Linking employee compensation to customer satisfaction sounds like it would be a win-win situation for any company. After all, every company wants happy, satisfied customers. But is it really a good idea? A merit compensation plan for employees based on customer satisfaction should be put in place only after careful thought and planning. A compensation plan that is meant to grow a business can falter and take the business on a downhill roller coaster without adequate planning. Customer satisfaction must also be measurable with good data to ensure employees are rewarded effectively.
Measuring Customer Satisfaction for Effective Merit
Incentive plans that are based on customer satisfaction require good metrics and good customer feedback. Customer surveys and Net Promoter Score (NPS) analytics are one way of determining customer satisfaction. The NPS approach is a method of scoring a company based on their customer satisfaction level. Customers respond to a question about how likely they would be to recommend the company to a friend or colleague using a rating scale from 0 to 10. Based on the rating number, the customers are then divided into one of three categories:
- Promoters (9-10) – loyal customers who are enthusiastic about the company, products or services
- Passives (7-8) – customers who are satisfied but not overly enthusiastic about the company, product or services
- Detractors (0-6) – dissatisfied customers who may defer customers away from the company causing a negative impact on future growth
An open-ended question usually follows the rating, giving the customer an opportunity to elaborate on why they rated the company as such. This kind of information helps organizations fine tune their customer relations, products and services as well as set goals for improvements. The company’s score is calculated by subtracting the percentage of Detractors from the percentage of Promoters.
Whichever method is used to gather data, tying customer satisfaction to employee incentives has both pros and cons. First, there must be a method for quantifying the feedback collected to ensure that employee performance is rated fairly. Data used to link customer satisfaction with employee performance must be unequivocally determined to be about the employee service provided and not about the product or company. Customers who are unhappy with a product or company may give an unsatisfactory rating regarding customer service even if the service was excellent. Of course, the opposite is also true.
Surveys that are not automatically presented to each and every customer can leave an open door for employees who may “work the system” by encouraging customers with whom they are in good standing to complete a survey while not mentioning the survey to others. Employees also may focus on only one aspect of their job, neglecting other important duties.
An employee incentive plan for providing excellent customer service is still an all-around great motivator. If it is well thought out and done correctly, it can spawn a creative atmosphere with motivated employees who are enthusiastic about meeting company goals.
About the Author: Terrence Mast is student of human resources who enjoys researching trends in his field. More of his research findings can be found at The Best Online Human Resources Degree Programs.