CX-based Compensation Systems – Do They Work?

Many companies have adopted CX-based compensation systems as a means to encourage employees to improve CX based on metrics obtained through customer feedback. While these compensation schemes are popular, they often backfire, creating more harm than good. There are alternative methods to reward your employees for progress that should be considered before adopting a CX-based compensation system.

Why it may seem like a good idea

If customer experience has been made a top priority in your business plan, rewarding those who are doing the best job is a no-brainer. In many scenarios, money is the ultimate incentive to ensure people are stepping up their game and performing to their best ability. Incentives change behaviour, but not always in the expected or intended way. It can fuel healthy competition and significant progress, but to link monetary incentives to an NPS or CSAT score can be tricky. 

Giving employees higher pay or financial rewards for their performance tends to work best in sales environments where the proof is in the explicit financial gains. Employees who do not make sales, do not get bonuses. Employees who make sales get a commission based on the size of the sale. It is logical and there is little room for anyone to question its fairness. Compensating employees for good CX is not as cut and dried, so this method often disappoints in a CX-based environment, as customer-based metrics, unlike financially-based metrics, are not as precise or irrefutable. 

The issue with CX-based compensation systems

Sometimes customer feedback cannot be taken at face value and when financial incentives are introduced, employees start to doubt the legitimacy of the scores’ reflection of performance. To begin with, scores are not necessarily indicative of the job performed. A score can often be based on external factors outside of any employee’s control. 

Financial incentives are not effective at motivating employees to create better customer experiences. They induce stress, fuel unhealthy competition, and they make scores the priority over doing a good job. This is not great for confidence and leads to falling motivation. Rather than bettering customer experiences, employees try to game the system to enhance scores over helping customers as they begin to obsess over scores to the detriment of customers. They may pester customers to leave feedback, focus on specific tasks or customers that are more likely to lead to high scores, or question the veracity of feedback collection altogether. 

Furthermore, it is rare for someone to go to work wanting to do a bad job, so the need for financial incentive should not even exist. If employees are appropriately motivated and encouraged by their managers to perform well, praise alone should suffice to get them on the right track to improving CX. For employees who are struggling, obtaining any sort of financial incentive may seem out of reach, so there is no chance of them working harder and they may even work less as a result of feeling defeated. They won’t bother to do a good job at the task they were hired to do, as their attitude may change to them doing the bare minimum until they are compensated for doing anything else. It eradicates the responsibility they have to perform well and create great customer experiences, thus lessening their accountability. 

Alternative ways to reward your employees

1. Consider non-monetary incentives

There are so many ways to reward your employees for going above and beyond that are more fulfilling than compensation. You should celebrate great performance, but shout-outs in meetings or internal newsletters, quarterly awards, and the promise of potential promotion or raise can be enough incentive for employees to excel. Employees need to feel like there is meaning in the tasks they are doing so being verbally reinforced and encouraged can remind them that they have a purpose. You should create a culture of positivity – where good actions earn recognition. This will promote employee engagement and empowerment which will ultimately lead to improved CX.  

2. Reward the collective over individuals

Focusing on individuals can lessen the progress of the group. Customer experiences are rarely executed by a single individual. It takes a whole team to create great experiences. Team members should be boosting each other up, helping each other and working as a group to perform well. Competition amongst individuals to be the best creates a distraction that is detrimental to progress. When recognising great work, make sure to acknowledge the collective rather than a single employee. Focusing on team-level metrics will nurture a cohesive work environment amongst employees and get them to encourage each other rather than get in each other’s way.  

3. Focus on better CX, not better scores

All too often senior management can forget that the point of CX programmes is to actually improve the experience of customers, not to improve metrics. Of course, these two things are tied, but if employees are stuck obsessing over numbers they will use shortcuts to try to improve CX scores rather than focusing on legitimate experiences. 

Encourage your employees to put their energy towards making sure the customers are getting the best service they can and eventually the scores will improve organically alongside your brand’s reputation. Invest in training programmes to teach employees how to deliver best-in-class customer experiences rather than relying on metrics and monetary gains to drive their motivation and performance.

The importance of employee satisfaction as a determining factor for customer satisfaction cannot be stressed enough. Happy employees yield happy customers, but striking a balance between creating great customer experiences and rewarding your employees for their hand in making these experiences happen can be tricky business. Monetary rewards are not likely to get you the positive results you desire. Focus your energy and funds elsewhere to provide a work environment that inspires your employees to shine.