Rethinking NPS as the Only Product Metric

In the world of product metrics, it’s important to measure outcomes, not just outputs. When we talk about users, outcomes refer to changes in behavior. However many companies still rely on Net Promoter Score (NPS) as the primary metric to measure customer satisfaction.

NPS was introduced in a 2003 Harvard Business Review article “The One Number You Need to Grow.”  

The Bain & Co. consultant who wrote the article called NPS the “simplest, most intuitive and best predictor of customer behavior” and a “useful predictor of growth.”

The metric has since become a ubiquitous tool for measuring customer satisfaction, with many companies using it as a target for executive compensation. However, the metric has been criticized for being proprietary, problematic, and often misunderstood.

According to a 2019 Wall Street Journal article, NPS is often misused by companies as a target for executive compensation. The Bain & Co. consultant who wrote the original article even admitted that he had „no idea how people would mess with the score to bend it, to make it serve their selfish objectives.”

Additionally, research on NPS has produced contradictory results. One study found that „satisfaction” and „liking” were better predictors of recommendations than „likelihood to recommend.” MeasuringU compiled research on NPS and found that while the metric often correlates with satisfaction, it is not always a good predictor of future growth.

Therefore, it’s important for companies to learn more about NPS and never use it as the only metric to measure customer satisfaction. While NPS can be useful in understanding customer behavior, it is not a panacea for all product metrics. Companies should use multiple metrics to gain a more holistic understanding of their customers and make data-driven decisions.

In conclusion, NPS has played an important role in bringing customer satisfaction to the forefront of business discussions. However, companies should not rely on it as the sole metric to measure success. By understanding the limitations of NPS and using a combination of metrics, companies can gain a more nuanced understanding of their customers and improve their products and services accordingly.

OKRs – Objectives and Key Results fundamentals

OKR, or Objectives and Key Results, is a management method developed at Intel, adapted and promoted by Google, and used by organizations of all sizes worldwide.It is a simplified version of management by objectives (MBO).

Its most important components are the format of priorities, the process of setting them up, and the monitoring of their progress. Implementing OKR can have a significant impact on a company’s ability to execute its strategy.

OKRs allow companies:
– Set and communicate priorities,
– Reduce the number of priorities,
– Align actions: ensure that all teams are working towards the same goals,
– Monitor progress and identify areas where additional effort may be needed,
– Clarify responsibilities.

OKRs help to ensure focus and collaboration, provide transparency and establish clear rules for operation. This usually leads to increased employee engagement and allows for a focus on delivering value to customers and the company.

OKRs are most effective in product development, but can also help with running any business. When implementing the method, you can stop at the level of the company by setting and communicating its objectives. OKRs are most commonly implemented for the company and teams. Individual OKRs should not be used, and OKR goals should not be linked to performance management processes.

The format of priorities

The goal in the OKR describes a priority for an organization or a team. Its format consists of two elements:

A qualitative Objective. A clear, specific, and memorable statement that describes the intended outcome. Since its purpose is to provide direction and maintain focus, it ought to be simple to comprehend.

The Key Results. A few points whose verification will show if the goal has been met. They should be quantifiable. The measurement must be independent of, say, manager evaluations. They should be chosen so that progress can be tracked and measurements can be carried out during the OKR period.

Example OKR for a company:

Launch successful international expansion
Generate at least 50 requests for offers from target markets per quarter
Sign at least 15 letters of intent with prospective clients
Sign at least 5 agreements with foreign clients
Achieve a minimum of $100,000 in new international revenue monthly

The goal in OKR format describes one challenge with a clear Objective and three to five Key Results. The organization should have no more than 5 goals for any given year. They should consider various aspects of the business (product development, marketing, employee competency development, and process improvement). On the team level it is best to set one OKR per quarter – only then can you say it is a priority.

Objectives and Key Results for teams

Companies using OKR set, align and monitor priorities for the whole business and teams. There are no individual-level OKRs since the most important role for the employees is to be part of a team.

The most often used cadence is a year for company OKRs and a quarter on a team’s level. This may vary depending on the business and the maturity of the organization. Having the same rhythm is crucial since it enables alignment and coordination.

Typical steps when determining OKR for the coming quarter.
1. The vision and strategy of company is known
2. Management sets and communicates company OKRs for a year
3. Teams determine and align their priorities
4. Evaluation of goals and retrospective of the previous period

During the alignment phase, literally every manager and leader has work to do. A disciplined approach helps with regular evaluation of results. The whole company gains knowledge about the progress and priorities. When done regularly, the quality of discussions here keeps improving.

Why should the retrospective come after the new objectives are set? It may seem contradictory, but it makes it easier to start the quarter with new goals. Conversations about them are not anchored in current numbers, and it is easier to talk about ambitious goals. On the other hand, the retrospectives should not be done under time pressure.

Organizations should strive to enter every new period with all goals set. It is one way of ensuring discipline in the process. 

Strategy execution research – common problems identified

Nowadays companies struggle to improve their strategy execution. How do we know what are the main problems in this field? Let’s take a look at some sources: large-scale surveys with corporate executives and managers.

EIU Research 2014
The greatest challenges for companies accorging to EIU

First The Economist Intelligence Unit study from 2004. The EIU conducts periodic research on the subject. In 2004 they surveyed 276 executives in the US and Canada. Only 43% rated their companies as successful at executing strategic initiatives. The most important issue to improve: communication from senior management.

Booz Hamilton HBR 2008
What Matters Most to Strategy Execution – HBR 2008

In „Secrets to successful strategy execution” published by HBR in 2008 consultants from Booz & Company share results from their 5 years long research (1000 organizations). Three out of five companies when asked if “Important strategic and operational decisions are quickly translated into action” the answer was no. Again similar results:  information and decision rights are crucial to successful execution.

Hrebeniak 2006 research
Five obstacles to strategy execution – Hrebeniak 2006

Wharton–Gartner Survey described by Professor Lawrence G. Hrebiniak in „Obstacles to Effective Strategy Implementation” paper (2006). He wrote: „I undertook an empirical study of implementation issues in which data were collected from 443 managers involved in strategy execution”. Key obstacles: poor change management, vague strategy and poor information sharing.

OKRs are not an „HR thing”

Companies see them as a silver bullet for both performance management AND strategy execution. When HR is in charge of OKRs, the strategy alignment component is missing and people regard OKRs as yet another method of evaluating them.

The idea in short: OKR for strategic priorities – yes, performance management – no. No silver bullet. To develop people and invest in teams, discipline and regular conversations about work and progress are required.

OKRs should be used to clarify what is important, maintain focus, and improve execution. They should steer the conversation toward the most important issues. We create them for businesses and teams. Some say that they are „just goals,” but this is a trap.

Years of management education and practice have resulted in a strong link: goals => SMART => performance management. As a result, for many managers goals are for individuals only. Breaking this is difficult. To begin, it may be helpful to label OKRs as „team priorities.”

A team is the most important unit in the organisation. This is where value gets created. People don’t work in companies, they work in teams (read Buckingham). There is no team without a shared goal. It really is that simple.

HR plays a significant role in the implementation of OKRs. It needs to help with training, support middle managers and work with feedback from people. Switching from any old system to OKR is a significant change. The HR department may have its own objectives, such as improving recruitment processes.

HR departments face a challenge when it comes to performance management. The evidence shows that the traditional approach does not work. These systems are pricey but „only 14 percent of employees strongly agree that the performance reviews inspire them to improve,” according to Gallup.

So HR people look for new things. OKR gives some hope, which is an illusion. To improve things it is not enough to change the method of goal writing. You must train managers to do their jobs which is developing people and having conversations with them about work and results.

Managers need to have regular 1n1s and two other types of conversations with employees: about results and about development. Those are separate meetings with distinct goals. And BTW, feedback should be given on a regular basis, ideally when the reason for it occurs.

Achievement of goals, especially individual, should not be the sole reason for a raise or promotion. The reason is, again, teams. What matters is also what kind of player someone is, whether his expertise matters and what his contribution is.

[oryginaly published as a post on LinkedIn]