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Connect Customer Experience to Business Value With a Balanced Scorecard and Value Framework

7 minute read
Paul Hagen avatar
How two management tools can help customer experience pros deliver results that resonate in the C-Suite.

Customer experience professionals have a problem. Almost eight out of 10 can’t prove they’re delivering business value by improving their organization's CX. Unless that quickly changes, the C-Suite will start losing its appetite for further CX investment — and CX leaders will start losing their jobs.

Take this recent example: a major financial institution had CX as a strategic priority among executives and had a strategic investment fund of nearly $200 million dollars. The firm identified its top Net Promoter Score (NPS) drivers, mapped key customer journeys, performed root cause assessments, and determined which actions would have the biggest NPS impact. However, more than 90% of the projects that would improve the overall experience were not currently prioritized and weren’t receiving funding. Instead, the company was spending money on leadership gut-feeling initiatives that simply weren’t tied to tangible value creation.

To avoid this fate, we use a data-driven four-step approach using common tools like a Balanced Scorecard and a CX Value Framework to define “value” across different stakeholder groups, ensure alignment and build connective tissue across siloes. With these tools, CX professionals can engage in planning that connects CX initiatives to overall business and operational goals, and begin crafting better stories that resonate across the C-suite.

Step 1: Build a Balanced Scorecard

In mid-August, the Business Roundtable, the business world’s most prominent association of large-cap CEOs, thrust itself into the headlines with a bold proclamation revising its members’ commitment to, as they put it, “all of our stakeholders.” No longer should the focus of CEOs and the organizations they lead be exclusively on delivering value to shareholders, the statement declared, but also to employees, customers, suppliers and the communities where they operate.

The Roundtable’s statement should serve as a rallying cry for CX professionals, and the Balanced Scorecard is the perfect tool for executing the CEO's vision.

We start by establishing a Balanced Scorecard, which allows leaders to articulate different perceptions of value, including among customers and employees. 

A decades-old management tool, the Balanced Scorecard helps organizations overcome the disconnects between internal groups that are looking at processes or capabilities from within their silos. It allows operations, finance and customer stakeholder groups to identify and balance their unique definitions of value. And it is uniquely suited to help organizations understand which investments will deliver the most value across those groups.

For CX professionals, the Balanced Scorecard will also provide insight into what kind of metrics will help convince the C-suite of the value of CX initiatives. For example, the CFO may not understand how NPS connects to the metrics that matter to her, such as profit margins and costs. By identifying those metrics, the CX lead is better equipped to demonstrate that NPS drives down customer-acquisition costs, leading directly to higher margins.

Related Article: Decisioning – The Only Way to Accelerate Analytics to Value

Step 2: Determine Drivers of Scorecard Elements

The next step is determining what levers the organization can pull to drive CX improvements that deliver value.

The identification of value drivers requires a solid data foundation and the analytics expertise to connect interactions to outcomes over time. Since the data may reside in various stakeholder silos and could take time to pull together and normalize (many firms report it takes 12 to 18 months to establish reliable data), CX leaders should start this effort early in their tenures. Enlist internal or external data science experts to model, test, extract and normalize data for this effort.

In the meantime, don’t overlook the power of small data. Observing customers and employees using qualitative research techniques can reveal no-brainer opportunities to drive value that can be calculated on the back of a napkin — without loads of supporting data.

The most effective investments are backed not only by data, but also by a thorough understanding of how those initiatives will play out at the tip of the spear, where employees and customers interact.

Related Article: Embracing the Era of Deep, Small Data

Step 3: Manage a Portfolio of Activities that Drive Scorecard Measures

After determining the biggest drivers of value across the Balanced Scorecard, those activities must get the resources they need and be optimized so they deliver value to customers and other stakeholders. The key to moving from metrics to building a Value Framework is to focus leadership attention and competency on its mechanisms for resource allocation — how it funds and staffs strategic initiatives. Do this by using the drivers as lenses through which leadership evaluates projects or initiatives requesting funding. We use a project prioritization tool — highlighted in a recent Forrester report (membership or purchase required) — as part of any strategic roadmap exercise to ensure we’re looking at customer or employee value as well as operational or financial value.

portfolio scorecard

This kind of tool would prevent an implementation that might save the company millions but then results in a degraded experience, leading to higher churn. Conversely, the process might fund an effort to improve onboarding with proactive emails and outreach phone calls that dramatically improve the experience, reduce subsequent support calls, and increase retention by 25%.

Learning Opportunities

The results will be felt in the finance department, and the CX lead will be equipped to draw a connection from CX value to the organization’s profitability.

Related Article: How to Convince Your CFO to Invest in Customer Experience

Step 4: Build on Capabilities that Create Differentiation

In the essay "How will you measure your life?" author Clayton Christensen wrote that a “company’s strategy is determined by the types of initiatives that management invests in. If a company’s resource allocation process is not managed masterfully, what emerges from it can be very different from what management intended.”

This is the fundamental rationale for identifying metrics that connect to the activities most likely to drive toward the organization’s core strategy. For CX professionals, driving core strategy means focusing on the capabilities that will attract the most valuable customers and convincing them to pay the prices that are most profitable.

Using a Balanced Scorecard and Value Framework to connect key metrics to CX-improvement activities allows CX professionals to focus on the capabilities that will build on that differentiation in a way that’s apparent in key metrics across the organization.

Connecting the Strategic Dots

For one reason or another, leaders at many firms fail to connect operational, financial, customer and employee experience. Projects that look myopically at operational metrics don’t move the needle on improving customer experience scores. At Houston Airport, for example, leadership made operational improvements that reduced baggage-claim wait time in half, yet had zero impact on customer complaints.

Or the opposite may be true: the CX professional’s myopic focus on improving NPS may be driving up costs, which is a problem for the CFO, who then demands spending reductions that offset whatever gains the CX leader was making on NPS.

In either case, the solution starts with identifying the activities that will drive operational, financial and CX improvement. For the CX professional, that means zeroing in on the initiatives that both increase customer loyalty and show up in the metrics that COOs and CFOs value.

Using a framework and balanced scorecard, business leaders can see the totality of CX — from enterprise value, to drivers, to capabilities — and strategically connect the dots in ways that will allow their CX efforts to reach their full potential.

About the author

Paul Hagen

Paul Hagen is a senior principal with West Monroe Partners in San Francisco where he heads the firm’s customer experience and innovation strategy. He is an experienced strategy, customer experience, and marketing professional with over 20 years of market research, human-centered design, technology and digital strategy, facilitation and project management experience and a track record for creating solutions that enable business goals through innovative technology and systems.

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