Five lessons learned about paying consultants for Net Promoter Scores
Over two years ago, my organization implemented the Net Promoter Score (NPS) as part of individual consultant’s variable compensation packages. Variable compensation at Professional Services organizations (PSOs) is most commonly used to reward desired behaviors. Since the initial deployment of NPS, there are five lessons learned that are broadly applicable to other PSOs that are considering adding NPS to the mix. But first, you need to understand why NPS is a valuable Key Performance Indicator (KPI).
We chose to deploy NPS because consultants can strongly influence the outcome and benefit from the results. The problem with traditional KPIs is that they measure financial performance, and a consultant who’s getting the job done on time looks fine under conventional financial measures. However, customers are not likely to recommend consultants who get the job done in a workmanlike and utterly boring manner. NPS measures whether or not your consultants are creating advocates or adversaries for your brand, which is critical to landing add-on sales at existing clients as well as new customers.
Five key lessons learned:
#1. NPS should not be a single measurement. Most variable compensation plans for consultants incorporate billable utilization as a goal, which is a proxy for the firm’s financial health. Some compensation plans also include revenue goals, Management by Objective (MBO) goals, or other targets. NPS can be incorporated effectively into these goals, provided you set objectives and determine their financial weighting.
For example, consider a compensation plan that is based 70% on billable utilization and 30% on NPS. This weighting emphasizes quantity over quality – management is showing individual contributors that it is demonstrably more important to bill more hours than to create customer advocacy. Comparably, a compensation plan based 60% on NPS, 20% on MBOs, and 20% on billable utilization shows that the firm’s reputation comes first and foremost. This encourages consultants to build relationships and champions within client companies.
#2. Consultants need to take ownership. NPS is based on a single question, “How likely are you to recommend Reynholm Industries based on your recent consulting project with Roy Trenneman?” You can vary the question text a little, but not much, under the NPS methodology. The emphasis is squarely on the consultant and their performance during the consulting engagement.
Consultants will need to change their behaviors to achieve high NPS ratings. The obvious change is to the way they approach consulting engagements and interactions with customers. A less obvious change is to encourage customers to complete NPS surveys, and to follow up with clients to complete those surveys. The reason for this change is that consultants will learn they need a lot of positive ratings to maintain a high NPS.
#3. NPS for individual variable compensation is not suitable for efficiency practice areas. An efficiency practice area might have a senior consultant who’s responsible for specifying the work before handing it off to junior staff and interns. Those junior staff likely have no interactions with the client, as typically all communications are routed through the senior consultant. As a result, NPS is not a viable measurement for them individually. NPS could be part of the senior consultant’s compensation mix, as they ‘own’ the relationship with the client. But the individual contributor who worked for two hours on the client project isn’t going to see the point or the benefit of NPS.
#4. NPS can cautiously be used for performance improvement plans. The goal of NPS is to create advocates for your brand. What if a consultant on your team is instead creating adversaries and obstacles to future business? NPS can be a leading indicator of negative behavior issues that affect your customers.
If your firm chooses to use NPS for a Performance Improvement Plan (PIP), set clear limits on what constitutes an acceptable NPS score for an individual consultant. For example:
30 – 50 50%
10 – 29 25%
0 – 9 10%
< 0 PIP
Under this sample plan, a consultant would receive 100% payout of their NPS component of their variable compensation plan if they had an NPS over 50 for the period measured. However, a consultant with an NPS of less than zero – and NPS is on a -99 to +99 scale – would be put on a PIP.
You will also want to speak with your HR team about this course of action. Employees should be made aware of their most recent NPS results – both positive and negative – so that they can make course corrections to their behavior. If you are looking to put someone on a PIP for their low NPS, ensure that you have verified the low ratings with customers before starting the PIP. If your organization is following NPS, that is built into the process of closing the loop with clients who give negative ratings.
#5. You need a lot of data for NPS to be meaningful. Our NPS implementation is based on a rolling two-quarter window of reviews from customers. This means that bonuses paid out at the end of December were based on reviews collected from July through December. It is also necessary to send follow-up reminders to clients who have not completed their NPS survey because a lack of data can produce innacurate results.
For example, consider a consultant who has two reviews in a two-quarter period. One review is positive, and the other is neutral. This would give the consultant an NPS of 50. Comparably, if they received two reviews and one both were neutral, their NPS would be zero. Moreover, if the consultant were on a nine-month project with NPS measured only at the end of the project, their NPS would also be zero – because there would be no other ratings collected in the six-month window.
The right mix is to collect NPS data from multiple individuals at the client account. If a consultant conducts a training class, your NPS survey should go out to all of the attendees. If you send an NPS survey at the end of a project, you can choose to send it to just the project lead. Ideally, you would send it to other project participants and/or stakeholders from the customer account. That way, you get an overall rating on your consultants.
NPS is ultimately a proxy for your firm’s reputation. The observer effect holds true here, because by measuring your individual consultants’ NPS, you will affect how others see your company. With the right incentives, your staff will position your firm in the most positive light and improve your reputation.