What Measures Impede Long Term Growth
Measurement and accountability crystallizes movement towards a goal, individual performance, and helps identify employees worthy of merit. Measurement is the language of any organization. The more measures we can hold employees accountable for the better, right? Hold on. There’s a cautionary tale to running a company with an extreme and unbalanced reliance on internal measures.
Most corporate measures and employee goals are internally focused, financially-oriented, and functionally silohed. There’s an unfortunate consequence for companies that ONLY focus on these measures. While it’s healthy to manage business with a pragmatic view of financial health, over the long term, a primary focus on these internal lagging measures is not what builds a great company.
Can you agree that a great company is one which builds products based on customer needs, strives to delight customers, and generates positive word of mouth as a result? Great companies reinvent and innovate. Now, how many internal measures and key performance indicators directly tie to accomplishing these objectives? Can you identify the internal measures that measure the required cross-functional cooperation to ensure the entire customer delights customers?
Sustained-growth companies create great experiences and benefit from positive word of mouth. The Ultimate Question / Net Promoter questions supports this, where Fred Reicheld studied companies with sustained growth and found when customers were willing to tell friends about that company.
What companies are you willing to tell friends about? Here are some ideas: Toyota / Lexus, USAA, Costco, Southwest Airlines, Craigslist, Apple, JetBlue, and Amazon. What do these companies have in common? All are lean, efficient, and cost-conscious…and as such must have rigorous measurement and accountability. However, in learning about several of these companies (and I’m making assertions for the rest) they have a strong leadership and cultural mandate to foster positive employee relationships, employee trust, deep customer understanding, an appreciation for experience, and the capability to build products and processes across functional silos.
Jeff Bezos of Amazon, for example, gets directly involved in customer feedback sessions. I once saw a letter on the Amazon home page where he announced a multi-million dollar investment in customer service capabilities. If you read anything on Craig Newmark and Craigslist you will find customer service is his primary concern. Costco decided on a generous return policy on principle. I’m sure the CFO had some heartburn over that decision and it may have even gone against an internal measure of reduced returns. But it makes me a loyal customer.
In contrast, some companies manage performance with employee fear and penalties for not hitting internal measures – which are unlikely to be customer-centric. What is the first thing you review at an executive operations meeting – internal and financial measures or customer-centric measures such as net promoter scores?
Paradoxically, it’s a mistake to hold employee accountability and bonuses on customer satisfaction. Why? Employees (and executives) are capable of gaming the system, rather than doing the right things for the customers that result in those scores. Instead and hold accountability to actions, behaviors and processes that enhance a customer-centric company. Drive a culture from the tops down that supports investment and risks on behalf of the customer.