This article originally appeared on LinkedIn.
A number of years ago, I met a Harvard Business School professor named Boris Groysberg. After several meetings discussing Net Promoter®, he decided there might be an interesting case study in examining how an organization makes customers the center of its operations. I introduced him to the executives at FirstService, where I serve as a board member, and they in turn suggested he meet the leaders of one of their subsidiary companies, custom closet designer California Closets—a longtime NPS practitioner. The result is a recently published Harvard Business School case study about the company’s use of NPS that Professor Groysberg now teaches to students.
Because of the depth of his research—he and coauthor Annelena Lobb spent more than a year on the project—I knew he’d have developed an interesting perspective, and invited him to share what he’s learned about how this company makes customer value central in its operations.
Before we get into the Q&A, it’s important to explain that the research for case studies is funded by Harvard Business School, not the company, and the case study is not an endorsement, source of primary data, or illustration of effective or ineffective management.
Let’s start at the beginning, Boris. How did you get interested in NPS?
In December 2012, I was helping with a project at my child’s school. The school was trying to figure out how to improve the educational experience and if NPS could help. I was interested to learn whether NPS could work in an educational setting. I read a bunch and then reached out to you, Fred. We got together, and you walked me through how it had been used in nonprofits. Generally my work focuses on talent management, organizational behavior, HR—that space. What was interesting to me [about NPS] was that while I was used to companies talking about customer centricity, they were not really doing much about it.
So you got interested in how an organization can actually use a focus on customers to spark action?
You have to find a system that, No. 1, listens to the customer and then, No. 2, does something with that data to make operational improvements and services. I care about HR, culture, structures, how you organize. Marketing has historically owned the customer relationship, but I cannot do my job without thinking about how a company thinks about managing that customer relationship.
Why did you choose to study NPS at California Closets?
I wanted to find a case company that really listened to the customer and did something with the data. I wanted to see the up and downs. All case studies take a significant amount of time to develop. That one was at least a year. We wanted to document the journey, what they’ve learned, mistakes. We need a lot of data and access, interviews. That match happened.
Did you find what you expected?
We were skeptics about what they have done and how they have done it. They gave us so much data. Financial performance by location, customer responses, both quantitative and qualitative responses, examples of how they use that data to improve operations and to improve innovation. California Closets management gave us what they did well and what they did not do well.
How did NPS fare?
Too many times, executives and CEOs are focused on one metric, one number. It could be NPS, an engagement score, a number from a balanced scorecard, financial metrics. What does that number tell you? The number is like taking a temperature. What I find most interesting is what do you do with the other things you collect from the client? Can you aggregate customer feedback, and how can you be more effective? The best companies use this as a system to improve iteration or innovate for new products. It’s not just that California Closets’ NPS is high, it’s that there’s very little variation. That’s what surprised me. They have franchisees and company stores, a premium product, and customers who are very different from employees. How do you create something with so much consistency? That brings us to operations. It’s about execution. When you are customer-centric and listen to customers, what do you do with that? How do you create an organization that listens and incorporate feedback to create a better organization?
In the case study, you describe how they evaluate lost prospects—people who visit a store, but then choose not to buy. Why is it important to talk to people that didn’t become customers?
Very few companies actually do this. California Closets called this measure future customer NPS. This NPS overall was low, but some people working at various California Closets locations had unbelievably high numbers from this group. What are they doing? Sometimes we are so siloed, one department doesn’t learn from another, one region from another. At California Closets, though, a lot of best practices were documented from that group of people who did this well. Many managers [at other companies] don’t ask what the people doing something well are doing. Once you do, then you collect those processes and create playbooks. Those are really important. They shrink the variance. They shrink the randomness. They create consistency. Great companies don’t leave customer value to chance. They operationalize it, find the way for a lot of people to get engaged, and they incorporate it in their short- and long-term plan.
Thank you, Boris.
Net Promoter®, Net Promoter System®, Net Promoter Score® and NPS® are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.