The Dubious Management Fad Sweeping Corporate America

 

NPS—or net promoter score—is a measure of customer satisfaction that has developed a cultlike following among CEOs. It also may be misleading.

Best Buy and American Express use it to dole out employee bonuses. Target and Intuitpoint to it to justify investments. Delta Air Lines and UnitedHealth can’t stop talking about it.

Much of Corporate America is obsessed with its net promoter score, or NPS, a measure of customer satisfaction that has developed a cultlike following among CEOs in recent years. Unlike profits or sales, which are measured and audited, NPS is usually calculated from a one-question survey that companies often administer themselves.

Last year, “net promoter” or “NPS” was cited more than 150 times in earnings conference calls by 50 S&P 500 companies, according to a Wall Street Journal analysis of transcripts. That’s more than four times as many mentions, and nearly three times as many companies, compared with five years earlier.

Executives pointed to strong or rising NPS as proof that shoppers preferred to pick up orders at Target Corp. stores or that Google’s newest Pixel smartphone was off to a good start. Out of all the mentions the Journal tracked on earnings calls, no executive has ever said the score declined.

.. The score was introduced in 2003 in a Harvard Business Review article titled “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.”

.. Since then, the metric has taken on a life of its own, so much so that the inventor, Fred Reichheld, said he is astonished companies are using NPS to determine bonuses and as a performance indicator. “That’s completely bogus,” Mr. Reichheld, who still consults for Bain, said in an interview. “I had no idea how people would mess with the score to bend it, to make it serve their selfish objectives.”

The score is typically derived from customer responses to a single question that companies ask at the checkout register of a store or in an email or web pop-up online: On a scale of 0 to 10, how likely are you to recommend the company’s product or service to a friend? The survey usually includes a follow-up question asking customers to explain their ratings.

NPS is based on the premise that every company’s customers can be divided into three groups. People who answer 9 or 10 are “promoters,” or loyal enthusiasts who keep buying. Those who give a score of 0 to 6 are “detractors,” or unhappy customers. Those who answer 7 or 8 are considered “passives,” satisfied but easily wooed by competitors.

.. Management consultants are notorious for pushing ideas to CEOs using jargon and claims of improved business performance. Total quality management, or TQM, which advocated installing quality programs at companies, and business re-engineering process, and BRP, which was a way to restructure companies, gained traction in the 1990s and then faded. NPS has outlived such fads, spawning a cottage industry of consultants and software firms that help businesses implement and boost their score.
Some academics have questioned the whole idea, suggesting that NPS has been oversold. Two 2007 studies analyzing thousands of customer interviews said NPS doesn’t correlate with revenue or predict customer behavior any better than other survey-based metric. A 2015 study examining data on 80,000 customers from hundreds of brands said the score doesn’t explain the way people allocate their money.“The science behind NPS is bad,” said Timothy Keiningham, a marketing professor at St. John’s University in New York, and one of the co-authors of the three studies. He said the creators of NPS haven’t provided peer-reviewed research to support their original claims of a strong correlation to growth. “When people change their net promoter score, that has almost no relationship to how they divide their spending.”

Some data scientists said the way NPS is calculated, in which one survey metric is subtracted from another, increases the margin of error and requires a larger sample size to get useful results.

“It’s common for companies to track NPS data as if it’s gospel—not knowing that it’s super noisy by design,” said Kim Larsen, who has worked as a data scientist at several companies, including Charles Schwab Corp.

Bain, which now refers to NPS as “net promoter system,” said some companies are focusing too heavily on the score, but still defended the approach for some practical benefits. It is simple to communicate to employees, provides an easy way to follow up with customers and can be used to benchmark against rivals. The firm also said third-party analyses, including the 2007 studies, of whether NPS correlates with revenue aren’t as good as the analyses companies conduct internally.

“These are not stupid people. They are running large, successful companies,” said Rob Markey, a Bain partner who helps clients use NPS. “They have demonstrated to their own satisfaction that it’s good.”

Among the first companies to implement NPS were General Electric Co., Intuit Inc. and Charles Schwab Corp., whose leaders were convinced of the benefits after meeting with Mr. Reichheld and other Bain consultants. Now, hundreds of companies are using the score and many have tweaked the methodology, such as making the numerical scale 1 to 5 or including additional survey questions.

International Business Machines Corp. said it switched from a three-question survey to NPS in 2015. Employees in different departments can see the NPS feedback on their phones. “What it’s become here is a shared truth,” said Kathy McGettrick, vice president of market development and insights at IBM.

.. “A big challenge with the methodology is that organizations tend to focus on the metric as the objective instead of gaining the insight to learn and act on to improve the customer experience,” he said. “When organizations manage to the metric, they find ways to game the system.”

The results are easy to manipulate, whether intentionally or unintentionally. On Reddit posts, Best Buy employees share tips and tricks to improve NPS, which the company derives from a random sample of customers. They said they can get better results when they explain to customers how the scoring works, or tell them their compensation is connected to the result. Some said they remind only the happiest customers to take the survey.

“When horrible NPS comments would come in, the management would rail at the employees,” said Alan Sabido, a former Best Buy employee who worked at a Las Vegas store for three years until he quit last year. Mr. Sabido recalled an instance when his store team received a bad score because a customer had a poor experience at a different Best Buy location.NPS took on a greater role after Hubert Joly joined as Best Buy’s chief executive in 2012. The company said it was administering the NPS survey question to customers who bought products as well as those who didn’t. Best Buy also made the metric one of the criteria used to determine bonuses.

.. Delta executives describe NPS as the “true North Star,” she said, though the airline uses other customer metrics as well. “We have been able to statistically correlate our NPS performance with our revenue premium,” she said, referring to how much more Delta is able to charge than a competitor because of its brand.

.. It’s hard for investors to interpret the score because companies don’t typically share response rates, margin of error, or whether results are adjusted for cultural and other biases. Research shows  , and Americans tend to give higher scores than consumers in some countries such as Japan and Korea.

3 Reasons Product Managers Quit (and How to Prevent It)

There are many technology jobs where you can throw on your headphones and block out the rest of the world for large chunks of your day, but product management isn’t one of them. Interacting with others is a huge part of the job and being a hermit simply isn’t an option.

Working alongside a wide range of people is one of the benefits of product management, as you are the facilitator of collaboration, the hub at the center of various organizational spokes, and the engine that turns a market requirement or customer request into a useful piece of functionality. But the job can become unpleasant quickly when you don’t enjoy dealing with the people you must collaborate with on a regular basis.

Symptoms of an unsatisfactory team environment include complaining about individuals, avoiding meetings, antisocial or aggressive behavior, and obvious exasperation. But even when a product manager isn’t broadcasting their unhappiness with their coworkers, they can still be silently seething as they dread another day dealing with someone who makes them miserable.

And since talent-craving companies are always advertising what great places they are to work, the grass can definitely seem greener elsewhere.

There are three common ways a manager can be perceived as a “bad boss” that a product manager might want to flee from:

  • Lack of leadership—Product managers don’t just want someone to tell them what to do, they want someone who will help them improve and grow. If a manager isn’t providing mentorship, constructive feedback, recommendations, and inspiration, they won’t fully engage the product managers under them or inspire much loyalty.
  • Lack of clarity—When there’s only one product manager, the role is very clear (do everything). But as teams grow, responsibilities must be divvied up and areas of accountability must be clearly defined. Not only should a product manager know what they’re responsible for and the accompanying expectations, they should also have ownership of distinct parts of the product or process. Having to constantly check in with your boss is both inefficient and demotivating.
  • Lack of opportunity—There aren’t too many product managers content to do their existing job forever; they’re looking for chances to advance, take on more responsibility, and expand their skill set. Their manager plays a key role in making this happen by creating an environment where individuals are encouraged to grow and take risks, as well as by offering specific opportunities for product managers to extend themselves and develop their careers.

Everyone dreams of having a job they love, where they jump out of bed excited to go into the office and see what the day holds. While many people eventually shelve those aspirations for a steady paycheck, most product managers don’t have to.

Instead they find products and companies that are exciting and opportunities they are truly passionate about. Why work on something uninspiring using outdated technology and stale business models when there are so many other opportunities to build something truly innovative that changes people’s lives?

Even in a space that may not be as sexy as self-driving cars or virtual reality, there are still many chances to innovate within an industry, leverage emerging technologies, and shake up the status quo. When a product manager doesn’t feel like their current gig is giving them that chance, they’re likely to look elsewhere for a job that will let them scratch that itch.

“Due to the varying scope of responsibilities for the product manager from company to company, the skills and experiences at one place may not translate to automatic success at another,” says Vinh Jones of Lithium Technologies. “As the hiring manager, you have best grasp on what skills are needed to be successful within your current environment.”

Although you can’t always control all the variables enough to create a totally harmonious experience, you can at least mitigate the drama with some good planning. Of course symbiotic personalities within the product team itself are also key; there should be good dialogue and trust between team members and not too much competitiveness and jockeying for position.

Beyond personalities, roles should also be assigned to create an opportunity for product managers to be successful while developing additional skills and experiences. Giving them responsibility for discrete areas of the product that are within their capabilities but still provide stretch goals and challenges is a tricky, but essential, balancing act for leaders.

Not everyone dreams of being a manager, sometimes you just get elevated to the role because of your excellent work as an individual contributor. But once you get the title and a team, the hard part begins.

There’s no shame in admitting that you’re not a great manager right out of the box. You just need to identify and acknowledge your own growth areas and work to address them. As a leader, your focus is now on your team versus yourself, and you might need to add some skills to your repertoire to become the manager you want to be (and your team wants as well).

Are you setting clear and achievable goals? Are you having quality one-on-one’s with each product manager on a regular basis? Are you providing constructive feedback and praise? This isn’t rocket science, but for someone not used to managing others it’s easy to fall into bad habits and not cover Management 101 items while still focusing on product strategy.

The other tricky part of management is knowing when to step back and let your team members succeed or struggle on their own.

“Don’t solve their people problems. Don’t make decisions for them. Overall, don’t disempower them by doing their job,” says Brandon Chu of Shopify. “Doing so sets them up to fail, because people around them will no longer perceive them as having the agency to make decisions, and their job-ending frustration is self fulfilling from there.”

While the have-to-dos have to get done, product managers should be encouraged to pursue their own ideas as well, as long as they don’t become too much of a distraction. There are plenty of examples of unexpected positive outcomes coming from letting individual employees experiment (think Google’s 20% rule) and it will let product manager’s scratch that itch without actually leaving the company.

“Talented employees are passionate. Providing opportunities for them to pursue their passions improves their productivity and job satisfaction,” says Travis Bradberry of TalentSmart. “Studies show that people who are able to pursue their passions at work experience flow, a euphoric state of mind that is five times more productive than the norm.”

Don’t solve problems if you want to be a great manager.

To be a great manager, here are 16 questions you can start with instead of jumping in to solve the problem yourself:

  • What do you see as the underlying root cause of the problem?
  • What are the options, potential solutions, and courses of action you’re considering?
  • What are the advantages and disadvantages to each course of action?
  • How would you define success in this scenario?
  • How do you know you will have been successful?
  • What would the worst possible case outcome be?
  • What’s the most likely outcome?
  • Which part of the issue or scenario seems most uncertain, befuddling, and difficult to predict?
  • What have you already tried?
  • What is your initial inclination for the path you should take?
  • Is there another solution that isn’t immediately apparent?
  • What’s at stake here, in this decision?
  • Is there an easier way to do what you suggested?
  • What would happen if you didn’t do anything at all?
  • Is this an either/or choice, or is there something you’re missing?
  • Is there anything you might be explaining away too quickly?

What you’ll notice when you ask these questions is that most employees already have an answer (or several answers!) to a given problem. But they were uncomfortable with it, or they were worried about getting it “wrong.”

Part of asking the questions isn’t just to help them think through the problem more clearly, but also to help them realize they know more than they think, they’re more capable than they think, and that they’ve mitigated the risks better than anticipated.

Your job as a leader isn’t to just help clarify thought process – but to give confidence in their thinking.

As Wade says, “You’re trying to just help them get to that realization that, ‘You know what to do.’”

After all, a great manager is centered on building the capabilities of their team, not their own capabilities

Don’t solve the problem, yourself.

5 Skills a Modern Product Manager Must Have

There are essentially three ways on how product managers work:

  1. They escalate every issue and decision up to the CEO, and in this model he is just an administrator. The majority of companies are in this category.
  2. The product manager calls in a meeting with all the stakeholders, gives them a couple of ideas and let’s them fight between each other. In this case, the PM is just a roadmap administrator.
  3. The product manager gets shit done. In this case, the PM is a winner.

My intention is to convince you that the 3rd way is the right one.

You know your customer better than anyone else

You know your business like the back of your hand

You are the go-to guy to learn about your industry and everything that’s happening in it

You know everything about all the trends, technologies, customer behaviours and expectations. You are so good at it that you could write a book about the job you are doing.

Competitors? You know everything about all of them, but you never let that distract you.

If I ask you how many people left or subscribed today, you know the answer

Today some companies and startups expect PMs to be comfortable with data and analytics. He should have both qualitative and quantitative skills. A big part of the data you need to know is — “What your customers are doing with your product?”

Most PM’s start their day with 30 minutes or so of studying the data of what happened in the past 24 hours. They are looking at: sales, usage and customer satisfaction analytics, results of A/B tests. And this is an important point that you must not delegate to the analytics department or an assistant. Why? Because you don’t want to miss important details of your customers. You must know everything to draw a bigger picture.

You are a risk taker and inventor

There are trends in our industry, such as machine learning, AI, VR, AR, voice. These are not just fads, but they are here to stay. So you have to be able to adapt, experiment, take risks and not be afraid to fail when trying something new.

If you are not excited about learning these new technologies and exploring with your team, then you need to reconsider if this a career for you. That’s why having a passion for products is essential. It is something you can’t teach. You just have it.

Are you sure this not the description of a CEO’s job?

And that is true. A product manager is like a CEO but for the product.

Where is empathy and communication in all of this?

I have touched on this topic a little bit in the beginning but did not include it in the list because I consider this as something that should come by default. You should remember that having peoples skills is something crucial with all the technology that is happening.

Communication and empathy skills will define the success of a PM that in no way it will come without the help of their teams. This way it is essential to establish strong work relationships with your key stakeholders and business partners. You have to convince them of two things:

  • You understand their constraints
  • You will bring them solutions that will work within those constraints

.. Work very hard to build and nurture the strong collaborative relationship with your product team. Because, as your family, they will be your support along the journey.

.. With Internet access, you can get these courses online at: Skillshare, Coursera, Udemy, Udacity, EDX and Khan Academy.