Customer Experience Superheroes - Series 9 Episode 1 - Winning on Purpose with Fred Reichheld

Fred Reichheld is business management royalty. The inventor of the universally adopted metric NPS (Net Promoter Score), Fred has dedicated his life to helping promote the importance in business of enriching peoples lives. He has worked with many organisations across the globe understanding what it is they do to make their customers want to stay with them and encourage others to join them too; the true meaning of loyalty as Fred puts it. 

Despite NPS being adopted by every industry and across the globe, Fred remains restless. With the majority of those using NPS not gaining the full potential. To address this Fred has written an incredibly generous book, 'Winning on Purpose' which not only lays down the formula for measuring commercial gain from customer experience, but also shares a lifetime of experiences with some of the most successful brands on the planet.

In conversation with Lexden's CX's Christopher Brooks, Fred unpacks his manifesto from Winning on Purpose for enriching people's lives and encouraging more love in business. A tour de force, with a pedigree track record this podcast is a must for any CXer, as is Fred's latest book, Winning on Purpose'

Transcript

SPEAKER_00 0:11

Hello and welcome to the latest episode of the Customer Experience Superheroes Podcast Series. My name is Christopher Brooks and I'm your host. We are now in our ninth series, but from the start, our ambition is to be able to bring you ideas, inspiration, and insights from some of the most advanced, developed, and well-loved practitioners of customer experience. In our latest episode, you could say we've hit gold. We're going to be talking to a man who truly deserves the title Influencer. If you don't know Fred's name, you'll certainly know his work. The Net Promoter School or NPS. Fred has written a number of books on the Net Promoter system. And in this latest book, he takes it to the next level. He's going to leave us a legacy to understand how to commercially employ as well as enriching people's lives. The true purpose of Net Promoter Score. I caught up with Fred in what was one of my favourite interviews to date to understand the man, his loyalty to Bain, his inventions, his take on how Net Promoter Score has been accepted by the world, and we'll discover how much more work there is to do before we get to a point where it's truly living up to the potential he hoped it would. Okay, so we are here today on the uh Customer Experience Superheroes podcast with a man who has become part of the fabric of our industry. Fred Rikhardt is here with us. I can't believe I'm actually saying that. Fred Reichhardt is here with us today to talk about something quite extraordinary that is happening. But Fred is a man who speaks a lot about loyalty. And one of the first things I want to talk to you about, Fred, before we get on to the book, uh, which is uh is a very exciting piece of work, is your loyalty to Bain. You've been there how long now?

SPEAKER_01 2:18

I started in uh 1977, so you know, 44 years and counting.

SPEAKER_00 2:24

I mean, you've obviously seen a lot of a lot of changes, not just to to the industry, to the economy, but sort of personnel around you. I mean, um, it's quite rewarding to hear someone talk about loyalty who has been so loyal to an organization, but what's kept you there for for all this time? What's been the the motivation to carry on with Bain?

SPEAKER_01 2:45

Uh in the early days, it was because we were having such a unique impact on our clients that the notion that a young person could have that kind of reach and influence is what appealed most. But over time, it was just the caliber of person that Bain could attract and retain and the aspirations that the firm has, the set of values of what we want to achieve. There are a set of values that the firm lives by, strives to live by, and they're pretty close to what my personal values are. So when you find a place that lives the life that you're proud of and attracts a lot of people who have similar values, it's that's a community you'd like to stay in your whole life if you can. But you you know, the trick is you have to earn that right in a business. You have to create a valued role of contribution. And I've been lucky enough to be able to do that at Bay. And and and it's hard, you know, there's a lot of energetic, ambitious, hardworking, creative people, and and you have to be able to figure out something that you can do that the organization truly values.

SPEAKER_00 3:48

When you say you were lucky, I mean, did it feel like the right place when you got there, or did it grow on you? Did you not kind of have to get used to the values it had and and they chime with you, or did you kind of from day one go, this is home?

SPEAKER_01 4:01

No, it I think you re-ask that question every year. You can have values written on a wall uh or in a pamphlet, but how well they're being lived and and when you go off kilter, how quickly they get uh re-energized. Those are value judgments you make all along the way. And you know, continuing this last time, we should I write this book with Bain or is it time to go off on my own? And every time I've asked that question, it's it's always been a uh this is better as part of the Bang community. Although, you know, if I left at this point, I'd still be part of the Bang community.

SPEAKER_00 4:32

I've heard in the preface you refer to sort of the digital godfather of loyalty, I think is the expression there. The more I I read and the more I hear you talk, aren't you just an inventor at heart? I mean, if you've got a great big shed out in the back with lots of kind of you know mechanical pieces that you're putting together as well, you're an inventor.

SPEAKER_01 4:51

Somebody did somebody tried to introduce me and figure out what I was, and it is a hard one. One guy has argued that you know, at core at the core, Fred, you're a teacher. I don't think of myself that way, but you know, I guess there's some truth in that. I do agree with you. I'm an inventor. I've always felt that uh instead of just playing the game that other people have invented and the score system that they've invented, you really got to figure out in your life what it is you care most about winning. And they've those measures probably don't exist yet today and need to be created. Yeah, I'm an inventor not just of tools and processes, but trying to figure philosophically what what is it you try to achieve in your life that's worthwhile?

SPEAKER_00 5:34

It's very clear from the book, it's very emotional to hear. You know, you talk, you're a husband, you're a father, you're a you're a grandfather. How important has it been to have that community around you? Because we forget that your invention is just it's just part of our vocabulary today, but you were there before the acronym, you were there before the confidence. You had to, one of the superpowers we talk about is that active listening. It's clear the the CEOs you were working with, for them to give the time and effort to you, you've listened to them, you've actively listened to them without the intention of responding, just hearing what they're saying and taking that away and worked with it. So, this community you've built around yourself, the families and these leaders, how important has that been to you in terms of inspiring the work you're doing?

SPEAKER_01 6:19

Well, I don't think you can accomplish anything in life except through the relationships and the communities that you're part of. It's just very hard to change anything. We don't have that many years, we don't have that much energy, and we certainly are going to touch six billion people around the world personally. So it's always indirect and through relationship. And yeah, I think you know, I've been very thoughtful through my life about who I want to spend time with and only invest in relationships and in communities where I feel like I can contribute in a meaningful way, and that they that that group has a concordance in what they believe is important in life. You know, and and I try to buy from companies and invest in companies the same way that you choose who you're going to go to dinner with on Saturday night. The more you can find people who are going to make the world a better place, then you can commit your life to supporting their success. And and in so doing, really supporting your own mission.

SPEAKER_00 7:14

That comes through in the book. You refer to that. There's sort of that's what load is about. It's about investing resources and effort and energy in things that you believe are going to make the world a better place. Some of the the early conversations when you were you were looking at developing a measurement, were they part of the discussion even back then? And I see very interestingly how the actual acronym could have been very different when it first started. There was, you know, alternatives there about enriching lives. So was that always at the heart of it?

SPEAKER_01 7:44

No. What started me on this uh path was spotting companies that I admired who also had uh were delivering economic results that were just extraordinary. You couldn't explain their success with traditional economics that I learned in college and business school and in the early years at Maine. And it became clear that it it had to do with loyalty, that that people coming back for more and bringing their friends was at the core of great organizations, great communities. Initially, I thought, you know, loyalty is what you're after. And I looked at retention rates and the economics of loyalty. But over the years, what became more interesting was well, what is it that a company does that earns that kind of loyalty? It you don't just trap people in your community and create exit barriers. You don't, you don't fake them out with with tricky marketing and and uh just you know catchy advertising. It's how they're treated and how they treat one another that makes them loyal. And in the end, I think it's whether they feel loved and well cared for that makes people loyal to an organization. And over time, I saw that you know, it's not just retention, it's treating people so well that they feel their life has been enriched and they want to share that with a loved one. And that's where recommendation to a friend became such a central part of my thinking. You know, it's it's way more than just a survey question. Yeah that that notion that you've experienced something that was so special, made your life better, that you really want a loved one, a friend or a colleague to have that same experience. That's an act of love, not loyalty. Over the years, that's become more apparent. So, net promoter score, as you implied, I you really measure your success of all the lives I touch and impact, how many are enriched and how many are diminished. And so the this promoters minus detractors is the math that I use today, but it was really lives enriched minus lives diminished, that I think makes this relevant, not just to businesses, but to every organization and every person. I guess if you share my philosophy, but I think most people do, they want to have a positive impact on the lives they touch. And for me, that's all talk until you have a measurement system that is well understood and universally used, and a taxonomy of talking about outcomes that everybody agrees with, because otherwise you're just sort of making up your own stories, and people think they're saying the same thing, but they have completely different interpretations.

SPEAKER_00 10:21

Sure. I mean, I think you you coined the phrase a customer capitalist manifesto. I mean, I thought I thought it was interesting to see that as an expression, give some kind of judicial or some financial grounding to it. Is that the intention there?

SPEAKER_01 10:34

Yeah, I think uh I'm willing to uh argue at this point in my life that there is only one way to create a great organization, and that's uh through leaders who are committed to helping their teams enrich the lives of customers or their constituents, if customer is the wrong word. And and so the leader's primary job is to their people, to their teams, but that responsibility is to help inspire them on a mission of service that delivers remarkable experiences to customers and makes their lives so much better that they recommend them to friends. And it's that that's the flywheel that drives the economics of the business, it drives the spirit of the business, and it is completely missed by financial accounting today. The benefits are obvious over time through the finances, but I think if you follow the logical implications of financial accounting, it actually leads you down this destructive path that makes you think profits is what a business is about, or even shareholder value, which is really a second or third order outcome of what I think the primary purpose of a business is, which was to enrich the lives of its customers.

SPEAKER_00 11:47

So I get it said to me quite often that you know those who were schooled in sort of the 80s and the 90s, that was what was served up to them about you know shareholder value, and therefore everything else was a distraction. So at the moment, is you know, we're having to push really hard to get things like the environment, employee satisfaction, um, community back into the mix. Do you need enlightened leaders to be able to get there? Or do you have individuals you've worked with who have kind of gone, I now get it? You know, it doesn't matter, there's some skeletons in the closet. And one of the organizations I know you work with is Nike. And I've spoken to a couple of the people from there who just seem to get it, you know, they sacrifice revenue for doing the right thing for improving outcomes now. Whereas perhaps in the past, as they were growing up, these things weren't always so front and center.

SPEAKER_01 12:37

I grew up in the 70s, went to college in the 70s, and and even back then, uh, most of the clear economic thinkers were focused on shareholder value and the notion that uh if you ran a profitable business, you were making the world a better place. The Adam Smith invisible hand and so forth. I think that's flawed thinking, deeply flawed. But there's an equally there's a deep flaw in the just thinking, oh, we're really here to make the pollution better, or to, you know, to make the environment better, or to make a great place to work, or these are all vital and appropriate, but you can't do any of those things unless you have that first duty. Certainly, you know, you have to make this a better earth for for our customers. And I think this customers are smart these days that if they have the facts, they really don't want to be associated with a company that pollutes the environment or cheats on their taxes. So, yes, metrics have a role to play in all these dimensions, but they are hard to come by and make them audit-worthy and reliable. I've I've seen the horrible things that happen to net promoter score as people take a uh a perfectly good measure and then try to make it into a target and hold people accountable. You know, they drive their bonuses off their survey-based net promoter scores, and far more bad is coming out of that than good because it's destroyed the credibility of net promoter scores. So now I have an appreciation it is so hard to have a well-designed audit-worthy metric. We don't even have that yet for customers. And I've been doing this for 40 years. Now we're going to throw in the environment and governance and things that I believe deeply in. But boy, getting the metrics right that are worth holding people accountable to be serious. That is a long slog.

SPEAKER_00 14:28

Just come back to that point. I mean, you expression I picked up was, you know, I'm deeply troubled with how badly most are implementing MPS. I mean, and I've heard you talk about this before. You said this is a life's work, and you do, you know, you go on to talk about legacy and things. And, you know, does it feel like there's a lot more work to be done to get people to that point to understand it's about enriching lives and about be associated with organizations that make you feel good about yourself?

SPEAKER_01 14:53

It's a mixed, it is a mixed track record at this point. I think uh most people take net promoter on with uh good intentions and probably do more good than bad with it. But in truth, I think the uh amount of abuse and misuse of the net promoter system, it's it's just so inconsistent with the philosophy that underpins it. That I uh that's one of the reasons I had to write the book. All of these, and mostly well-intentioned, but so many misapplications of the system. Let's get those fixed and get it back on track. And then because it has spread across the world, Fortune magazine did a uh feature a year ago and concluded that something like two-thirds of the big companies in the world are using Net Promoter. I would guess only five or 10% are using it in a way that would make me proud. And and on average, the typical practitioner of with Net Promoter is getting something like five, 10%, 15% of the full potential value of that approach. So there is a long way to go, and I need lots of other people to pick this up and and get it fixed because I'm getting pretty old.

SPEAKER_00 16:05

So that brings me back to a point which again is one of the superpowers we talk about, which is share everything in the spirit of progress. You know, the choice to open source this in from the outset, was that with the hope the right gang would pick it up and run with it? Or I guess you know you had no idea at that particular point, but is that a decision that you do reflect upon that actually perhaps this should have been in the right hands? Or or do you think actually, no, this is you know, we need to get it wrong to get it right? There seems a lot of you know, a lot of the work you do seems to be very based on kind of continuous improvement. So that's okay, isn't it? We're just getting towards the point we need to get to with it.

SPEAKER_01 16:43

Yeah, I was I was convinced early on that open source was the best uh approach. I didn't realize how badly people could mangle things, but but I but but nevertheless, if if I had tried to maximize Fred's net worth by keeping this a uh uh a black box and only and sort of renting it out or selling it to my clients, I'd probably be a lot richer today, but I'd have way less influence on the world. And Net Promoter itself would have never advanced to the level of sophistication it has. You give this to companies like like Apple and Lego and uh Nike and thousands of others, and and they come up with some really uh creative, innovative ideas on how to do it right. And the technology companies like Medallion, Qualtrics, and and Customer Gauge, and dozens of others, they've figured out technologies of rolling this out that I never could have influenced or financed. So I'm I'm thrilled with the overall impact and yet daunted by how much fixing there there needs to be. And I think the reason the reason this book is called Winning on Purpose, because I think where people are flawed and where it's going off their tracks is where they really have the wrong fundamental objective. They have a confused understanding of purpose. I believe the only way to build a great organization is to make customer enriching customer lives your primary purpose. And yet only 18% of business leaders today agree with that point of view. It's shockingly small.

SPEAKER_00 18:23

I saw that, I saw it's kind of less than one in five. It's it's it was, yeah, it was quite that's why I talk about enlightened leaders. You kind of it still feels like they are the the early adopters almost of kind of that philosophy. Um, I mean, I think the way the structure of the book leads us very nicely through the net uh purpose uh system as as you kind of like uh evolve it to, and that starting point, kind of that you know, that understood purpose about enriching the lives of other people. Then you move into this really interesting piece on lead with love. Do you want to expand on on you know what we mean by this? Because we've been talking about the financial aspects of it, uh, we're talking about enriching lives, and then we but then we bring this really emotive word in their love. So lead with love. What do we mean by that?

SPEAKER_01 19:07

Yeah, love is a very tricky word because uh, as I say in the book, you know, people will say, I love you to their uh their spouse, to their dachsund, they they say they love ice cream. So I I think love in this with this definition that in a relationship, a loving relationship is one where the happiness you derive from that relationship is primarily the result of making their your partner happy. The more, the more that you make that partner's life enrich their life, the more you benefit from the uh from that relationship. And it is that in it's it's that kind of a relationship that I think makes great companies, that that leaders only prosper when their teams prosper. They prosper through the success of their people, and their people succeed only when they make customers' lives better. And that loving, you know, when customers feel the love, when they feel someone is treating them with loving care, they come back for more and bring their friends. And that kick starts a uh a flywheel that is stronger than any other force, economic force in business. And I think that's that's why these companies who have the highest net promoter score, which is really just an indicator that they are earning the greatest love from their customers, but they're they're just generating the most outstanding financial returns, not because financial returns were their primary objective, it's because when you get that flywheel started and customers feel the love, a lot of really good things happen.

SPEAKER_00 20:42

You you reference one of my favorite brands, and I have to say, um, you know, for the for the case study examples from USA USAA, I'd have bought this book alone. You know, whenever I see an example of theirs, I scoop it up. And and there's one that you you refer to, which I hadn't seen before, around the catering um of an evening and kind of allowing employees to have more time with their family because they didn't have to do the shopping and the cooking, and kind of that that penny dropping moment where you realize kind of the well, that's exactly what a good general does. He cares for his troops, that kind of connection. So, so this is what I'm seeing here is what you're talking about is having that purpose and seeing it through in terms of lead with love is actually empowering the employees to recognize what the the role model for for great experience is because they're receiving it themselves, that kind of that gift, that gratitude, you naturally pass it on because you've got the role models there. I mean, these these 18% you know that are that are getting to that particular point, do they have a DNA that means the other you know 82% will never get there? Or or do you believe it's just a case of spending more time with you know in in loyalty, falling in love with being associated with people who treat you well? Helps us get to that particular point.

SPEAKER_01 22:02

Well, uh, I'll give you two answers on that. One, as much of an uphill battle as I think it is to get more people to recognize the loving side, the loving, the necessity of love in business. The truth is, these firms that do love their customers and are generating outstanding net promoter scores, those guys are gaining market share and growing, and they are winning over the economy. So it might only be 18% of leaders today, but I'll bet it's 30, 40, 50 percent of the revenues on earth are being earned by these companies who get it. But there is a, you know, it's we use financial measurement systems that completely force the different mindset. It's profit-based, and we measure success, we do our budgeting, we allocate capital. Uh, investors care most about financial accounting, and that measurement system becomes our reality, our paradigm. And that is so uncustomer focused. You know, a gap accounting doesn't even make you keep track of how many customers you have, let alone how many are coming back for more each year and bringing their friends. So, my whole philosophy of love drives the flywheel is invisible to an accountant.

SPEAKER_00 23:22

And I think you you say, and I think you put it very, very well, that if you've got to start with making things better for customers, then the consequence will be increased shareholder value. You're you're looking to invest and do more, but if you start with increased shareholder value, invariably the mind goes towards reducing things for customers, removing things, make you know, making it more efficient and having the opposite effect to what you're trying to do. It's as simple as that, isn't it, in terms of binary terms?

SPEAKER_01 23:49

Yeah, if leaders, I mean, you're not going to delight customers unless you have inspired employees who are innovating and care about their customers and are willing to take risks. They know that if someone abuses them, whether it's a customer or a colleague or a vendor, that the leaders will protect them. If you don't have that confidence and trust, there's no way you'll get the employees to do their best and earn customer loyalty. It's not like you just focus on your customers and everything else takes care of itself. You have to be very thoughtful, but nothing, you don't even have the degrees of freedom to worry about those other things unless you get that customer one right up front. When I started early on, I've told some of these stories in the book, but the notion that love for your people is at the core of all great leadership came from me talking with uh military guys. I have I have no personal military experience, but I interviewed the commandant of the Marine Corps because one of his colleagues said, Oh, Fred, you're he will love your work. You'll be amazed at how much overlap there is. And and that guy was right. Chuck Krulak was the head of the Marine Corps. He used the word love 30 times in our interview. And I thought, wow, that is unusual. But the more he described it, he made the same kind of love that I did, taking care of your people and helping them achieve their mission and worrying about their safety and well-being. And then I met uh Bob Harry's, who ran USAA at the time, also a decorated uh general and uh vice chairman of the Joint Chiefs of Staff at one point in his career. And he was talking about his response, you know, why do they have these prepared meals down in the commissary for their employees to get? I don't know if they're free or were subsidized, but basically it just made it easier for single parents to live a better life at home. And uh he just he thought about his job is caring for the safety and well-being of his troops. And that that was the thing that made the light go off. He said, Of course, that's the kind of leader I'd want to work for. Someone who's who cares about me, not someone who's gonna replace me with a robot the instant they can, or that is you know, pounding away on my my compensation. Oh, and and now Andy Taylor, the the the other story I tell very early. Andy is he's not the founder, his dad was the founder, but Andy took enterprise rent a car from a tiny little niche business in St. Louis, Missouri to the largest car rental company on earth. I asked Andy what he was most proud of. And I'm thinking, I don't know what the Taylor family is worth, tens of billions of dollars, you know, just awesome success. And uh he said, Oh, it's it's that notebook over there. He pointed to this big fat notebook, and it was all of the enterprise employees who were earning over $200,000 a year. Because his definition of success was helping lots of these entrepreneurial branch managers and area managers really achieve a level of financial success that they never dreamed was possible. But he made it clear to them the only way you can do that is by taking such great care of your customers, they come back for more and bring their friends. And so it over the years, I've seen this love from leaders transferred through their teams, their frontline teams to touch customers is the road to greatness.

SPEAKER_00 27:10

That is this this piece around making the success of others your reward is seeing that as your goal and and kind of not seeing it selfishly what you achieve, but what others achieve because of you. And I think that that could I can just envisage this uh folder on on the shelf there, just brimming and getting bigger and bigger and bigger, and the bigger it gets, it just recognizes just how many more people have been successful because of their association with enterprise. I mean, that taps in nicely to that kind of chapter on inspiring teams. I mean these sorts of actions are incredible, but you you need that psychological safety, don't you, with an organization to have the confidence to go wrong, to push it too far, to do things that didn't quite work as well, because we don't get it right every single time. In terms of measurement, how do you see that? I mean, we have we have obviously Net Promoter Score is expanded to employee promoter score. Do you see it coming through in there? Is that where we see it?

SPEAKER_01 28:08

Yeah, employee NPS is a real powerful tool. It's a good measure. I don't think that's the breakthrough idea, though. Um, I think it's how you link that kind of how do you build a feedback system that's trustworthy, where where frontline team members can speak the truth without fear or favor. Uh, it's very hard. You don't want to have a culture where all of your frontline teams are bad mouthing their boss and blaming all their problems on him or her. And yet, in the end, leader has to be someone that that team trusts and feels proud to be associated with. And at Bain and Company, we uh we found that while we have homework assignments, it's a weekly feedback huddle where everyone gives feedback and it's focused on how likely we'd recommend this team or joining this team to an interested colleague. That that's sort of the seminal question. And people are asking themselves and giving a score and explaining and and then talking about it in a team huddle. That's that's really coaching and self-improvement for the team and the leader. But every six months, there's a very, very carefully anonymized upward feedback vote where teams are asked to rate their leader. That is both coaching, but it's very evaluative. And you really you can't get promoted to a senior level at Bain unless your team thinks highly of you. But it's not just you like the guy or or the girl, you know, you'd risk you recommend them to someone else. You want to work with them again and you recommend them to others at the firm. And you know, why do people do that? Because they live the values of the place, they help you succeed, they're good at what they do. There's there's a whole mix. But by making that a rigorous process, the people who run Bain and Company are good people. And so few companies have you, oh, that you'll hear, oh, we have three 60-degree interviews and blah, blah, blah. And you go, Are you kidding me? Have you thought about this for 10 seconds? How hard it is to give honest critical feedback to about a boss? I mean, that's just radioactive. You don't want to be perceived as the Debbie Downer or the Danny Downer in your organization. So, you know, everyone is saying nice stuff. So, how do you ga the truth out? And Bain has done that brilliantly. And by the way, Bain, from almost being bankrupt back in the 90s, we really came close to it was a near-death experience, self-inflicted wounds primarily, and have grown to be one of, if not the best, place to work in the world. There are lots of measures, and you know, people are skeptical, but glass door is a pretty good measure, but take any measure. Bain is is one of the top in the top handful, and and today the best in the world. And it's not random, it's not from uh coaching people how to fill out surveys. It's because we have a set a system of how of leadership and governance that I think is really impressive. And I do try to share that in the book.

SPEAKER_00 31:00

I know you talk about you know with with Netpromoter score that in you you came to this was you know that you're emotionally connected when you're recommending one organization to another. That must be kind of two or three tenfold when you're when you're talking about individuals and an organ, you know, within an organization, because you know they're there all the time around you. And so you're really emotionally invested when you're kind of saying, Oh, that's the person, yeah. That person I'd I'd work with again and again and again.

SPEAKER_01 31:30

It is the uh ultimate question. You vote finite minutes on earth, each of us is given. You want to spend it with people that you're proud to be associated with and and who you can help, but but also will help you uh succeed and prosper. We try to simplify things. One thing you see in that promoter is don't ask a dozen questions if one will get the answer, or even 80% of the answer. You just uh because it's a complex world. Same thing with with our employee feedback. We we have an annual survey at Bain and it's dozens and dozens of questions. It bloated itself up to 150 questions at one point. And one of the very creative guys in that HR department wanted to see if he could get one question or one statement that it was an agreement scale scale, and how much of team happiness you could explain, the variations in team and individual happiness. And he found one statement, it says, I feel like a valued member of a winning team. I think the words were a little different. I feel valued, motivated, and inspired. But but that notion of how do you feel valued, motivated, and inspired? Well, you're a valued member of a winning team that wins for its customers. And it's that simple idea that is at the core of 80% of what drives happiness. And I think it's true in every organization. So, given that, you really ought to have a measurement system and a feedback process that doesn't just do surveys, but has feedback loops and systems of improvement and coaching. And it links to how you hire people, how you promote people, how you compensate people. At Bain, the managing partner, the CEO essentially, was not allowed to have the highest compensation. There always had to be two partners at least who would earn more money because you didn't want people going into the managing partner role who were doing it for self-aggrandizement. Somebody uh came over for lunch or drinks the other day and claimed that 20% of big businesses are run by sociopaths. And I thought, oh, that's is that true? You know, maybe it is actually. There's a lot of highly ambitious controlling, I want to get rich at the expense of others. Sure, if I have to. How do you not have that kind of person be the one leading your organization? Well, it works pretty well if they work their way up through the ranks, and everybody that works shoulder to shoulder with them gets has to say, is this the right is this a good person or not? The world can figure out if they can deliver the financial results. But what the world can't see is what kind of impact they're having on the teams uh internally.

SPEAKER_00 34:03

It does require, doesn't it, though, to have a decent data feedback flow because we give feedback as consumers, as employees, and we want to know that's valued, you know, if we're emotionally investing in it. So therefore, it's got to be connected up so that action happens on the back of it, even if that action is now action, it's gonna happen. It's making sure that you know whether it's inner or outer loop, that flows through the organization so we know how valuable this is and it gets used. And I guess you you alluded this to this earlier yourself. That wasn't your gig. You you were not gonna be the guy who kind of created the wiring to make it all work. But I guess you've you must have been inspired by just seeing the way that side of things have grown over the last few years. I mean, I saw a piece from Bruce Temkins the other day on sort of comparing MPS across different countries, you know, different the cultural differences. And you just think the amount of data and information that we have out there now that we can integrate surely allows it to be a much more effective and compelling financial, emotional, and just you know, as you say, winning on purpose. We can do that now. It's perhaps beforehand it was a bit sketchier, you know, to rely upon that data. You must have found that in your in your time.

SPEAKER_01 35:12

Yeah, the data just wasn't there. Um, that's one of the reasons that promoter has been so broadly adopted, I think, is it as mediocre implementation's been uh it's so much better than what we have had. One thing I've been frustrated by is the lack of apples to apples comparisons that people can learn from. And and finally, Bain has started a data business called NPS Prism that does apples to apples x-rays of industries and will will tell you, you know, who's first, who's second, who's third, who's fourth in terms of loving their customers. So they measure a net promoter correctly and they do it by episode of customer experience. So companies can learn how to get better using that data. Now it's it's been around for a couple of years, it's made it's grown very rapidly, but eventually that data, you'll be able to buy it and see not just who I should invest in. I mean, that's how I invest my personal money because I know when companies have the most customer love, they are very likely going to uh make their investors rich. And so for the last decade, I've invested in those companies. And sure enough, my portfolio has more than tripled the stock market average over the decade. That data is what employees want. They should go, they should want to work for a company that is going to prosper economically and who loves their customers because that's a more fun place. That makes you proud. That's the purpose that makes your own life worthwhile. It's it's where I want my kids to work. And certainly customers would want to know who's got the best NPS? Well, that's sort of who's doing the best job of enriching customer lives. I think I'd be interested in buying from that company. And yes, so data, once there's reliable, trustworthy apples to apples data, that's going to accelerate the change in the world.

SPEAKER_00 37:04

And with the findings that we get from the studies, is not to rest on LROS, is it? I mean, I think you you refer to, and this is why I refer back to kind of continuous improvement. You talk about, you know, the learning, just the relentless learning, just keep that's okay. Just keep building on what you've done before. Better outcomes by the very nature means that as soon as you've delivered it, you're on to better outcomes. And you know, we should embrace that, shouldn't we? Or because I do see, and I think maybe it's where you go back to around sort of where it's it doesn't work, is where people set a target and a benchmark and they get there and they pat each other on the back and it goes down and it goes they go up again, as opposed to it just being this continuous learning, which the source of richness and how you can keep rewarding your customers and keep encouraging loyalty. That that's a fundamental part of it, isn't it?

SPEAKER_01 37:52

Too many companies use net promoter as a target, and more than anything, it's a way, one more way for employees to get in trouble. You know, if they're in the bottom decile or quartile of net promoter scores, they're uh in remedial training and they'll get fired if they don't fix it. That makes them care more about their score than about using the feedback to learn how to serve customers better or to uh improve. I understand how people make this error, and I probably would have made the same error, but man, don't turn this into a target where the score is the goal. The score is only useful in helping you categorize feedback and link in the right learning systems. It it uh you can get a sense, you read the verbatim comments, you go talk to the customer, you get a good sense of do they feel like their life has been enriched. But you're not gonna do that with a survey score, you're just getting a hint. I've gone the next step, and because I've coached so many people to stop linking scores to bonuses and getting into trouble. People don't listen. So I've finally figured out I have to come up with a score that really is an audit-worthy accounting-based score that can be the uh think of it as the twin for survey-based net promoter scores. And we've developed that. It's called Earn Growth. And you'll see in the book, we've laid out how to calculate it, how it's used, how it's much more appropriate as a hardwired hard metric for holding people accountable. And I hope that earn growth as that new metric is going to help turbocharge the next decade of progress in this uh enriching lives customer-focused revolution.

SPEAKER_00 39:32

And this comes to my point, just playing back to that relentless learning. I mean, this is uh the third incarnation, isn't it? Now we're talking so so over over the time you've learned um how people have used it, how people have adapted it, how people have abused it, and it's allowed you to continue your work to go, okay, fine, see what you're doing with it. Okay, not quite right. Let me just add another layer to it, let me add something to it. So so EGR is kind of you know an accompaniment to sit alongside net promoter systems.

SPEAKER_01 40:02

It's definitely not to throw it out. I it's I when I started, it was really retention rates. That was the core of my economics, loyalty economics. And then it net promoter was much better, but net promoter we saw the limitations um because it was being misused. Earn growth will help Net Promoter be more effective. So it's not throwing out the the old, it's it's helping refine and improve it. And I think earned growth will need at least one more important thing. There's a component of earned growth that's figuring out of your new customer flow, how much of that flow is coming through primarily through recommendation and referrals from your uh existing customers. Yeah, and most companies just don't have the uh systems to track that today. I think we've already we've laid out in the book and in the appendix a very practical way of getting started at that. But I think until companies really have a sophisticated way to track referrals and uh recommendations, they're not going to be able to recognize that that's actually the most important part of this whole equation. You know, people come back for more. That's sort of easy to measure, but that's not the highest standard. You keep coming back for more. If you made a sort of mediocre choice and now you're stuck with it, it's just not worth changing unless something's really bad. But you don't recommend to a friend unless it's really special. So that highest standard of excellence is when you treat someone so well they want to recommend that and put their own personal reputation at risk. And that higher standard is what gets to the core of good business. And we just do not measure it carefully today. It's embarrassing. You'll see all these hot shot digital firms looking at customer acquisition costs, payback periods, and stuff. And you say, Oh, well, let me show me how you did the customer lifetime value, the net present value of the customer. And they never have anything very meaningful about the referrals or recommendations that the existing customer generates. And it's because they have no way of measuring it. It turns out that's the biggest economic chunk of the whole equation, and you're ignoring it, then you just can't do that.

SPEAKER_00 42:13

I like the way the model itself forces marketing to take a look at yourself as well. It's really important to get supply and to get operations to get marketing together, so that the reality is you've inspired and you've you've earned the right for that customer to be with you. They've gone, hey, I'll put my hand up and yeah, this is a place I want to be. Rather than, you know, we've got them through the door. How do we do that? Don't worry about it. You know, they don't really understand how we got them through the door either. And looking at those two together, yeah, it's it's a game changer because it gets people around the table. And it's back to you know, one of the key points you make around good profits. You know, actually, we've got people with us because they love being a part, being a customer of our business, they're gonna stay with us because they're inspired by what we do, and they're happy to give us their money over the competitors, and that's good profits. So, so I so I I really like the fact the economic model is there, but it's still underpinning that really important piece around we're driving towards good profits, which goes right back to that purpose piece. It's almost full cycle here, what you've or full circle, what you've you put together here. But I mean, I'm sure that's obviously not lost on you at all, but it was really impressive. I could almost kind of join the dots, go, ah, there it is, good profits, and now I'm back to the purpose-based organization.

SPEAKER_01 43:32

Those words are fuzzy and hard to make sure that you're uh meaning the same things and speaking the same language. So there's always I really believe you have to have measures and economic relationships along with the philosophy of purpose so that you can run experiments and you can test things and really learn and progress. I'm excited about getting the purpose laid out more correctly. Than we did before. But I'm just as excited about the measurement systems and the economic evidence that we can present in the book that will, I think, win more people over to this cause, but also help the people who already think they're in the cause to have a clearer picture of what they're really after.

SPEAKER_00 44:17

But I think that's what's great about it is that you can lift it off the page and start to work with it. You can get it straight away. You can, it feels like a piece to add in to where you were before. And just to kind of to close it, I you'd almost say, well, that there you go, there's the evidence. The CFO's now going to be happy. But I like the fact that you sort of like draw us back and they say, well, hang on a second, hang on, hang on. There's still a lot more work to be done. You know, be humble here. Look at the fact that, you know, it's not all roses, there's still more things that need to be improved. I mean, you could have ended at the chapter before because that was, you know, the economic equation. It we've got it sorted here. What inspired you to say, you know, don't stop? Keep, I think the expression is uh uh redefining the remarkable. Well, what inspired you to put that piece in there?

SPEAKER_01 45:00

Well, it's uh, you know, why do people recommend to their friends? It's not just because they're getting good service predictably, that gets boring. It has to be something remarkable. And and and so you need a an innovation factory, a wow factory that continues to stretch for new improvements and things that will get people's attention. The founder of Costco, Jim Sinegal, told me, you know, we we got a really good business at Costco, but we feel like if we were just the low-cost provider and everything was predictable in the stores, we were low cost, we would lose. Because if all you cared about was the lowest cost and it was predictable, you get bored and you'd buy online. The only reason people come into our stores is this treasure hunt. They find stuff that is really delightful and surprising. He's a brilliant guy. But I think everybody ought to think about this, has to be a treasure hunt. There have to be unanticipated surprises because that's what makes people wake up and recognize the value of a relationship and want to talk about it to their friends. And in that light, the you know, the final chapter is called Be Humble. It is really hard to do that. It is hard to innovate again and again and again, and we have so far to go. We don't even have the systems to keep track of most of this stuff. I've I've made a lot of progress, and there's a set of rules and a customer capitalist manifesto. It's all powerful stuff, but we are really just scratching the surface of organizing, governing, measuring, rewarding business leaders based on how many lives they enrich. How many business people like Andy Taylor keep track proudly of how many people are making a lot of money in their organization and their alumni, which you should care about? How many people we keep we keep track of how well we're doing for our investors, but that's the only stakeholder where we really keep track of lives enriched.

SPEAKER_00 46:54

I think it's so important, isn't it, to have that spark of creativity in the organization. And you know, as you as you've laid out previously, that psychological trust to allow individuals and teams to be thinking like that and not just chasing a number because otherwise they'll never get there because you know it doesn't work for them. So so I really like the way in this this book we've got kind of this fabulous manifesto, we've got all the ingredients for winning on purpose, which is a much broader conversation and uh narrative than perhaps you've been recognized for in the past. So, did it feel very therapeutic getting it all laid down? Is this a myriad of conversations you've had with different people, or or is this the conversation you've always had? You've just never got the opportunity to get beyond the three-letter acronym when it comes to what you're famous for.

SPEAKER_01 47:47

Oh, I think I've intuitively understood this uh at its core, but I never really could articulate it as clearly as I think I've done in this book. And I haven't been able to put the uh the processes and tools in in place with so many different practical applications from different industries, different scales. I mean, the the companies I start out the argument uh with uh a little company called Caliber Collision that is no longer a little company, it's just explosively successful in the in the auto body and collision space. But it we it also includes the Amazons and the Apples, the Leviathans of the world. It's the same principles are working from the Warby Parker and Peloton are big examples here. So these digital explosive successes are using the same philosophy and tools of around that promoter as the the big guys. So I the guy that the fellow who's the CEO of Nike uh wrote the forward to the book, John Donahoe. He said, Fred, I think this is your strongest piece so far. And I I feel like he's right. I agree. I think this is the book I'm most proud of.

SPEAKER_00 48:53

I mean, I always ask people, you do you think your best work's behind them or or ahead of them? I mean, I guess sort of 10 years ago, would you have said it's still to come? Or, you know, is this actually just the latest chapter and just watch what comes next?

SPEAKER_01 49:07

I thought it would be a self-managing uh, you know, once the world saw the truth, read the book, started using the right measures, I could retire to the garden and uh cool my heels. I I no longer think that. I think it is really hard to change a system existing system. And uh there is a lot of work ahead.

SPEAKER_00 49:26

Finally, it it it felt like this was also a really grand theatrical event we'd all got brought into. And it's actually, you know, this is all for Adelaide and Claire. This isn't for us, is it? Any of this, this book. It's not designed for us. It's it's to give them an appreciation of what they should work towards in the future. And readers will see. We're talking about your your granddaughters here. It's helping them understand how important loyalty is and how important it is to associate with the right people and to care and to invest. That's what you're telling us here, isn't it?

SPEAKER_01 50:00

Yeah, I hope uh I hope as many uh that many people read the book as carefully as you did that this was written. It was essentially for my grandchildren.

SPEAKER_00 50:10

Yeah, it's a beautiful piece. It's a beautiful piece. It really does connect, and I think um, yeah, they'll have it tucked in their back pocket as with great grandchildren for years to come. This has been a really enjoyable um interview for me. You've unpacked lots of things over the years. I wish I had a telephone I could have picked up and asked you about. And I think for many, many people, you've joined all the dots up in a way that perhaps we've never had the opportunity to do. So um a real pleasure for me, Fred. If someone hadn't come across you and understood the work that you do, what what would you say you know would inspire them to get the book?

SPEAKER_01 50:45

Oh, I think it uh it probably puts business in a new light and it'll help them not just succeed personally, but know what organizations they want to uh uh be customers of, employers of, and investors in. It really, I think, will change the way people think about business and how to measure success.

SPEAKER_00 51:04

Brilliant. That's fabulous. Well, look, thank you so much for your time. I wish you all the success. And I wish everyone who picks up the book the success that you hope it achieves as well. And do look after yourself. Thank you so much for your time, Fred.

SPEAKER_01 51:18

Thank you, Christopher.