In his recent post, Fred posed a question on the topic of compensation linked to NPS and explored the pros and cons. Naturally, when I think about this topic I look at it from perhaps another angle - that of long vs. short term economics.
If this seems arcane, put yourself in the position of management for a publically traded company facing the capital markets focus on immediate quarterly earnings and consider the incentives to cut short term costs out of your business (especially in a recession) at the expense of long term customer loyalty. Now imagine that you only have an average of 3 years in your position. You still want to take the bet on the future?
No big deal? Budget designers seek exactly the opposite. They would rather pay variable compensation out of short term upside for the company - so the bonus "pays for itself" out of earnings or savings. I recently heard a major corporate CEO make exactly this argument for keeping NPS out of compensation. And in a tight margin large company, putting a meaningful chunk of cost "out of synch" with the rest of the business is a tough call.