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.