Do Your Results And Measures Need A Divorce?September 18, 2008 by Stacey Barr
One of the most common reasons people hate their measures is not that the measure is bad. It’s that the measure is the wrong one for the result they’re trying to monitor.
A performance area you see this happening a lot is customer service performance. There are a raft of customer related measures around these days, each with its own promise of driving business growth. And don’t think that the research will lay it out clearly for you. Depending on what you read, you could be a believer in the Net Promoter Score’s “power on one” image, or a trigger-happy defender of the good old customer satisfaction index.
But we forget something vitally important, as we too eagerly dive into debates about which is the best measure.
We forget to start with the result we’re trying to monitor.
Let’s use the very trendy Net Promoter Score as an example. Managers love it for its simplicty and the exciting claims that NPS is a strong predictor of business growth. But recent research – like an article in the Summer 2008 issue of MIT Sloan Management Review – is challenging the superiority of NPS over other customer measures to predict growth. How could this be, and what should we do? Should we throw it out like bath water?
The calculation of NPS comes from asking your customers the question “How likely is it that you would recommend us to a friend or colleague?” It’s simply measuring the customer’s intention to recommend. And that’s a few steps removed from the result of getting more profitable customers and more from existing customers.
But the NPS is a good predictor of whether customers will actually recommend your product or service or company to others. And this is certainly deemed one of the important behaviours that will contribute toward business growth. The problem is not with the measure, but with the result it’s married to.
Always check and revisit the result you’re wanting to monitor!
You want to make sure you don’t fall into the proxy trap too often, and use the wrong measures as evidence of important results. In the case of NPS, you should ideally be measuring NPS, plus the actual percentage of your new customers that are referred by existing customers, plus how much business growth this adds in terms of profit. Then you have a more complete story.
Whether it’s customer service performance or any other area of performance in your organisation, you can only find meaningful performance measures when you start from, and stay well aware of, the meaningful results you’re trying to measure! Always design or choose your measures through a deep understanding of your results.
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