Why Paying Employees For Delivering Good CX Is A Bad Idea€¦ · Why Paying Employees For...

Why Paying Employees For Delivering Good CX Is A Bad IdeaHow CX Pros Can Make Every Employee Accountable For CX Delivery Without Resorting To Monetary Incentives

by Maxie Schmidt-Subramanian and Samuel SternMay 23, 2018

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Key TakeawaysMonetary Incentives For CX Performance Weaken Employee Morale And Create Bad CXThe most common unintended consequences of implementing customer experience (CX)-linked incentives include employees gaming the system and obsessing about scores, not about customers.

Five Myths Explain Why Firms Use Incentives Despite Evidence of Adverse BehaviorBlinded by these myths, companies forge ahead with monetary CX incentives without stopping to consider the downside.

CX Pros Must Wean Their Firms off Monetary IncentivesMost firms have some form of monetary CX incentives, and so CX pros must plan to reduce their negative impact.

Why Read This ReportFirms should hold employees accountable for delivering better experiences. Many companies do so by linking CX performance to variable pay. Unfortunately, that is a mistake. We identified five myths about monetary CX incentives that explain why companies reach for them so often and why they are just as often frustrated — or even appalled — by unintended consequences. This report recommends better ways for driving customer-centric behaviors that improve CX delivery and guides CX pros on weaning their organizations off monetary CX incentives.

© 2018 Forrester Research, Inc. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Unauthorized copying or distributing is a violation of copyright law. [email protected] or +1 866-367-7378

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Table Of Contents

Incentives Distract From What Motivates Customer-Centric Behaviors

Five Dangerous Myths About Customer Experience Incentives

How To Motivate Great CX Delivery Without Monetary Incentives

Recommendations

How To Wean Your Firm Off Of Monetary CX Incentives

Supplemental Material

Related Research Documents

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FOR CUSTOMER EXPERIENCE PROFESSIONALS

Why Paying Employees For Delivering Good CX Is A Bad IdeaHow CX Pros Can Make Every Employee Accountable For CX Delivery Without Resorting To Monetary Incentives

by Maxie Schmidt-Subramanian and Samuel Sternwith Harley Manning, Will Willsea, Ben Salamin, and Shayna Neuburg

May 23, 2018

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How CX Pros Can Make Every Employee Accountable For CX Delivery Without Resorting To Monetary Incentives

Incentives Distract From What Motivates Customer-Centric Behaviors

Many CX professionals ask Forrester whether tying CX metrics to variable pay could help improve CX performance — often after their senior leadership has already asked them to do it. It’s not surprising that their leaders gravitate toward tying CX to compensation: 85% of companies use pay for performance or “variable” pay. These are typically incentives tied to an employee’s individual performance, group performance, corporate performance, or a combination of all three.1 Unfortunately for CX professionals and their well-intentioned execs, there is ample evidence that tying CX accountability to compensation backfires (see Figure 1). Examples of perverse employee behaviors include:

› Begging: “Please give me a 10!” Employees can become completely obsessed with the metrics that influence their pay. Firms in virtually every industry have experienced situations where employees spend most of their energy coaching customers to give them high scores. In the process, employees create deeply negative experiences.2 What’s worse, that negative sentiment is burnt into customers’ memories because it happens at the end of an interaction.3 Managing toward a score also creates a negative, demotivating employee experience. Employees become cynical as they strive to achieve a goal they can’t always achieve. At the retail location for an American cell carrier, employees believed that when they received three survey responses with a score of 8 or lower on the Net Promoter Score (NPS) scale, they’d get fired.4

› Arguing: “That survey shouldn’t count!” When employees aren’t coaching customers, they’re arguing with their CX pro colleagues. Many CX pros we speak with spend massive amounts of time and energy governing the process of collecting and reporting metrics that are the basis for monetary CX incentives. Employees push back on issues including the size or representativeness of the sample, the statistical significance of the results, and why the CX team calculates the metrics the way it does. Sometimes employees ask to cut specific survey responses, asserting that the customer was unfair or just plain wrong. The time to resolve these disputes adds up: We estimate that a CX team inside of a large company can spend more than 1,000 work hours on policing and governing incentives.5 That is a major commitment of resources, made even more acute by the small average size of CX teams.6

› Resisting: “Can’t change the survey questions!” Incentives can handcuff efforts to mature CX measurement — and improvement — programs. Based on their past experiences as practitioners as well as their work with clients, Kim Palenik and Diane O’Hara from Medallia described this problem. CX pros find themselves avoiding updates and changes because stakeholders are extremely reluctant to change survey questions or evolve metrics.7 That’s because those changes would not only prevent stakeholders from trending key performance indicators (KPIs) over time but would also alter the monetary incentive calculations associated with specific performance levels on those KPIs.




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› Demanding: “Not until you pay me!” Each time companies incentivize employees to perform a specific activity, it adds to the overall expectation that employees shouldn’t perform any activity unless they are specifically compensated for it. That means incentives have a built-in ratchet effect — employees will fight against the loss of incentives for one activity and expect incentives for any new activities they are asked to perform. Those expectations raise the cost and complexity associated with asking employees to perform any new tasks.

FIGURE 1 Tying Monetary Incentives To Survey Scores Leads To Unintended Employee Behaviors

Expected employee reactionFirms linking incentivesto CX performance Actual employee reaction

Energize employees to put more effort into experience delivery.

Deliver friendly in-branch experiences.

Deliver better experiences to customers, and ultimately generate better surveys.

Go beyond just servicing the vehicle, to provide a friendly experience at the service center.

Interpreted that a low Net Promoter Score (NPS) is grounds for �ring and started begging customers for good scores*

Flagged “do not email” for customers they thought would give a low survey score

Offered freebies to customers in exchange for the survey scores they needed to get their bonus

Coached customers on what scores they should give on the survey

American cell carrier

Multinational bank

Porsche

Japanese automaker

*Net Promoter and NPS are registered service marks, and Net Promoter Score is a service mark, of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.

Five Dangerous Myths About Customer Experience Incentives

Why do so many firms implement monetary CX incentives despite ample evidence that they backfire? Forrester looked to research in behavioral economics and psychology to understand what was going on. We identified five myths that explain this situation (see Figure 2):

1. signal myth: Incentives show employees that a firm takes CX seriously. Especially at the beginning of a CX transformation, tying monetary incentives to CX performance seems like proof that senior leaders are putting their money where their mouths are.8

Reality: At best, incentives signal that a firm takes CX about as seriously as other business priorities — but it doesn’t demonstrate a single-minded focus on the customer. At worst, CX incentives signal that firms are pretending to be serious about CX but really aren’t. CX incentives




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— absent any other improvement initiatives, like offering training and guidance to help employees know what experience to deliver or removing barriers to experience delivery — expose the firm as unserious in its commitment to better CX.

2. Control myth: We need a set of rules to drive customer-centric behaviors. Some managers believe that employees — if left to their own devices — won’t do what managers need them to do. They therefore try to exert more control by introducing rules.

Reality: Piling on rules that overprescribe every detail of an employee’s work creates a boring, stultifying work environment. It also removes agency and autonomy from individuals.9 Take, for example, contact center agents who must follow scripts, stay within compliance rules, and upsell, all while using several applications at the same time.10 With all these rules, it is not surprising that employees have little mind space or energy left to connect with customers. But blaming employees for this gets the cause and effect exactly backward. What’s more, it is not possible to craft a set of rules that covers all the right behaviors. That’s because the right behaviors vary depending on criteria like customer personality, journey, or the specific context of the interaction. And many of the behaviors that drive great CX, like collaboration or proactivity, are hard to codify in rules.

“Ninety percent of adults spend half their waking lives doing things they would rather not be doing at places they would rather not be.” (Barry Schwartz, psychologist, author of Why We Work)11

3. Effectiveness myth: Incentives work because they are changing behaviors. This myth rings true with many of us because we have — in our personal or work lives — observed situations in which monetary incentives have changed behaviors. For example, changing a sales compensation plan will typically change the behavior of the sales department. That simple cause-and-effect relationship suggests employees are “coin-operated.”

Reality: While monetary incentives do almost always change behaviors, they often do so in unintended, undesirable ways. Behavioral economics research has revealed some of these consequences. First, while monetary incentives may have short-term positive effects, they have adverse effects on long-term behavior (see Figure 3). Second, variable pay might work for repetitive, routine behaviors, but it hurts the performance for behaviors like empathizing with customers and colleagues or being collaborative, creative, and proactive.12 Monetary incentives make employees less likely to exhibit these behaviors. If employees do end up acting coin-operated, it is only because their employers have created environments in which money is the only remaining reason to come to work.

4. Motivation myth: Monetary incentives motivate employees to do better work. Incentives provide a compelling reason for putting in the time and effort required to be customer-centric on a continuous basis.

Reality: Monetary incentives never replace what is truly motivating about work for employees: making progress on important tasks and believing that their work has real purpose, they are connected to their colleagues, they have opportunities to master new skills, and they have the




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autonomy to determine the best way to work.13 While employees need reasonable wages and benefits to have economic security and dignity, they do not gain more motivation from more money.14 Data about job engagement makes a powerful point about this: While 85% of companies use variable pay, only 13% of employees feel engaged and fulfilled at work.15 In fact, if employees are already intrinsically motivated to be customer-centric, adding monetary incentives can crowd out this motivation (see Figure 4 and see Figure 5).16

5. Retooling myth: We can fine-tune the incentive system to stamp out gaming. CX pros and their colleagues sometimes believe they are just one tweak away from an incentive system that employees can’t game. They’re betting that the next iteration of rules and incentives will finally be effective to drive the desired behaviors.

Reality: Every change to game-proof the incentive system is more likely to focus employee creativity on finding new ways to circumvent the system rather than on improving CX. The automotive industry is a great example because car manufacturers have long relied on monetary incentives to drive dealer behaviors.17 When manufacturers started to tie compensation of dealers to CX metrics, dealer employees reacted by cajoling customers to give high scores on surveys. Porsche UK, for example, discovered that its stellar NPS was the result of dealers offering freebies to customers in exchange for higher scores.18 Car companies reacted by trying to detect score coaching. For example, in a recent customer survey published by a Japanese automaker, we saw the question, “Did any employee coach you on what score to give?” And now, we hear anecdotal evidence that dealers threaten customers with bad service in the future if they don’t give high scores today.

FIGURE 2 Five Myths That Explain Why Firms Underestimate The Risk Of Using Monetary CX Incentives

RealityMyth

Incentives send mixed messages about CX.

Rules stie employee autonomy, and most customer-centric behaviors are hard to codify.

Incentives change behaviors in unintended, often undesired ways.

Money doesn’t motivate employees as much as factors like progress, purpose, autonomy, and connection.

Monetary incentives always lead to gaming.

SIGNAL: Incentives show employees that a �rm takes CX seriously.

CONTROL: We need a set of rules to drive customer-centric behaviors.

EFFECTIVENESS: Incentives change behaviors, so of course they work.

MOTIVATION: Monetary incentives engage and motivate employees.

RETOOLING: We can �ne-tune the incentive system to stamp out gaming.




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FIGURE 3 The Adverse Effect Of Monetary Incentives On Long-Term BehaviorFr

eque

ncy

of

beh

avio

r

Time

With incentive

Without incentive

Source: Roland Bénabou and Jean Tirole, “Intrinsic and Extrinsic Motivation,” The Review of Economic Studies, 2003 and Barry Schwartz, Why We Work, Simon & Schuster, 2015

42%Label

Behavior frequency increases when incentives are introduced.

42%Label

Behavior frequency reverts to the previous level once incentives end.

42%Label

Behavior frequency may sink below pre-incentive levels.




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FIGURE 4 Monetary Incentives Reduce Willingness To Collaborate And Help Colleagues

Social norm

Market norm

“I know she’d do the same for me.”

“I need to �nish this presentation for a client. Can you stay late and help me?”

“Of course!”

“$100 isn’t worth it; I’d rather spend time with my family.”

“I need to �nish this presentation for a client. If you stay late to help me, I will give you $100.”

“I am actually super busy, too. Sorry.”




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FIGURE 5 Examples Of How Introducing Monetary Incentives Quashes Other Motivations For Desired Behaviors

Source: Dr. Dan Ariely, Predictably Irrational, HarperCollins, 2010; The Journal of Legal Studies, vol. XXIX, The University of Chicago, 2000 and Bruno S. Frey and Felix Oberholzer-Gee, “The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out,” The American Economic Review, 1997

AARP legal assistanceAARP asked whether its lawyers would provide legal assistance to its members at a discount. Overwhelmingly, lawyers said no. But when asked to do it pro bono, they said yes. Why? Lawyers found giving advice for free the right thing to do, but at a discounted rate they didn’t think they received a fair “price” for their effort.

Daycare late finesAn Israeli daycare center introduced a �ne for every minute parents were late for pickup. But lateness went from 25% to 33% when the �ne was �rst introduced and then to 40% after 16 weeks. Most surprisingly, it went up to 50% after the �ne was taken away again. Why? The responsibility of being on time clashed with the incentive, and the incentive crowded out responsibility.

Swiss nuclear waste storageCitizens’ willingness to have a storage site in the community was 51%. The community sentiment: “It has to go somewhere.” But when citizens were offered six weeks’ salary in exchange for having the site in their community, willingness plunged to 25%. Once again, the self-interest calculation (“wait, there is no amount of money that makes this OK”) crowded out responsibility.




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How To Motivate Great CX Delivery Without Monetary Incentives

Monetary incentives can’t change the fact that behavior change is hard and takes time.19 As a better alternative, CX pros should encourage their organizations to play the long game with behavior change. Focus on creating a virtuous cycle of early improvements while providing ample time to let further changes play out. CX pros coax that process along when they:

› Evangelize the humble gardener mindset to build comfort with relinquishing control. General Stanley McChrystal’s book Team of Teams recommends a change in how we conceive of leaders, as well as how we coach and hire them.20 Leaders should not strive to be “carpenters” — omnipotent, fearless decision makers who directly control individuals’ growth — but rather “humble gardeners” who create conditions where growth is more likely. For example, Comcast has a manager training program in its call centers called “Supervisor to Coach.”21 The idea is to move managers from the mindset of “I tell you what to do and then you do it” — as Brian Gillespie, vice president of forecasting and financial excellence at Comcast, put it — to a model where they coach employees at least 6 hours a day.

› Create clarity on what success is and enable employees to achieve it. CX pros must make it easier for employees to be customer-centric. How? By identifying behaviors that drive great CX and removing hurdles that prevent employees from achieving those behaviors (e.g., lack of training and adverse policies, processes, or systems).22 This matters for all work but is most important for seemingly mundane tasks that turn out to be critical to delivering great CX — like cleaning rooms at hospitals and hotels. Cleveland Clinic, Crowe Horwath, Google, Hampton Hotels, and Randstad Belgium have all trained employees on customer-centric behaviors and cleared away hurdles that prevent more employees from consistently applying the right behaviors (see Figure 6).23 These practices help employees “behave their way into new beliefs.”

› Provide opportunities for deliberate practice. In research with surgeons, Anders Ericsson, author of Peak, found that top performers would not only videotape their surgeries but also spend considerable time reviewing the tapes.24 Watching the videos helped them notice problems they hadn’t been aware of during surgery. Then, they would use those examples to guide discussions with the surgery teams about what they could do to better anticipate and plan how they’d react to similar problems in the future. Vendors like Cogito and Onsophic (with Intago) have created tools that provide feedback loops that employees can use to track and improve their performance (see Figure 7).25

“Preparation, reflection, and joy are signs of deliberate and good practice.” (Anders Ericsson, psychologist, author of Peak)26

› offer prompt praise and recognition to heighten motivation for delivering better CX. Recognition is a powerful tool to enforce good behaviors.27 It works without monetary incentives or costly perks. For example, Crowe Horwath’s Pay It Forward program, where employees can — at the press of a button — recognize their colleagues for contributing to good client




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experience delivery, has significantly increased the percentage of employees who feel that their CX contributions have been acknowledged.28 eRetailer Zalando implemented a real-time tool that crowdsources both structured and unstructured performance feedback from meetings, problem-solving sessions, completed projects, launches, and campaigns. Employees can request feedback from supervisors, colleagues, and internal “customers” through a real-time app that lets people provide both positive and critical comments.

“Acknowledgement is a kind of a human magic. A gift from one person to another that translates into a much larger, more meaningful outcome.” (Dan Ariely, psychologist and behavioral economist, author of Payoff)29

› Recognize above-and-beyond performance separately. When employees truly do go beyond the call of duty, companies should tailor their recognition to how special the employees’ specific actions were. Through its research on the efficacy of recognition programs, employee recognition provider O.C. Tanner has found that noncash incentives — gifts like home appliances that will remind employees of the award each time they use it or celebrations that are personalized in some way — work better than cash rewards as recognition of above-and-beyond performance.30 For example, Zappos invented Zollars, which it advertises as a way for coworkers and managers to recognize employees when they have gone above and beyond.31 Employees who receive the unexpected Zollars can spend them on branded swag, movie tickets, or donations to charity or enter them into a raffle for bigger prizes.




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FIGURE 6 How Firms Identify And Enable Customer-Centric Behaviors While Avoiding Incentive Pitfalls

Best practice approachFirm Pitfall avoided

Through bright spots analysis, learned that nurses who rounded hourly on patients received higher scores for communication and patient experience.

Used participatory exercises to help back-of�ce workers identify how what they do affects the CX.

Created a system of objectives and key results (OKRs) in which employees set stretch goals for themselves (bottom up, instead of cascading corporate goals down into the �rm).

Found out through observation which behaviors separate the hotel managers who deliver great CX from others. Developed collateral and training for managers based on these bright spots.

Identi�ed drivers of customer experience and shared with employees how they can improve CX.

Partnered with nurses to identify schedule and process changes that would make it easier for more nurses to consistently round on patients.

Highlighted how contributing to better CX is part of (instead of on top of) back-of�ce employees’ day jobs.

Made companywide priority initiatives as well as individual and team goals transparent throughout Google. Therefore, individual and team goals are typically well aligned with corporate goals. In addition, Google separates evaluative and developmental feedback. Achievement of OKRs is not directly linked to compensation.

Identi�ed barriers for managers that arose from policy and process requirements. For example, Hampton discovered that socializing with guests around breakfast is important and that a policy requiring mangers to hand in paperwork directly after breakfast prevented that, so it dropped the policy.

Preserved employee autonomy by not creating a set of mandatory employee behaviors but instead creating more purpose in employees’ work through its customer delight initiative.

Cleveland Clinic

Crowe Horwath

Google

Hampton Hotels

Randstad Belgium




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FIGURE 7 Examples Of Firms That Use Technology To Provide Opportunities For Deliberate Practice

How the firm supports deliberate practiceFirm

Software vendor Cogito uses behavioral science combined with machine learning to identify behaviors that correlate to de�ned success in CX. The software helps enhance the employee behaviors that result in a positive CX impact. Client Humana, a health insurance �rm, leverages Cogito to deliver in-call speaking guidance to its call center agents as well as a dashboard to assist employees with self-directed training.

Training technology vendor Onsophic uses arti�cial intelligence to cater to employees’ training needs and deliver on-the-job training and simulator-based training. To improve customer centricity for a multinational workforce services company, Onsophic partnered with voice of the customer �rm Intago. Intago captured customer feedback as a success measure and identi�ed key CX drivers. Onsophic used the identi�ed drivers to deliver interventions in the form of personalized micro learnings to employees.

An ABC test con�rmed that the interventions worked to improve customer feedback. The A group was prepared for interventions and received them; the B group was prepared for interventions but didn’t receive any; and the C group was the control group. A outperformed B and strongly outperformed C.

Humana, working with Cogito

Workforce solutions �rm, working with Onsophic and Intago

Recommendations

How To Wean Your Firm Off Of Monetary CX Incentives

CX pros who work at firms that already have monetary CX incentives should be deliberate in their efforts to unwind the incentives. Follow these steps to draw back from monetary CX incentives:

› Assess how much current incentives and rewards cost and how effective they are. First, estimate how much money your firm spends on monetary CX incentives (see Figure 8). While our $97.2 million estimate may seem like a rounding error on a Fortune 500 company’s balance sheet, it represents a dream budget for the vast majority of CX pros. Next, review the efficacy of your current rewards and incentives. Using our checklist, evaluate whether each component of your compensation (including annual compensation, variable pay, and equity incentives) and rewards (e.g., cash rewards for the locations or teams with the highest NPS) systems exhibit the five characteristics of best-practice incentives and rewards (see Figure 9). The more “no” marks for a component, the higher you should prioritize it for elimination.

› Recommend alternative ways to spend the money. CX pros should be ready with suggestions for how to redirect some of the incentive money for other investments in employees. There are good alternatives, including increasing base pay or funding peer-to-peer or prosocial incentives.




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For example, a Harvard Business School study found that rewarding employees with money to spend on charity improved job satisfaction at an Australian bank.32 Firms could also invest the money saved in culture-changing initiatives like training or recognition. Giving recognition can be its own reward. O.C. Tanner found that employees who always give recognition have 26% higher engagement scores than employees who never or rarely give recognition.33

› Withdraw incentives step by step to avoid loss aversion. CX pros should assume that every reduction in monetary incentives for CX will cause an acute feeling of loss among affected employees.34 One way to protect against this is to follow the example of one financial services company. It withdrew incentives for selected teams. The changes were incremental, never forcing employees to go cold turkey on CX incentives. They moved from individual- to team-based incentives, then backed off to CX incentives at regional levels, and finally stepped back to having CX incentives just for the senior management level. This process played out over several years.

› Plan for how to mitigate the effect of remaining non-CX incentives on CX. Even after eliminating monetary CX incentives, CX pros might find that employees are distracted by monetary incentives tied to other corporate objectives. For example, think of bonuses tied to upsell and cross-sell metrics that incent employees to prioritize interactions with customers who seem like good conversion targets at the expense of other customers. To mitigate the CX impact of these other incentives, firms add in minimum CX thresholds that employees must achieve to qualify for the incentive. For example, at Merrill Edge, some employees must achieve a minimum acceptable performance on the firm’s transactional customer satisfaction score to be eligible for a portion of the variable incentive.35




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FIGURE 8 Incentive Calculator For CX Transformation Budget

Annual salary*

Variable pay†

CX-related variable pay‡

Number of employees§

Annual spend on incentives

$45,000

20%

20%

54,000

$97.2M

x

=

x

x

*Median annual earnings of US full-time employees†The US range is 5% to 35%.‡Forrester estimates the US range to be 10% to 30%.§Average for US Fortune 500 companies in 2017

Source: Bureau of Labor Statistics, Q1 2018; Society for Human Resource Management; and Fortune 500

FIGURE 9 Checklist: Are Your Incentives And Rewards PEPed-UP?

Why

Check if this is truefor your incentives/rewardsHow

Rewards from peers, not only from managers, are effective in creating a culture of recognition.

Rewarding employees for good performance should celebrate the employees’ achievements. This creates an emotional connection for the employees.

Giving employees money to spend on others — colleagues or a charity — drives job satisfaction and motivation.

Unexpected rewards break with the tit-for-tat issue of monetary incentives because they are not perceived as part of normal compensation.

Rewards reinforce new behaviors when employees associate the rewards with the behaviors.

Peer to peer

Exciting

Pro social

Unexpected

Prompt




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Supplemental Material

Companies Interviewed For This Report

We would like to thank the individuals from the following companies who generously gave their time during the research for this report.

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Atlassian

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Cogito

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Impraise

Ingredion

Intago

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Mattersight

Medallia

Merrill Edge

O.C. Tanner

Onsophic

Endnotes1 Direct compensation typically consists of base salary, an annual incentive plan (e.g., performance-based variable pay),

and long-term equity incentives (e.g., stock grants, stock options). In addition to direct compensation, firms reward employees with cash or nonmonetary rewards.

The percentage of organizations using variable pay vehicles — such as annual or quarterly bonuses based on individual, team, and organizational goal achievement — rose 1 percentage point for the third straight year to 85% in 2017, according to research from WorldatWork, an organization of total rewards professionals.

Source: “WorldatWork Report: U.S. Salary Budget Increases Come in at 3 Percent,” WorldatWork press release, August 1, 2017 (https://www.worldatwork.org/press-room/worldatwork-report-u-s-salary-budget-increases-come-in-at-3-percent).

2 Rather than focusing on the customer’s goal, the employee focuses on their goal for the interaction. This signals to customers that employees care about meeting their needs only to the degree to which it will lead to a high score on a survey.

3 Research by Amos Taversky and Daniel Kahneman has shown that the peak moments of an experience in terms of pain or pleasure and how an experience ends are disproportionately responsible for how individuals remember the experience. That research forms the basis for the peak/end rule.

Source: Daniel Kahneman, Thinking, Fast and Slow, Farrar, Straus and Giroux, 2013.

4 Source: Maxie Schmidt, “A Mistake To Avoid When Using CX Metrics For Employee Incentives,” Forrester Blogs, April 14, 2014 (https://go.forrester.com/blogs/14-04-14-a_mistake_to_avoid_when_using_cx_metrics_for_employee_incentives/).

Net Promoter and NPS are registered service marks, and Net Promoter Score is a service mark, of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.

5 Among the interviewees we spoke to, having one to four full-time employees dedicated to managing the measurement program wasn’t rare. And interviewees said those employees spend a considerable proportion of their time on policing and governing the incentive system: From explaining why the way the metric is calculated makes sense to devising processes in which employees can dispute individual survey results.

That’s an estimated effort of 1,135 hours per year: two employees, 49 work weeks (assumption to account for vacation, sick time, and holidays), 38.6 work hours per week, and 30% of work time spent on incentive processes and governance.

Source: Alison Doyle, “What is the Average Hours Per Week Worked in the US?” The Balance Careers, March 31, 2018 (https://www.thebalance.com/what-is-the-average-hours-per-week-worked-in-the-us-2060631).

6 The majority of CX teams have nine or fewer team members. For more information, see the Forrester report “CX Teams: What They Do, Where They Report, How Big They Are, And How Much They Spend.”






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7 In an advanced CX measurement program, CX pros evolve metrics over time — either because the focus on the metric has resulted in an increase in performance or because the metrics stop being useful to measure the quality of CX and tie it to an organization’s overall metrics.

8 And compensation exerts a huge influence on people. As Lou Gerstner, former CEO of IBM, says: “People do not do what you expect but what you inspect. Culture is not a prime mover. Rather it is a derivative. It forms as a result of signals employees get from the corporate processes that structure their work priorities.” Gerstner further expands: “Compensation is one of the most important of these processes. If the reward system pays a premium for one kind of behavior, that’s what will determine employee behavior, regardless of the words enshrined in the value statement.”

Source: Nigel Fenwick, “The No. 1 Barrier To Effective Digital Transformation,” Forrester Blogs, October 7, 2016 (https://go.forrester.com/blogs/16-10-07-the_no_1_barrier_to_effective_digital_transformation/).

9 Autonomy is one of the major motivating factors for employees. For more information, see the Forrester report “Customer Obsession Is An Employee Engagement Strategy, Too.”

10 Applications for telephony, knowledge management, and CRM are a few of the myriad technologies that, when implemented incorrectly, can muddle the work of customer contact agents, strip autonomy from employees, and stifle overall growth.

11 Source: Barry Schwartz, Why We Work, Simon & Schuster/ TED, 2015.

12 Source: Dan Ariely, Payoff: The Hidden Logic That Shapes Our Motivations, Simon & Schuster/ TED, 2016.

This is partly driven by the fact that incentives increase work pressure. Source: Chidiebere Ogbonnaya, Kevin Daniels, and Karina Nielsen, “Research: How Incentive Pay Affects Employee Engagement, Satisfaction, and Trust,” Harvard Business Review, March 15, 2017 (https://hbr.org/2017/03/research-how-incentive-pay-affects-employee-engagement-satisfaction-and-trust).

13 This is rooted in the self-actualization theory as coined by Kurt Goldstein and developed further by Abraham Maslow’s into his hierarchy of needs. For more information, see the Forrester report “Customer Obsession Is An Employee Engagement Strategy, Too.”

14 Source: Tomas Chamorro-Premuzic, “Does Money Really Affect Motivation? A Review of the Research,” Harvard Business Review, April 10, 2013 (https://hbr.org/2013/04/does-money-really-affect-motiv).

15 According to a recent Gallup study of 230,000 full-time and part-time workers in 142 countries. Source: Steve Crabtree, “Worldwide, 13% of Employees Are Engaged at Work,” Gallup, October 8, 2013 (http://news.gallup.com/poll/165269/worldwide-employees-engaged-work.aspx).

16 Source: Dr. Dan Ariely, Predictably Irrational, HarperCollins, 2010; The Journal of Legal Studies, vol. XXIX, The University of Chicago Press Books, 2000; and Bruno S. Frey and Felix Oberholzer-Gee, “The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out,” The American Economic Review, 1997.

17 In a study O.C. Tanner conducted, it found that “a simple combination of a symbolic award, a treat, and a meal out” was more likely to deliver value as part of a recognition program than cash rewards were. Source: “Recognition in the Modern Workplace,” O.C. Tanner, 2017 (https://www.octanner.com/institute/white-papers/recognition-in-the-modern-workplace.html).

18 For more information, see the Forrester report “Use Customer Journey Mapping To Make Your Culture Customer-Obsessed” and see the Forrester report “The Convergence Of Brand, Marketing, And Customer Experience.”

19 For more information, see the Forrester report “Leading Indicators Of An Effective Culture Transformation.”

20 Source: General Stanley McChrystal, Tantum Collins, David Silverman, and Chris Fussell, Team of Teams, Portfolio, 2015.











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21 Brian Gillespie, VP of forecasting and financial excellence at Comcast, speaking at Mattersight’s Call to Loyalty Conference, 2016. Source: “You Really Got Me: Dominating the Loyalty Space - A Fireside Chat,” YouTube video, January 3, 2017 (https://www.youtube.com/watch?v=prM8TNItLYM).

22 Employees want to see that they’re not alone in making changes. See the Forrester report “Remove Barriers And Add Enablers For A Customer-Centric Culture.”

23 For more information, see the Forrester report “How To Put Customers Front And Center For Behind-The-Scenes Employees” and see the Forrester report “How Firms Help Employees Evoke Emotions That Deepen Customer Loyalty.”

Google employees create their goals with a view on the strategic imperatives for the firm that are public. And because all goals are visible, the individual and team goals are typically well aligned with corporate goals. Source: “Startup Lab workshop: How Google sets goals: OKRs,” YouTube video, May 14, 2013 (https://www.youtube.com/watch?v=mJB83EZtAjc).

24 Ericsson’s research on the importance of deliberate practices was first popularized in Malcolm Gladwell’s book Outliers. The 10,000-hour rule was at best a simplistic explanation of the importance of practice time to mastery and at worst an inaccurate representation of the true insight from Ericsson’s research: For practice to lead to mastery, it had to be guided by an expert and focused on the development of key skills and competencies that the performer needed to master to become an expert in her chosen field. Source: Anders Ericsson and Robert Pool, Peak: Secrets from the New Science of Expertise, Eamon Dolan/Houghton Mifflin Harcourt, 2016.

25 Colleagues and managers notice the new pattern and tell their colleagues about it, which helps these colleagues be more aware of it, and they can adapt their beliefs to match the now-observed behavior. If employees think that maybe they can do something, then it builds confidence, or if they think that people do care that they are making an effort, it encourages them to try more, etc.

For more information, see the Forrester report “Harness The Power Of Emergent Behavior To Design Great Employee Experiences.”

26 Source: Anders Ericsson and Robert Pool, Peak: Secrets from the New Science of Expertise, Eamon Dolan/Houghton Mifflin Harcourt, 2016.

27 Dan Ariely said: “The good news is that by simply looking at something that somebody has done, scanning it and saying ‘Uh huh,’ that seems to be quite sufficient to dramatically improve people’s motivations. So the good news is that adding motivation doesn’t seem to be so difficult. The bad news is that eliminating motivations (by ignoring somebody’s performance [added by authors of this report]), seems to be incredibly easy, and if we don’t think about it carefully, we might overdo it. So this is all in terms of negative motivation or eliminating negative motivation.” Source: Dan Ariely, “What makes us feel good about our work?” Ted Talk, October 2012 (https://www.ted.com/talks/dan_ariely_what_makes_us_feel_good_about_our_work).

28 This is from a recorded interview with Julie Wood, chief people officer at Crowe Horwath. Source: “Pay It Forward,” Crowe Horwath video, 2016 (https://www.crowehorwath.com/Website/SiteTemplates/template-main.aspx?id=10849).

29 Source: Dan Ariely, Payoff: The Hidden Logic That Shapes Our Motivations, Simon & Schuster/ TED, 2016.

30 Source: “Recognition in the Modern Workplace,” O.C. Tanner, 2017 (https://www.octanner.com/institute/white-papers/recognition-in-the-modern-workplace.html).

31 Zappos also has a coworker bonus program to reward employees with a “little extra cash on their paycheck.” Employees can award $50 to a coworker each month for really “WOWing their socks off.” Source: Mike Stith, “6 Ways to Build Employee Engagement and Relationships in your Company,” Zappos Insights, September 30, 2013 (https://www.zapposinsights.com/blog/item/6-ways-to-build-employee-engagement-and-relationships-in-your-company).











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32 Read the “Prosocial Bonuses Increase Employee Satisfaction and Team Performance” study. Source: Lalin Anik, Lara B. Aknin, Michael I. Norton, Elizabeth W. Dunn, and Jordi Quoidbach, “Prosocial Bonuses Increase Employee Satisfaction and Team Performance,” Harvard Business School, May 7, 2013 (http://www.hbs.edu/faculty/Publication%20Files/13-095_4a7a4e90-eebf-4552-98df-57b11ed48c9e.pdf).

33 Read the O.C. Tanner Institute white paper. Source: “Influencing Greatness: Giving, Receiving, and Observing Recognition,” O.C. Tanner, 2016 (https://www.octanner.com/landing/offers/giving--receiving--and-observing-recognition.html).

34 People value avoiding losses more than they do acquiring gains. And so, any loss, real or perceived, is felt more acutely.

35 In general, Merrill Edge customizes the weighting and inclusion of CX-based incentive to the roles, responsibilities, and skill levels of the team. For example, more entry-level teams tend to see a higher focus placed on CX metrics to establish a foundation upon client experience. As associates move onto higher-skilled teams, the weighting of CX tends to become smaller. Other highly skilled associates who have direct or specialized client relationship responsibilities may see CX as a team-level qualifier, again including the incentive as appropriate to the team.

Source: Interview with Jane Bartosik, director, client experience and communication at Merrill Edge, March 2018.

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