Net Promoter Score® was developed as a means to measure customer loyalty more quickly and accurately. In a Harvard Business Review article the creator of the system, Frederick F. Reichheld, explained that simply measuring customer retention rates isn’t enough. Attracting a high number of customers is great in the short run, but loyalty is what will help your company grow in the long run. Loyal customers spread word of your business, lower new customer acquisition costs and will use your services/products, even when confronted with a cheaper option. NPS is based on customer surveys that ask one simple question: “Would you recommend our company to a friend or colleague?”
Companies can use NPS to also gauge employee loyalty. Employee Net Promoter (eNPS) score, is calculated in the same way, except you’re asking the question, “How likely is it that you would recommend this company as a place to work?”
Loyalty is not simply how long an employee has been with your company, but how committed they are to your company’s success.
One of the top concerns of every HR department is attracting and retaining top talent. Employees are often the best source for attracting new talent to your company, so keeping your existing team happy pays off in the future. However, Elance/Odesk found that 57% of Millennials consider long-term company loyalty to be dead. According to a survey by the American Management Association, declining employee loyalty causes low morale (84%), high turnover (80%), disengagement (80%), growing distrust (76%), and lack of team spirit (73%). To guard your company against high turnover and the inability to attract talent, it’s important to keep track of your eNPS.
Failing to keep on top of employee loyalty can also greatly damage your company’s image. Employees are now free to air their true feelings about their employer on social media. Companies that make it on Fortune’s “100 Best Companies to Work For” list experience a 14% average rise in stock prices per year, compared to 6% in the overall market.
Employee engagement has a major impact on customer satisfaction. Your employees are your brand ambassadors and, as such, if they don’t believe in your brand, this will come across to your customers. Creating a strong company culture that helps engage and educate your employees on your company values will greatly impact brand loyalty. Surprisingly, Gallup found only 41% of employees actually know what their company stands for and how their brand differs from competitors. According to Target Training International, over 60% of customers stop dealing with a company due to perceived indifference on the part of an employee.
To keep on top of these issues, it’s important to check your eNPS regularly. Send out quarterly surveys asking your employees to rate on a scale of 1-10, “How likely is it that you would recommend this company as a place to work?”
Those employees who answer with a 9-10 out of ten are considered net promoters. Anyone under this number is considered either a passive promoter (7-8) or detractor (0-6). Just like your NPS, your eNPS is calculated by subtracting the number of detractors from the number of net promoters.