The Hottest Six Sigma Quality Improvement Topic: Making Front-line Managers Responsible for Collecting, Analyzing and Tracking Net Promoter Scores
Posted: 06/22/2009 12:00:00 AM EDT | 0
New studies and books say front-line executives must be responsible for obtaining customer feedback and crafting solutions to identified problems. These studies and books also ridicule lengthy marketing research studies about customer satisfaction—especially when there is no plan or organizational mechanism to get the study off the shelf and into front-line action.
In short, unless the Six Sigma department's recommendations for improving customer satisfaction/quality are converted into doing, they are not recommendations—they are dreams.
Everybody knows that line people should quickly react to bad customer feedback. Corrections and improvements should be made as soon as possible. Field input from those closest to the customer (for example, sales/servers/stores) should be systematically monitored by an organization's R&D department/designers/buyers/executives without hesitation and with immediate follow up. Unfortunately, in many organizations, reacting to customer feedback is a nuisance—and disruptive to the daily task.
Pay attention! The Customer Is the Business
Tom Peters has been saying for years, "Get feedback from end users, reps, distributors, franchises, retailers, suppliers...Listen frequently. Listen systematically—and unsystematically." Every generation of managers suddenly discovers this fundamental truth: The customer is the business.
Only by providing what the customer considers value will an organization prosper and survive among the inevitable hordes of competitors that sooner or later arrive with competing customer-getting value propositions.
Most things get done in small doses. If front-line managers continuously make customer improvement changes—correct deficiencies, enhance the buying experience in small but significant ways and the like—the business will remain a formidable competitor.
Sustained success is largely a matter of regularly focusing on the right things and making a lot of customer-related—but uncelebrated—little improvements every day. Getting better and better one step at a time adds up.
Recently it is being realized that a new strategy is needed to capture and react to customer feedback. Strategy precedes structure, which means a change in the organizational structure is required to administer a changed strategy. New things must be done and done differently to capture and positively react to customer feedback.
Front-line managers must be empowered to constantly improve the total customer getting/customer keeping value proposition. This is wonderful in theory. But—until very recently—there was no methodology or mechanism for making this happen. Thanks to pioneering work by Bain & Co., organizations now have a proven, tested and perfected process that can be immediately implemented. This simple and easy-to-understand process makes reacting to customer feedback a front-line activity.
The Ultimate Question Leads to the Ultimate Answer
In a Harvard Business School Press book titled The Ultimate Question, Fred Reichheld reveals how the most successful organizations in the world constantly discover (via front-line employees) what customers want, need, value, expect and are willing to pay for. Reichheld—a former Bain & Co. partner and now a Bain Fellow—illustrates through numerous examples in his book a new metric called a net promoter score (NPS).
The NPS has taken the corporate world by storm. Many believe that it is the most powerful marketing/Six Sigma metric yet created for improving customer satisfaction, quality and corporate profits.
Others do not believe it really works. Indeed, there is much controversy. But dozens of Six Sigma practitioners from America’s best-run organizations are almost evangelistic in their praise of this metric and have displayed a missionary zeal in encouraging others to launch a NPS program.
Many organizations are using NPS as a tool or systematic methodology for continuously improving what's being done and for continuously innovating.
What is a net promoter score? Reichheld, in an interview with ChiefMarketer.com, explains it as follows:
"Net worth is one of the fundamental measures in a business. What we've done is create the equivalent for customers. We've identified the assets in the customer base and subtracted the liabilities. And we've done that by asking one question and deriving one statistic: the net promoter score. The ultimate question is: How likely would you be to recommend us to a friend?
People who scored 9s and 10s are promoters. They account for 80 to 90 percent of the positive word of mouth. They generate the growth in businesses and make employees proud to be there.
Passives are those who give you a seven or an eight. They're perfectly satisfied for the moment, but they'll switch to a competitor if something better comes along.
Then are those who score zero through six. Those are failing grades. Those customers are detractors. They complain and will eventually defect.
If you take the percentage of your customer base who are promoters, subtract the percent who are detractors, you come up with the net promoter score, or the net worth of your customer base."
High statistical correlations between increases in the NPS and profit growth spur growth in using this methodology!
Now Comes the Clincher!
In many, many companies—analyzed and monitored by Reichheld and his associates—NPS and profits/sales growth were highly correlated. If we understand correctly, for every 12 point improvement in NPS, on average, profits doubled.
For this reason, America's best-run companies have decided that improvement in the NPS defines what they mean by performance. Improving the NPS dictates where efforts should be spent. Front-line employees are responsible and accountable for improving net promoter scores for their businesses, products lines, geographic regions, stores and plants.
It bears repeating: Small increases in NPS produce large increases in short-term profitability and long-term growth. Hundreds of organizations are now using net promoter scores to establish "ownership" for customer feedback, and empower front-line managers to take immediate action on negative feedback.
Dozens of organizations including General Electric, Enterprise Rent-A-Car, USAA, Costco, Dell, Southwest Airlines, Adobe, Cisco, Apple and FedEx are actively engaged in computing, analyzing and tracking net promoter scores.
Further, in-house seminars are being given by Six Sigma groups to indoctrinate employees in what must be done to incrementally improve net promoter scores.
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