MarketTools Blog

As customer feedback solutions evolve to include new capabilities for sharing feedback with employees at all levels, companies that strive to become more customer-centric are looking to tie customer feedback to compensation.  The idea is that this helps motivate employees to provide the highest level of customer service. 

There are many differing opinions and ongoing discussions on this topic – but if you’re ready to start tying customer feedback to compensation within your organization, here are three critical steps to get you started.

1)   Start with a MATURE and HEALTHY customer feedback program.  
By mature, I mean you’ve been collecting data a year or more, you’ve got a good sense of where your scores fall out and how stable they are, your data has been shared and generated interest within all levels of the organization, and you’ve done enough analysis to really understand how various customer experiences drive your outcome metrics.  By healthy, I mean you’ve got a good survey response rate, you’re confident in your customer databases, and customers seem to understand and accurately answer your surveys.  If you try to tie feedback to compensation before your program (and your understanding of it) is ready, you’re at huge risk of having the whole program crash and burn because the numbers are too volatile or not credible, or because you can’t confidently describe to employees how they can move the satisfaction needle in their day-to-day work.    

2)  Choose a metric.  Maybe more than one.  
There’s no one-size-fits-all metric here: every industry (and every business) will have different goals and a different model for customer loyalty.  Ideally, you should take your year or more of survey data and tie it to actual customer behavior with respect to your organization.  Which survey metrics best predicted actual repurchase, renewal, or increased spend?  Those are your corporate-level metrics.  Are there certain specific experiences that contribute to high scores on those metrics?  Those might be sub-metrics for certain teams (e.g. satisfaction with support or sales).  You should choose metrics that are stable, that you understand well from your historical data, and that employees will feel they can actually impact.

As you consider the right metrics to use in your employee evaluation, be sure to look out for competing goals and policies within your company.  For example, maybe your analysis suggests that call center representatives should be teaching the customer something new during a support incident to really drive customer loyalty.  That sounds like a perfect goal to base compensation on within the call center—it’s tied to outcomes and directly within the control of the support rep.  But if the organization also has a conflicting goal around keeping calls short, you’re setting reps up to fail at one goal or the other.  That’s no way to get buy-in from your front line employees!

3)  Structure your program around the right goals. 
Once you’ve chosen your metric(s) your next job is to figure out the target goal you’ll be evaluating employees against, and what employees will get if they deliver!  This is yet another area where your historical data is critical.  What kinds of increases in scores are realistic, given the movement you’ve seen in the past?  How large would an increase have to be for you to be confident it’s not just noise in the data?  Or should your goal simply be to maintain a current score (yes—sometimes this is OK too!).  Do you have enough responses to accurately calculate scores at the individual level (HINT: in my experience you very rarely do!), or should compensation be based on team or corporate scores (or a combination of the two)? 

You’ve also got to consider what proportion of compensation will be based on customer feedback vs. other goals and evaluation.  In my experience, somewhere between 10% and 20% seems to be the sweet spot.  Less than 10% and the organization doesn’t pay much attention.  But if you get too far past 20%, I find many organizations start to scrutinize every single data point – which quickly becomes unproductive and distracting.

These steps are meant to put you on the path toward tying customer feedback to compensation in a meaningful and effective way within your organization – click here for tips on keeping your compensation program on the right track.