed a new science, and the entire community would benefit from hearing about your thinking on this topic, along with the experiments and experiences (both successes and failures) that have led you to your conclusions. I hope you will share your opinions by replying to this blog entry.
Nitesh Chetri
says:
I think it differs case by case.
When the culture needs to reflect loyalty rapidly (e.g. when your sales people are too skewed to volume), having loyalty-linked compensation will work.
But when you are dealing with many different issues (not just volume vs. loyalty), I would rather make the compensation simple and consider loyalty qualitatively.
There is no one compensation system that solves everyone's problem. That's why we need the top management with good judgment.