Does incentive compensation lead to more customer-centric behaviour?

Does incentive compensation lead to more customer-centric behaviour?

Does incentive compensation lead to more customer-centric behaviour?

Markey and Reichheld, on Bain & Co.’s Insights, address the issue of companies tying in their Net Promoter Scores (NPS),  what can be defined as the customer loyalty metric,  to incentives for employees. Instead of creating the outcome they were hoping for, in terms of making the company more customer-centric and encouraging employees to deliver a better service, it often created the reverse situation. Some companies saw their employees questioning the accuracy of the score, or worse yet tampering with the results or finding shortcuts to higher the scores. The NPS thus created the wrong type of employee behaviour.  Nevertheless, the authors don’t disapprove of using scores to reward employees — they simply emphasize the need to approach it in the correct manner.

Markey and Reichheld list six recommendations to ensure that the NPS generates the positive outcome.

1) Wait until your system is stable and reliable so that metrics can be trusted
2) Show a clear link between the NPS and business performance. Does the NPS correlate to higher growth and profitability? Is it encouraging employees to carry out the right kind of discretionary efforts?
3) Do employees have the chance to understand, take action and influence root problems? If not your NPS will not make a difference if your employees cannot rectify major client issues.
4) Educate and train your employees so that they can provide a better customer service
5) Over-communicate the company’s incentive programme and reward system until every employee gets tired of hearing it – then and only then, does it mean that the message has come across.
6) Set up policy guidelines and rules that strictly forbidden gaming or tampering with the NPS

The article addresses the complexity of incentive compensation in terms of creating desirable results — making the company more customer-centric, getting better client feedback, and getting employees to be motivated enough to take action and deliver a better customer service. However, the authors summarize perfectly the approach companies should truly try to adopt, by answering the question if it’s even possible or a good idea for companies to buy their employees motivation:

“Can you buy this kind of caring with incentive compensation? You might as well try to buy friendship. Your best employees—the ones you want to keep, who create the most value and whom you most want to encourage— will put in extra discretionary effort because the system is giving them a chance to exercise their judgment, to master a task and to be part of a productive team. They are people who value the opportunity to enrich someone’s life. Their motivation is intrinsic, not extrinsic. They don’t do it for the money.”

In conclusion, it’s great to have NPS in place and it will certainly result in business growth if it’s implemented in the right way, as recommended above. Yet, the fundamental issue to address is whether or not a company is able to recruit and retain employees that get a sense of purpose and satisfaction from helping customers with a particular need or a want. Therefore, a company’s business performance is directly related to its ability to identify, attract, recruit and retain employees who feel passionate about their job, as their performance will be outstanding. Ultimately, the answer to “Do your employees love their work?” should be a resounding “Yes!”

To achieve business growth, getting the right people becomes one of the most important strategic objectives. Go beyond recruitment and focus on “employer branding”.

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Markey, Rob & Reichheld, Fred (2013). Your best employees work for love, not money. Bain & Company Insights. [Online] Available from: http://www.bain.com/publications/articles/your-best-employees-work-for-love-not-money.aspx#! [Accessed on 28 October 2013]