POSTED BY: Jim Ittenbach | April 28, 2016
Empirical evidence indicates that what gets measured, gets managed. Once key performance indicators (KPI) are revealed, behavior adjusts accordingly. While this is the purpose of a KPI, intended and unintended consequences both exist.
Our studies have identified two divergent approaches to monitoring a KPI. The primary use is to track current realities of critical business functions. These tend to be exactly what leadership needs to create real-time decision making that keeps an organization on track with targeted outcomes. Again, while this yields an observational advantage to ensure goal achievement, a KPI can be equally be employed to foster opportunity.
A frequently overlooked function of a KPI is to go beyond its use to prevent disruption or loss by exploring the interconnectedness of the KPI to opportunity. The best example is a Net Brand Performance Score (NBPS). The NBPS is a very popular indicator of how an organization is fulfilling its promised value proposition by protecting the customer experience. The equation is simple. With a scale of 0 – 10, where the higher the number provided the more willing a customer is to recommend your brand to others, you take the composite of the top two ratings (Promoters) and subtract all those who rated you 0-6 (Detractors). An organization with a net score of 60+ is cultivating customer loyalty. A net score of 80+ is exceptional.
Obviously, the best way to improve your score is to eliminate detractors. Examining the reasons “why” scores are low allows organization to stop service failures, mitigate negative commentary and accelerate their NBPS.
Yet, the best way to improve profitability is to examine what’s different between customers who rated you on top versus those who rated you in the middle (Passives). Creating service strategies that migrate Passive customer relationships to Promoter customer relationships can have a double impact. It improves loyalty; which improves share of wallet. Focusing upon middle tiered customer relationships is often the most rewarding. Live long and prosper.
This article originally appeared in the April issue of the Hendricks County Business Leaders publication.