Net Promoter Score (NPS) – All you need to know

First introduced in 2003, Net Promoter Score (NPS for short) has been a key way for brands to measure their consumer loyalty. Its use seems to know no industry bounds. Businesses as diverse as telecommunications, banking and food retail are all using NPS. So popular is it that an increasing number of organisations, enticed by its simplicity, are now extending its use beyond the consumer arena and using it to measure employee loyalty, by incorporating NPS into their employee engagement surveys.

For those not familiar with NPS, consumers or employees answer a simple question. How likely is it that you would recommend to a friend or colleague on a scale of 0 to 10, with 0 being not at all likely and 10 being extremely likely? Those who answer 9 or 10 are classed as promoters; those who answer 6 or less are classed as detractors. The NPS score is the percentage of promoters minus the percentage of detractors. As simple, straightforward metrics go, you can’t get much simpler than that.

But is NPS ready to play a viable role in companies’ talent attraction and retention strategies?

Many consumer brands have fallen into the trap of treating NPS as just a score: it’s become a number to track over time and a point of comparison with competitors. The reason people are promoters or detractors, although important, is not the focus of interest. But it should be. The value of NPS as a way of measuring employee loyalty depends on employers not making this mistake.

Only when and if employers can “fight the temptation to let it [NPS] become just a score” (Reichheld and Markey) will NPS be ready to play a viable role in companies’ talent attraction and retention strategies.

NPS, net promoter score

But first the selling points of NPS. Aside from the obvious simplicity of NPS, numerous studies including those conducted by the Harvard Business Review, Satmetrix, and Bain & Company have found that there is a strong correlation between high Net Promoter Scores and revenue. Where companies have used NPS as a measure of consumer loyalty, there has tended to be a corresponding growth in business revenue. Businesses with the highest NPS scores have tended to outgrow competitors by at least two-to-one, and data shows that customers who have come from referrals have tended to be 18% more likely to stay with the business than other customers. The thought that adopting NPS as an employee loyalty metric could have a similarly positive impact on employee retention figures and cost to hire figures is extremely enticing.

NPS also focuses the mind. Companies who adopt NPS as a metric generally become more focused – more focused on increasing the number of promoters and decreasing the number of detractors.

The NPS trap

Unfortunately, NPS does not provide deep insights. In a way, its simplicity is both its strength and its flaw. NPS doesn’t specifically identify the reasons why your employees may be detractors. If you want deep insights you have to add additional questions to the NPS question. It’s the kind of metric that you have to follow up and seek to understand why people would recommend/would not recommend the employer.

Understanding why people would or wouldn’t advocate you as an employer is what’s critical to identifying practical steps to improving employee loyalty. Instead of obsessing about the NPS score itself, employers must obsess on what they learn from the follow-up questions. The temptation to compare with competitors, the industry NPS average or department X versus Y must be avoided.

There are other reasons why the focus ought to shift away from the NPS score and towards the more exploratory questions that accompany the likelihood to recommend question. The NPS score could unwittingly be asked right after a single negative experience and therefore may be skewed by that one recent experience. In other words, an NPS score may not be that accurate a reflection of the overall employee sentiment towards their employer.

Added to this, there’s the age-old problem of people saying they will recommend you and then not actually doing so. NPS is a measure of the desire to recommend but not a measure of the will to recommend – an important distinction to make. And some say only the latter really counts. In order to accurately measure how many customers who say they will recommend you should also be asking an additional question – have you recommended us in the last 12 months?

NPS 2.0

It’s no surprise that Net Promoter Score, once the preserve of consumer brands, is being embraced by ever more employers to measure employee loyalty. You would be hard pressed to find a more simple and straightforward metric. What could be simpler than asking, “How likely would you be to recommend your employer to a friend or family member on a scale of 0 to 10”. With research fatigue a genuine problem we need simple questions like this.

We need an employer-led next generation approach to NPS with a desire to understand why people would or wouldn’t advocate their employer.

Katharine Newton is Head of Insight at Talent Works International (TWI). TWI is a global talent communications firm that helps organisations around the world build effective and efficient talent strategies through our research, sourcing and creative teams.