Net Promoter Score as a Sales Compensation Metric

Share on facebook
Share on twitter
Share on linkedin
Net Promoter Score – or NPS – is a common performance metric that helps organizations track customer satisfaction.  The concept and calculation are remarkably simple.  Your customers rate their willingness to recommend you to a colleague on a score from 1 to 10 – higher scores are more favorable.  Your customers are then labeled based on their score: Detractors score you with a 6 or less Passives score you with a 7 or 8 Promoters score you with a 9 or 10 The final NPS is simply the percentage of promoters minus the percentage of detractors.  Pretty simple and seemingly effective. However, should NPS shift from being an organizational metric to a seller’s compensation metric? NPS as a Sales Compensation Metric I often advise against NPS as a sales compensation metric.  But why?  Here are some considerations that often make NPS a less desirable performance metric at the seller-level and as a measure driving commission payouts. Decrease line of sight NPS is often an assessment of the organization, product, delivery, service teams, etc.  There is a lot that goes into a sense of satisfaction.  More specifically, there is a lot that is outside the seller’s span of control that can lower NPS.  It may not be perceived as fair to penalize a seller. Infrequent Measurements Typically, NPS is tracked and updated only once or twice a year.  Therefore, even if the sellers were particularly influential to the NPS, it does not give much time to improve or alter scores.  Also, recency bias is a risk with infrequent measurement.  A customer has the potential to answer the question based on recent events as opposed to those over the entire period. Administratively Challenging Commission administration is rarely easy.  NPS adds manual work and complexity as the sales compensation team would need to extract all customer scores and match them to internal records and identifiers.  Then, they need to recalculate NPS for each seller’s book of business.  Those scores would also need to cascade to overlay sellers and roll-up to management teams.  It’s feasible – just a bit harder to a process that is already probably strained. Dilutive to Other Metrics Adding measures to a sales compensation plan reduces the impact or weight of your existing performance metrics.  Unfortunately, many sales compensation plans are already too complex and include too many measures.  So, if you plan to add NPS, you likely are reducing the correlation between revenue performance and compensation.  That can be problematic. NPS Can Be Counterintuitive There is a flaw in NPS.  [Please know that I say this with great respect for the device.]  If a paying customer (and detractor) stops buying from your organization, with all else being the same, your NPS goes up despite your revenue going down. Please recognize that I’m not hating on NPS.  NPS has a lot of merit as an organizational performance metric but it isn’t perfect.  Plus, it is just not a great compensation measure for sellers.  

This post was originally published on this site

Source: Gartner Blog Network On:

Read On

About the author: CIO Minute
Tell us something about yourself.

Leave a Comment

CIO Portal