Net Promoter Score (NPS) Calculation and concept……

Have you ever liked a company so much that you’ve told your friends about it?

The Net Promoter Score system uses one basic question to measure customer loyalty:

“How likely is it that you would recommend our organisation to a friend or colleague?”

There are many formulae to understand customer’s opinions, such as the Customer Satisfaction Score (CSAT) system, but the NPS system is intended to go beyond testing how satisfied a customer is with a company: it’s designed to test whether someone likes a brand enough to recommend it to others.

In other words, the person isn’t merely “satisfied” with the company – by telling others about the brand, the person is effectively marketing the company’s services.

Although there are pros and cons to NPS, numerous research studies have shown that the NPS system also correlates with business growth.

Studies by the Harvard Business Review have found that companies ranging from banking to car-rental companies show higher income when they improve their Net Promoter Scores.

So, if you’re looking for a more scientific way than just relying on online reviews to understand your brand’s strength, the NPS is a straightforward system to use, and one of its big benefits is that it allows you to benchmark your company’s results against others in your industry.

The Way NPS formula works

Just as the main question of the Net Promoter Score sample survey is fairly simple, the Net Promoter Score calculation system is too. At first glance, it may seem rather complicated, but we’ll show you how to break it down and make figuring out your Net Promoter Score an easy process.

The Net Promoter Score Scale

To get started, customers are asked to rate their likelihood of recommending a company to a friend or colleague by using a 0-10 point scale:

The number on the scale that a customer chooses is then classified into one of the categories: “Detractors,” “Passives,” and “Promoters.”

Score breakdowns:

0 – 6: Detractors

7 – 8: Passives

9-10: Promoters

You can think of the NPS system as similar to a four-star system on an online review, but the NPS scale gives you a broader way (and a more accurate method) to measure customer’s opinions.

How to calculate Net Promoter Score ?

Let’s suppose you’ve sent out an online poll with the NPS question and the 0-10 scale and you’ve received 100 responses from customers. What do you do with the results? Is it as simple as averaging the responses? Well, not quite. But it’s almost that easy.

The NPS system gives you a percentage, based on the classification that respondents fall into – from Detractors to Promoters. So to calculate the percentage, follow these steps:

·  – Enter all of the survey responses into an Excel spreadsheet.

·  – Now break down the responses by Detractors, Passives and Promoters.

·  – Add up the total responses from each group.

·  – To get the percentage, take the group total and divide it by the total number of survey responses.

·  – Now subtract the percentage total of Detractors from the percentage total of Promoters – this is your NPS score.

Let’s break it down:

(Number of Promoters – Number of Detractors) / (Number of Respondents) x 100

Example: If you received 100 responses to your survey:

10 responses were in the 0-6 range (Detractors)

20 responses were in the 7-8 range (Passives)

70 responses were in the 9-10 range (Promoters)

When you calculate the percentages for each group, you get 10%, 20% and 70% respectively.

To finish off, subtract 10% (Detractors) from 70% (Promoters), which equals 60%. Since an example Net Promoter Score is always shown as just an integer and not a percentage, your NPS is simply 60. (And yes, you can have a negative NPS, as your score can range from -100 to +100.)

Once You’ve finished your Net Promoter Score Calculation. Now what?

So you’ve sent out the NPS survey sample to your customers. You’ve compiled the results and run the numbers. You now have your Net Promoter Score number – maybe it’s a 52. Is that good or bad?

Well, like many things in life, it’s really all relative. If your competitors have NPS numbers in the high 60s, you’re probably going to try to work out where your brand could improve. On the other hand, if your competitors all have scores in the low 40s, you’re doing just fine.

 

 

 

Analyze Phase in Six Sigma

Purpose

To pinpoint and verify causes affecting the key input and output variables tied to project goals. (“Finding the critical Xs”)

Deliverables

  • Documentation of potential causes considered in your analysis
  • Data charts and other analyses that show the link between the targeted input and process (Xs) variables and critical output (Y)
  • Identification of value-add and non-value-add work
  • Calculation of process cycle efficiency

Key steps in Analyze

  1. Conduct value analysis. Identify value-add, non-value-add and business non-value-add steps
  2. Calculate Process Cycle Efficiency (PCE). Compare to world-class benchmarks to help determine how much improvement is needed.
  3. Analyze the process flow. Identify bottleneck points and constraints in a process, fallout and rework points, and assess their impact on the process throughput and its ability to meet customer demands and CTQs.
  4. Analyze data collected in Measure.
  5. Generate theories to explain potential causes. Use brainstorming, FMEA, C&E diagrams or matrices, and other tools to come up with potential causes of the observed effects.
  6. Narrow the search. Use brainstorming, selection, and prioritization techniques (Pareto charts, hypothesis testing, etc.) to narrow the search for root causes and significant cause-and-effect relationships.
  7. Collect additional data to verify root causes. Use scatter plots or more sophisticated statistical tools (such as hypothesis testing, ANOVA, or regression) to verify significant relationships.
  8. Prepare for Analyze gate review.

Gate review checklist for Analyze

  1. Process Analysis
    • Calculations of Process Cycle Efficiency
    • Where process flow problems exist
  2. Root Cause Analysis
    • Documentation of the range of potential Key Process Input Variables (KPIVs) that were considered (such as cause-and-effect diagrams; FMEA)
    • Documentation of how the list of potential causes was narrowed (stratification, multivoting, Pareto analysis, etc.)
    • Statistical analyses and/or data charts that confirm or refute a cause-and-effect relationship and indicate the strength of the relationship (scatter plot, design of experiment results, regression calculations, ANOVA, component of variation, lead time calculations showing how much improvement is possible by elimination of NVA activities, etc.)
    • Documentation of which root causes will be targeted for action in Improve (include criteria used for selection)
  3. Updated charter and project plans
    • Team recommendations on potential changes in team membership considering what may happen in Improve (expertise and skills needed, work areas affected, etc.)
    • Revisions/updates to project plans for Improve, such as time and resource commitments needed to complete the project
    • Team analysis of project status (still on track? still appropriate to focus on original goals?)
    • Team analysis of current risks and potential for acceleration
    • Plans for the Improve phase

Tips for Analyze 

  • If you identify a quick-hit improvement opportunity, implement using a Kaizen approach. Get partial benefits now, then continue with project.
  • Be critical about your own data collection—the data must help you understand the causes of the problem you’re investigating. Avoid “paralysis by analysis”: wasting valuable project time by collecting data that don’t move the project forward.
  • This is a good time in a project to celebrate team success for finding the critical Xs and implementing some quick hits!

Where Did Six Sigma Come From?

As with Lean, we can trace the roots of Six Sigma to the nineteenth-century craftsman, whose challenges as an individual a long time ago mirror the challenges of organizations today. The craftsman had to minimize wasted time, actions, and materials; he also had to make every product or service to a high standard of quality the first time, each time, every time.

Quality Beginning

The roots of what would later become Six Sigma were planted in 1908, when W. S. Gosset developed statistical tests to help analyze quality data obtained at Guinness Brewery. About the same time, A. K. Erlang studied telephone traffic problems for the Copenhagen Telephone Company in an effort to increase the reliability of service in an industry known for its inherent randomness. It’s likely that Erlang was the first mathematician to apply probability theory in an industrial setting, an effort that led to modern queuing and reliability theory. With these underpinnings, Walter Shewhart worked with Western Electric (a forerunner of AT& T) in the 1930s to develop the theoretical concepts of quality control. Lean-like industrial engineering techniques did not solve quality and variation-related problems; more statistical intelligence was needed to get to their root causes. Shewhart is also known as the originator of the Plan-Do-Check-Act cycle, which is sometimes ascribed to Dr. Edwards Deming, Shewhart’s understudy. As the story goes, Deming made the connection between quality and cost. If you find a way to prevent defects, and do everything right the first time, you won’t have any need to perform rework. Therefore, as quality goes up, the cost of doing business goes down. Deming’s words were echoed in the late 1970s by a guy named Philip Crosby, who popularized the notion that “quality is free.”

Quality Crazy

War and devastation bring us to Japan, where Deming did most of his initial quality proselytizing with another American, Dr. Joseph Juran. Both helped Japan rebuild its economy after World War II, consulting with numerous Japanese companies in the development of statistical quality control techniques, which later spread into the system known as Total Quality Control (TQC).

As the global economy grew, organizations grew in size and complexity. Many administrative, management, and enabling functions grew around the core function of a company to make this or that product. The thinking of efficiency and quality, therefore, began to spread from the manufacturing function to virtually all functions— procurement, billing, customer service, shipping, and so on. Quality is not just one person’s or one department’s job. Rather, quality is everyone’s job! This is when quality circles and suggestion programs abounded in Japanese companies: no mind should be wasted, and everyone’s ideas are necessary. Furthermore, everyone should continuously engage in finding better ways to create value and improve performance. By necessity, quality became everyone’s job, not just the job of a few … especially in Japan, at a time when there was precious little money to invest in new equipment and technology.

The rest of the story might be familiar if you’re old enough to remember. By the late 1970s, America had lost its quality edge in cars, TVs, and other electronics— and they were suffering significant market share losses. Japanese plants were far more productive and superior to American plants, according to a 1980 NBC television program, If Japan Can Why Can’t We? In response to all this, American companies took up the quality cause. They made Deming and Juran heroes, and institutionalized the Japanese-flavored TQC into its American counterpart, Total Quality Management (TQM). They developed a special government award, the Baldrige Award, to give companies that best embodied the ideal practice of TQM. They organized all the many elements and tools of quality improvement into a teachable, learnable, and doable system— and a booming field of quality professionals was born.

Quality Business

The co-founder of Six Sigma, Dr. Mikel Harry, has often said that Six Sigma shifts the focus from the business of quality to the quality of business. What he means is that for many years the practices of quality improvement floated loosely around a company, driven by the quality department. And as much as the experts said that quality improvement has to be driven and supported by top executives, it generally wasn’t. Enter Jack Welch, the iconic CEO who led General Electric through 2 decades of incredible growth and consistent returns for shareholders. In the late 1980s, Welch had a discussion with former AlliedSignal CEO Larry Bossidy, who said that Six Sigma could transform not only a process or product, but a company. In other words, GE could use Six Sigma as AlliedSignal was already doing: to improve the financial health and viability of the corporation through real and lasting operational improvements. Welch took note and hired Mikel Harry to train hundreds of his managers and specialists to become Six Sigma Black Belts, Master Black Belts, and Champions. Welch installed a deployment infrastructure so he could fan the Six Sigma methodology out as widely as possible across GE’s many departments and functions. In short, Welch elevated the idea and practice of quality from the engineering hallways of the corporation into the boardroom. Lest we not be clear, the first practical application of Six Sigma on a pervasive basis occurred at Motorola, where Dr. Harry and the co-inventor of Six Sigma, Bill Smith, worked as engineers. Bob Galvin, then CEO of Motorola, paved the way for Bossidy and Welch in that he proved how powerful Six Sigma was in solving difficult performance problems. He also used Six Sigma at Motorola to achieve unprecedented quality levels for key products. One such product was the Motorola Bandit pager, which failed so rarely that Motorola simply replaced rather than repaired them when they did fail.

Control Phase in Six Sigma……

Purpose

To complete project work and hand off improved process to process owner, with procedures for maintaining the gains

Deliverables

  • Documented plan to transition improved process back to process owner, participants and sponsor
  • Before and after data on process metrics
  • Operational, training, feedback, and control documents (updated process maps and instructions, control charts and plans, training documentation, visual process controls)
  • A system for monitoring the implemented solution (Process Control Plan), along with specific metrics to be used for regular process auditing
  • Completed project documentation, including lessons learned, and recommendations for further actions or opportunities

Key steps in Control

  1. Develop supporting methods and documentation to sustain full-scale implementation.
  2. Launch implementation.
  3. Lock in performance gains. Use mistake-proofing or other measures to prevent people from performing work in old ways.
  4. Monitor implementation. Use observation, interaction, and data collection and charting; make additional improvements as appropriate.
  5. Develop Process Control Plans and hand off control to process owner.
  6. Audit the results. Confirm measures of improvements and assign dollar figures where appropriate. Give audit plan to company’s auditing group.
  7. Finalize project:
    • Document ideas about where your company could apply the methods and lessons learned from this project
    • Hold the Control Gate Review
    • Communicate project methods and results to others in the organization
    • Celebrate project completion
  8. Validate performance and financial results several months after project completion.

Gate review checklist for Control

  1. Full-scale Implementation results
    • Data charts and other before/after documentation showing that the realized gains are in line with the project charter
    • Process Control Plan
  2. Documentation and measures prepared for sustainability
    • Essential documentation of the improved process, including key procedures and process maps
    • Procedures to be used to monitor process performance and continued effectiveness of the solution
    • Control charts, capability analysis, and other data displays showing current performance and verifying gains
    • Documentation of procedures (mistake-proofing, automated process controls) used to lock in gains
  3. Evidence of buy-in, sharing and celebrating
    • Testimonials or documentation showing that:
      • The appropriate people have evaluated and signed off on the changes
      • The process owner has taken over responsibility for managing continuing operations
      • The project work has been shared with the work area and company at large (using a project database, bulletin boards, etc.)
    • Summary of lessons learned throughout the project
    • List of issues/opportunities that were not addressed in this project (to be considered as candidates for future projects)
    • Identification of opportunities to use the methods from this project in other projects
    • Plans for celebrating the hard work and successful efforts

Tips for Control Phase

  • Set up a realistic transition plan that will occur over a series of meetings, training events, and progress checks scheduled between the team and the process participants (avoid blind hand-offs of implementation plans).
  • Schedule a validation check 6 to 12 months after the control gate review. Be sure the project sponsor and local controller/finance representative is present to validate that the results are in place and stable!
  • Never anticipate perfection! Something always goes wrong. Develop a rapid response plan to address unanticipated failures via FMEA (p. 270). Identify who will be part of the “rapid response team” when a problem arises. Get permission from sponsor to use personnel should the need arise.
  • Develop tools that are easy for process participants to reference and use. It’s hard to keep paying attention to how a process operates, so you need to make it as easy as possible for people to monitor the work automatically.
  • Work out the kinds before transferring responsibility for managing the new process. Handing off (to the sponsor or process owner) a process that is still being worked on will compromise success.

Define Phase In DMAIC

Define Phase Introduction

Purpose

To have the team and its sponsor reach agreement on the scope, goals, and financial and performance targets for the project

What you need before you start

  • First draft of project charter from sponsor(s)
  • Resource allocation (time of team members, initial budget)

Deliverables

  1. A completed project charter (covering the problem statement, business impact, goals, scope, timeline, defined team)
  2. Documentation showing what customers (internal and external) are or will be affected by this project and what their needs are
  3. High-level process map(s), at least a SIPOC diagram
  4. Completed project plans. Requirements will vary by company but often include Gantt charts; stakeholder analysis; resistance analysis; risk analysis; action logs, responsibility assignments, and communication plans.
  5. Outcomes from the project launch meeting showing team consensus around project purpose, charter, deliverables, and team responsibilities 

Key steps in Define

  1. Review project charter. Have your team discuss the draft charter from sponsors. Get answers to questions. Negotiate compromises or adjustments to scope, resources, timing, team membership as needed.
  2. Validate problem statement and goals. Review existing data or other sources of information to confirm that the problem you’ve been given…
    • Exists
    • Is important to customers (collect the Voice of the Customer)
    • Is important to the business (collect Voice of the Business information)
    • Can reasonably be expected to be improved using Lean Six Sigma (DMAIC) methodologies
  3. Validate financial benefits. Use existing data to calculate current costs, profits, margins, or other financial metrics relevant to your project. Estimate the financial impact if you achieve the project goal, and verify that it meets management expectations.
  4. Create/validate process map and scope. Document the main steps of the process (with a SIPOC diagram) to verify project scope; see if data exists to provide baseline measures on time, defects/errors, rework, etc., for a value stream map.
  5. Create communication plan. Identify project participants and stakeholders (sponsors, customers, managers, process operators, etc.) and develop plans for keeping them informed about and/or involved in the project.
  6. Develop project plans (schedule, budget, milestones).
  7. Complete the Define gate review.

Gate review checklist for Define

  1. An updated Project Charter
    • Problem Statement detailing when the problem has been seen, what the problem is, the magnitude of the problem, and the impact or consequence of the problem (such as effect on customer Critical-to-Quality expectations). Make sure the problem statement focuses on symptoms only (not on causes or solutions).
    • Key stakeholders: Who are they? How will they be involved in the project? How will progress be communicated to them?
    • Business Impact reflecting expected financial benefits and assumptions.
    • Goal Statement clearly identifying the key output metric (Y) to be improved.
    • Verification of Project Scope: broad enough to achieve the project objectives yet narrow enough to be completed within the Project Plan timeframe.
    • High-level Project Plan showing the targeted completion date for the project and intermediate milestones.
    • List of team members representing key stakeholders, appropriate mix of skills, and knowledge (especially about the current process).
  2. Documentation on your customer knowledge
    • Primary external and internal customers identified
    • Voice of the Customer gathered
    • Customer needs evaluated for priority and importance (through Kano analysis)
    • Ability to measure customer requirements
  3. A high-level process map and/or SIPOC 
    • High-level map showing major steps or activities (details will come in Measure)
    • SIPOC map completed to identify key Suppliers, Inputs, Process boundaries, Outputs, Customers (should demonstrate that the process boundaries align with the project goals)
    • Key process output variables (KPOVs) such as time, quality, and cost metrics (to show process links to project goals)
    • Optional: Key data on time, delays, queues, defects—if you don’t gather these data here, you’ll be collecting them in Measure
  4. Detailed Project Management plans
    • More detailed schedule of activities, especially for Measure (using a Gantt chart, for example)
    • List of stakeholders who will be impacted by the project, and their expectations and concerns
    • Communications Plan for the identified stakeholders and their concerns
    • Risk management plans
    • Identification of barriers/obstacles that could hinder the team (will likely require help from the Black Belt and sponsors to overcome these barriers)