Linking Customer Experience Metrics to Compensation

: How to Set Effective Targets

Every employee in the organization should have a customer experience metric on their performance scorecard, specific to their area of responsibility. This approach ensures that employees understand that improving the customer experience is “everyone’s responsibility.” Furthermore, setting an overall corporate goal, such as a customer loyalty score or index, reinforces the message that employees must all work together to ensure an improvement in the end-to-end customer experience.Setting targets is one of the trickiest parts of the process associated with linking customer experience metrics to compensation; it is a balance between art and science. Many employees, even at the senior management level, exhibit strong emotions toward any target being imposed on them—“That’s not fair. The target is too high. I’ll never be able to achieve that target. My target is higher than his/her target”—making the whole process even more challenging.Ideally, a target should stretch employees to achieve a higher level of performance. Targets set based on a best-in-class performance allow an organization to reward its top performers. For those employees who are average performers, it is better to lean toward the upside and focus on the positive aspects of customer experience improvements rather than to risk demotivating employees with targets that they don’t believe they can achieve. On some occasions, it may be appropriate to set a target simply to maintain a current customer experience performance level. If disruptions in the market are expected to occur, an organization has limited funding for new improvements, or the current customer experience performance level is already at a best-in-class standard, then setting a target to maintain current performance is a valid approach.To set credible, actionable and achievable targets, consider the following:

• Set targets that reward employees for achieving a meaningful performance improvement. The target must be set outside the margin of error to prevent rewarding employees for a simple random sampling error in the survey results.
• Consider the “end goal” or benchmark performance that you want the organization to ultimately achieve across all customer experience interactions. For example, set a target of 9 out of 10 for all performance ratings by customers as a long-term objective.
• Once the end goal is established and clearly communicated, determine what percentage improvement is expected to close the gap (e.g., 15%) between current performance and benchmark standards.
• Use a 1 decimal convention for reporting and target setting to prevent employees from focusing on minute changes in the actual numbers.
• Ideally, use one full year’s worth of data to establish the baseline before setting the target.
• Establish a standard (e.g., 8.5 out of 10) when improvements are not required, but rather target performance is set simply to maintain current performance.

SNAPSHOT: Northwestern Bank

At Northwestern Bank, the customer-focused culture is supported by a high level of frontline empowerment. A highly visible motto—“I can do that!” (ICDT)—is also a key operating principle that drives the bank’s commitment to customer service excellence. The ICDT approach emphasizes first-call resolution and a quality customer experience. Customer Service Center reps are empowered to take complete ownership of a customer’s concern. They have the authority to waive fees, adjust rates and go an extra step to “hug” customers with a free lunch certificate or other gift. CSC reps are not measured by handle time, the focus is solely on delivering a satisfactory customer experience.What type of impact has this can-do culture had on customers and the bottom line? While most local banks have experienced a slowing or reversal of growth, Northwestern more than doubled its market share since implementing ICDT. Read the full story here.