Research has demonstrated that some of today's most common metrics have significant weaknesses in terms of their usefulness as an indicator of what was previously thought to be obvious. Quite simply, we have made incorrect assumptions about what metrics were capable of telling us for decades. While this may be surprising, most of us learned to use these measures as we came up in our careers, and chances are you've never seen research or correlation analysis that substantiates them. In this post, I'll cover a few popular measures and re-frame them within a more realistic view of what they're useful for - and note where incorrect assumptions have been pervasively made about them in the past.
Assumption: A client that is “satisfied” is a loyal client, and this is a primary driver for future purchase intent.
The emergence of net promoter score (NPS) is based on some profound research (Satmetrix and Bain and Co.) that challenged the correlation between customer measures and actual customer behaviour. If our traditional beliefs about customer satisfaction were true, one would expect to see satisfaction ratings correlating similarly with NPS results. In fact, the correlation between satisfaction and behaviour is practically non-existent, at roughly 1/10th of NPS. Correlation between customer behaviour and "likelihood to recommend" (NPS) is 80% while correlation to "overall satisfaction" was closer to 8%.
Be aware that resistance against learning new measures like NPS tends to be high in organizations that don't understand it for several reasons: the limitations of the satisfaction measure are not well understood, leaders are uncomfortable with the new scale of results (-100 to +100), and there can be increased volatility of results. What's more important than stable results are accurate ones. Look to industry benchmarks to alleviate management resistance about what results to expect.
Takeaway: Satisfaction is to some extent relevant, but it's a passive measure that speaks neither to loyalty nor future purchase intent on the part of the customer. Maintaining a safe measure that does not fully mirror reality paves the way for gaps between real-life customer sentiment and management's understanding of it.
Assumption: We already know what clients think is important
Too many client surveys are rigid, irrelevant dinosaurs. We love trends, so we fight to maintain consistent measurement criteria; to be fair, this is often for good reason. We love predictability so we control what gets measured within it (so we can hit our targets) and we think that we understand exactly what should be measured. What often happens is that customer measurement criteria are internally driven using no deep-dive qualitative analysis (to increase your understanding of what the client actually values). What we end up with is something management can control, but leaves a significant risk that there's a gap between what customers actually value, and our understanding of it. This creates blind spots for management.
The best client surveys allow flexibility for clients to (either choosing only top issues to rate within a larger set, or completing qualitative research first and using their feedback to build the categories. Better, both.) heavily influence measurement criteria and when it is allowed to change over time based on what they think is important. What is more important than predictability is receiving information that is meaningful. Prepare for clients to express dis-satisfaction in different areas over time as you are able to resolve the issues that are most top of mind.
Takeaway: Strong performance in areas the customer doesn't care about is both irrelevant and a waste of organizational resources. Newer measurement methodologies measure 1) what is important, 2) how important it is, 3) how you perform against that, and 4) what the performance gaps are. This allows you to see how importance changes over time, where you're over invested, and where you're underinvested.
Assumption: Satisfied employees = engaged, loyal employees.
Historically, HR professionals have been concerned with employee satisfaction, which generally constitutes a measurement of contentment and how employees feel regarding job conditions, compensation, benefits, their organizational culture, work environment, and development opportunities. It's a functional measurement of the acceptability of the work environment.
Engagement is related but different. This monitors how connected employees are to their work, as measured by the amount of discretionary effort they are willing to expend on behalf of their employer. It speaks to whether people are willing to go above and beyond core responsibilities, share their innovative ideas about how to move the organization forward, and speaks to their level of passion for what you're working to collectively achieve. Engaged employees are generally satisfied employees, but the opposite cannot be assumed.
Takeaway: Both measures indicate something important. Engagement is beyond customer satisfaction, just like loyalty is beyond customer satisfaction. Using any of these measures isn't a mistake, as long as you're clear on what the measure is capable of indicating and where that stops. Metrics are used as guidance for decision making. If you’re basing decisions on poor information, your acuity for emerging risks in those areas is going to be poor as well. By moving to measures that tell a more truthful story, you’re positioning yourself for success.
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About the Author
Kirk Leverington is an 20-year veteran of the credit union system and a long-term corporate strategy manager. Combining a belief in challenging leaders to think strategically with an expert understanding of systematic approaches to implementation, Kirk has played an integral role over the years in supporting organizational change.
He has a Master’s degree in Business Administration from Royal Roads University, specializing in management consulting. Additionally, he is a Certified Management Consultant. Before starting his consulting practice at Lucid Strategy Group, Inc. in San Francisco, Kirk was the Senior Manager of National Consulting at Credit Union Central of Saskatchewan.
A version of this post was first published here.
