"All the women are strong, all the men are good looking, and all the children are above average."
Garrison Keillor, Lake Wobegone Days
Most performance measure in business are relative. Market share, growth rates, earnings. We benchmark against others all the time. But with NPS, many companies don't really know where they stand, and where they stand could be the ultimate measure of performance.
Several years ago, Bain and Company did some great research to understand how profit pools got divided up by industry, and how NPS played a role in that. They found that every industry had a “bright line”, an NPS score which separated winners from the pack, and that those who entered the winners circle (so to speak) enjoyed a disproportionate share of the profits in their industry. This shouldn't surprise anyone; in most industries profits are not linearly correlated to size or even market share. It's not a fair game - it turns out it's rigged in favor of NPS leaders.
What's really interesting to me, however, was that the bright line that separated the leaders was not uniform across all industries or geographies. Rather, it varied significantly by industry. This should come as no surprise: we usually see that Business to Business NPS results are often significantly lower and less variable than Business to Consumer. We also know that customers compare and formulate perspectives based on their expectations, which can vary according to prior experience and price. We teach customers what to expect in our industry, then we give them relative pricing to help set their expectations around our role as discounters or premium players.
Companies spend precious little time thinking about issues of comparable performance, which seems odd given its importance. After all, knowing what your score is only matters if you have some sense as to what it should be. This disconnect ripples through the corporation in multiple ways. Companies without a clear sense of NPS “situational awareness” will struggle to set appropriate goals, compensation metrics or process. I'd even go as far as to say that measuring NPS without a clear sense of target is worse than not measuring at all.
Part of the problem is the challenge around getting good benchmarks. We do publish benchmark data, so for those industries we cover, you can get an accurate sense of where you should be (and an independent view of where you are trending). But that data will never be detailed enough for some, so they often find themselves doing specific benchmarking studies. Others tell me that they make a benchmark of the data that is published in the book. While I agree it's aspirational to try and reach USAA's lofty NPS goals, it's probably neither feasible nor even desirable, assuming you are not a major insurance provider. Nor is it practical to simply target the top quartile and straight line trend your own NPS towards it as a goal setting technique. You are pretty much assured of falling short initially as NPS just doesn't improve in a straight line.
If you are determined to avoid detailed target setting and outside benchmarks, there is still hope. Stack ranked employee, or region or segment performance provides you with the opportunity to challenge the lower performing segments to raise their game to the average. That alone improves your score and starts moving you in the right direction; although it doesn't help you understand if your entire organization is on track for financial success.
One other thought. Absolute NPS does matter in one important way. Industries with low "threshold NPS" - a low target that gets you in the winner's circle - have fewer absolute promoters than those where only a high score wins. The absolute number of promoters can be thought of as word of mouth capacity, so their absence reduces the overall positive effect for industry participants and the industry in general. By all means, out-run the other guy for success, but to get real organic growth you still need an army of promoters.
