Performance Measurement: GE Asks The Ultimate Question

May 12, 2006
Would the customer recommend GE to friends?

Want to maximize business growth? Factor in a customer-focused continuous-improvement process. A key challenge for management is to monitor customer relationships as rigorously as profits are scrutinized, says Richard Wargo, vice president of marketing and strategic initiatives for a unit of GE Capital Solutions, Danbury, Conn. "Those relationships build the future."

The GE business unit, which focuses on equipment-based financing and leasing, provides an example of how the corporation engages the customer experience in a continuous-improvement process.

The survey system GE selected emphasizes one initial question: "Would you recommend us to a friend?" That rapidly and easily identifies problem areas for lean/Six Sigma engagement, adds Wargo.

"The process gives us a market-focused view of our performance relative to the competitive alternatives the customer could choose. Customer-identified problems become easy targets for corrective action. The result: greater potential for growth and future success," adds Wargo.

GE's surveys ask that customer responses to the question be scaled from zero to 10 with 10 being the highest ranking a customer can bestow. Customers giving GE a rating of nine or 10 are categorized as "promoters," seven to eight as "passives" and zero to six as "detractors."

Survey responses are tallied to produce a Net Promoter Score (NPS) as set forth in the system devised by consultant Fred Reichheld, Bain & Co., New York. (See his new book, "The Ultimate Question, Driving Good Profits and True Growth," 211 pages, Harvard Business School Publishing Corp.) Calculating the NPS requires subtracting the percentage of detractors from the percentage of promoters.

GE's first implementation of Reichheld's NPS system started in 2004 at the company's health-care equipment operations. Then, in 2005 NPS caught the attention of Chairman and CEO Jeffrey Immelt at the company's annual management meeting in Boca Raton, Fla. His response, as cited in Reichheld's book: "This is the best customer-relationship metric I've seen. I can't understand why any of you wouldn't want to try it." He had just heard the NPS presentation that Joe Hogan, GE Healthcare's CEO, made to the 650 GE executives attending the Boca event.

Immelt demonstrated his NPS commitment to continuous improvement and growth by mandating that up to 20% of the annual bonus of senior executives would have an NPS connection.

Reichheld emphasizes the implementation advantages. "Unlike conventional customer-satisfaction studies, NPS is a simple process that links up with what drives growth." He says it is almost impossible to profitably grow without scoring more promoters and fewer detractors among customers. "All we're saying is that we need to be systematic and rigorous in tracking how many customers we're turning into promoters and how many we're turning into detractors."

Like the concepts of lean manufacturing and Six Sigma, NPS has to start at the top of an organization and go all the way through and involve front-line employees, adds Reichheld.

How is the growth- and metric-conscious GE doing? First-quarter 2006 revenue was $37.8 billion, up 10% from a year earlier, with organic revenue growth of 9%.

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