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The New York Times once claimed that Bain & Company Fellow Fred Reichheld “put loyalty economics on the map.” Reichheld is a prolific writer whose many books compose a rich catalog on the topic. But he earned the Times distinction largely because he created the now ubiquitous Net Promoter Score (NPS) in 2003.
What’s A Net Promoter Score?
Reichheld developed the NPS metric based on his studies on how customer satisfaction and retention affect revenue growth and profitability. He delved deeper into the issue by reviewing numerous assessments designed to glean factors that drive customers’ opinions.
Over time, Reichheld noticed that conventional customer service surveys fell short in finding out what consumers really felt about their experience with a company. One of the primary reasons for this gap is that customers frequently bypassed these lengthy assessments, rendering their data inconclusive.
He decided that a much simpler approach would get better results, so he and his team looked for the single best question to gauge customer loyalty. After many case studies, the question they determined delivered the most value was:
“How likely are you to recommend Company X to a friend or colleague?”
Reichheld concluded that the willingness to promote a company to others was even more powerful than simply being satisfied with its goods or services.
He then created a scoring system for people’s responses to turn the question into an evaluation. Reichheld asked each respondent to rank their answer from 0-10, with 10 equaling “highly likely” and 0 “not at all likely.”
People who give a rating of 9 or 10 are put into the “Promoter” category. Those who leave a 7-8 are called “Passives,” and anyone with a 6 or lower score is labeled a “Detractor.” The NPS is derived by subtracting the percentage of detractors from the promotors.
The Role Of Employees In NPS
Usage of NPS assessments soared in the decades after Reichheld introduced the concept. And when companies dug deeper, they learned that customers based much of their evaluation on their interaction with employees. They also understood that the extent to which a staff member is satisfied with their employer significantly influences the quality of customer service they provide.
Consequently, the Employee Net Promoter Score (ENPS) was born. Mirroring the original metric, the ENPS asks employees:
“How likely are you to recommend Company X as a place to work to a friend or colleague?”
Dissatisfied workers aren’t always vocal, but they will probably respond to this question. And surveys that ask people if they would endorse their workplace give employers a vivid portrait of what their staff truly thinks of their company.
How Can NPS Measure Company Culture?
A company’s culture is formed by the everyday conduct of its staff. It’s revealed in how people approach their jobs, treat team members, and relate to the public. It affects every area of an organization, including product development, operations, management, teamwork, and customer service.
Consequently, organizational culture significantly impacts how people feel about doing business with or working for a company. Since Net Promoter Scores evaluate whether people would vouch for a company, they are basically measuring that company’s culture.
Moreover, the strength of an ENPS correlates with that of an NPS. If employees are happy and fulfilled because they have a positive workplace culture, they’ll put the enthusiasm and dedication they have for their employer into their service to the public.
Assessing NPS and ENPS is a way for CEOs to take the pulse of their company’s culture. Once they establish a baseline, they can dig deeper to discover how to improve it.
The Impact Of Company Culture On Customers & Staff
Since workplace culture reflects employees’ outlook and work habits, it corresponds directly to the customer experience. And the quality of a company’s culture can greatly enhance or destroy staff morale and effectiveness.
How Work Culture Affects Customers And NPS
PwC’s Future of Customer Experience report, based on a survey of 15,000 consumers, shows that one in three customers will leave a brand they love after just one bad experience. And 92 percent of consumers would abandon a company after two or three negative interactions.
Interestingly, an organization doesn’t have to do something egregious for people to walk away. For example, if their representative is slow to respond, doesn’t follow through, or is merely apathetic, a customer will likely shop elsewhere in the future.
Beyond the lost revenue caused by customer attrition, dissatisfied consumers frequently leave negative online reviews. Their poor experience can prevent other potential customers from ever engaging with a business.
Companies can’t afford to deliver top-notch service sporadically if they want to remain competitive. So instead, they must ensure that the people who choose to do business with them have a great experience with every interaction. That level of consistency can happen when leaders intentionally develop a customer-focused workplace culture.
To do this, they must reinforce the employee behaviors that will help them reach this goal.
Customer-centric behaviors include:
- Honoring commitments
- Doing what’s best for the customer
- Delivering results
- Going the extra mile
- Setting a tone of friendliness and warmth
When company representatives exhibit these behaviors across the board, customers will stick with them and recommend them to their friends.
How Work Culture Affects Employees And ENPS
Employee engagement is the degree to which staff members feel attached and committed to their employer. Gallop routinely assesses employee engagement across all sectors and reports that companies with a highly engaged workforce have 43 percent less turnover and an 81 percent lower absenteeism rate.
The strength of an organization’s culture is the primary driver of this connection.
Weak workplace culture can make employees miserable and dissolve their engagement. Unhappy workers may stick with their jobs for various reasons, but their hearts aren’t in it. They only do enough to draw their paychecks and certainly wouldn’t recommend their employer as a place to work.
Those who get fed up jump ship at the earliest opportunity and often aren’t shy about sharing their opinions publicly. Unsurprisingly, unhealthy workplace culture is one of the dominant factors driving the Great Resignation.
In contrast, a vibrant culture:
- Motivates employees by helping them understand how they contribute to overall goals
- Includes regular acknowledgment of people’s contributions and value
- Stresses employee wellbeing
- Is structured to help staff members grow and continuously improve their skills
- Is built on a foundation of respect and inclusion
As a result, an inspiring, supportive culture generates a high level of engagement, which funnels into the quality of performance throughout an organization. In addition, great culture turns employees into fans and brand ambassadors who will rave about where they work.
It’s no coincidence that companies with strong employee engagement also have at least 10 percent more customer loyalty and 23 percent higher profitability, according to Gallop.
Build A Great Work Culture And Improve Your NPS
Companies can get a read on their company culture by conducting surveys that measure NPS and ENPS. These assessments are a good first step toward earning the level of customer and employee loyalty that will drive success. But leaders need to take action after they use this assessment.
Organization with low or even moderate NPS or ENPS scores should prioritize improving their workplace culture. And companies with good scores shouldn’t take them for granted or assume they’ll remain favorable. Instead, they should fortify the culture that enabled them to do well on these assessments.
To strengthen their culture, leaders should regard it as they would any other important area of their business: they need a plan and a process. Their strategy should involve systematically defining, communicating, teaching, and reinforcing the behaviors that create a winning culture.
Leaders can expect consistently strong Net Promoter Scores from the public and their staff by creating an ongoing initiative to bolster their company culture.
Schedule a call with a CultureWise specialist to learn more about developing a workplace culture that increases loyalty and profitability. And receive informative articles, videos, podcasts, and webinar opportunities with a complimentary subscription to the Culture Matters newsletter.
