I spent the morning at the Net Promoter Conference in San Francisco where I had the opportunity to hear and learn from Charles Schwab President & CEO Walt Bettinger, who discussed how the company turned around by being ultra-focused on customer relationships and how they integrate Net Promoter Scores (NPS) into their strategy.
First, a quick tutorial on NPS. It’s based on the book The Ultimate Question by Fred Reichheld. Basically, companies using NPS ask a single question of their customers, “Would you recommend us to your friends and family?”, on a scale of 1 to 10. People who respond 9 or 10 are considered “promoters”, responses of 1 through 6 are “detractors” and 7 or 8 scores are “neutral”. Then the % of detractors are subtracted from the % of promoters to arrive at a Net Promoter Score (NPS). For example, if 40% of survey takers are promoters and 15% are detractors (leaving 45% as neutral), the NPS would be 25%
Back to Schwab. The company realized a few years ago that it needed to take a long hard look at customer relationships and started a full-scale strategy review. They wanted to build it however, around the ideals of Charles Schwab’s original Guiding Principles. (CEO Bettinger shared these, which I’ve included at the end of this post.) These principles formed what Bettinger called “the guardrails” that every employee could count on in the face of a tumultuous time of corporate and economic change.
The guiding principles that struck home for me were these two:
- #3 (Trust-based relationship) – Clients value relationships with people and organizations that they have confidence in, and trust that we will act in their best interest and help them reach their financial goals.
- #5 (Listening) – We improve the client experience by listening to clients at every opportunity – and acting on what we learn.
Schwab has an active listening community hosted by Communispace for their brokerage business, which I wrote about in the Groundswell book. But Bettinger described how important it was to not only listen, but to learn. At the start of their strategy re-do process, Schwab brought in a group of people who had recently left Schwab to talk with all of the senior executives for two hours. They discussed why they left, the motivations, their suggestions for improvement.
They then repeated the exercise with a group of existing customers for another two hours. Bettinger shared that there was only a very slight, slender difference in the comments between the two groups. It really hit home for the senior executives what a thin line divides an existing and former customer, and they set to work.
At the start of the process, in the retail group that works directly with customers, 6 out of 10 people spoke daily with a client. That meant that 4 out of 10 didn’t. Today, 9 out of 10 employees in the retail business talk to clients every day.
Moreover, the company put in place NPS. The key to NPS is that this is not about simply raising the number, but about encouraging every employee to understand how they personally impact NPS. So Schwab surveys customers regularly, and then follows up with every “detractor” identified in the surveys. It could be simply to find out what went wrong, or to get some direct feedback from the customer. The results are then reviewed by senior managers.
This alone is impressive, but I went up to Bettinger after his speech to get some more details. He confirmed that indeed, they follow up with thousands of detractors. I assumed it was every year — it turns out they do this EVERY DAY. Do the math – that’s hundreds of thousands, maybe even millions of customers touched every year.
Bettinger also confirmed that he carefully reads all of the summaries from the interviews, and then will reach out to individual reps in call centers to get more details behind the conversations. He shared with me, “When I talk with that rep in Indy (Indianapolis), I’m doing more than talking with one person. News spreads to all of the other reps how important it is for Schwab to listen to its customers.”
The results have been impressive. The Net Promoter Score has risen substantially over the past four years, now at a +26%. That’s a 50 point swing from where Schwab was in the past. The stock price was also rising along with the NPS, but the financial meltdown has impacted the price. Bettinger argued though that Schwab is in a better position today to weather the storm with its customers.
Is Schwab perfect? Far from it. But it is impressive that they are making an effort to listen better to their customers.
So how is listening done in your company? Is it a research panel where reports are generated to sit in a binder? How personally involved are your senior executives in daily listening to your customers — or is it a once-yearly exercise filtered through a market research team? In this fast-moving economic environment, I don’t think any company’s executives can afford to NOT be as closely connected to customers as they can be.
Charles Schwab’s Guiding Principles
Our beliefs about growing & delighting clients:
- Every client interaction changes our company’s future – either to the positive or to the negative.
- The majority of attainable revenue growth is a function of delighting our existing clients – which leads to increased business and referral to new prospects.
- Clients value relationships with people and organizations that they have confidence in, and trust that we will act in their best interest and help them reach their financial goals.
- Price matters – clients expect great value from us.
- We improve the client experience by listening to clients at every opportunity – and acting on what we learn.
- Client satisfaction is inherently linked to a “simple is better” philosophy that ensures we are easy to do business with.
- We will value all clients as a whole person – offering them a seamless client experience that reflects their total business at Schwab (brokerage, bank, 401k).
- We will be bold in our decisions around strategic growth – breaking with conventional industry practices in areas where competitors prefer the status quo.
Our beliefs about ourselves:
- It’s not about us. Clients do not care about organizational structures – they simply want their needs met and promises kept.
- Relentlessly improving our cost structure is critical to enabling investments in our services and price competitiveness.
- Our internal success measures will reinforce the importance of our focus on serving clients, while balancing the discipline required to reward shareholders.
- Investing in our people is core to our success today and in the future.