“Rigid, relentless sales goals” are the reason, according to a Bloomberg report, that Wells Fargo & Co. employees opened more than 2 million unauthorized accounts since 2011, leading to a federal investigation into whether criminal charges should be filed. Already this year, the bank has agreed to pay $185 million in civil fines, and the company’s CEO John Stumpf has consented to forfeit compensation worth about $45 million—all in an effort to appease lawmakers and regain the trust of customers.
The fake accounts allegedly resulted in consumers paying fees of about $2.4 million between May 2011 and July 2015.
More than 5,000 Wells Fargo employees have been fired for participating in the ruse—but many more were fired earlier for NOT meeting the bank’s “outrageous sales goals.” In fact, a class action lawsuit has been filed in California on behalf of the workers who claim the bank fired or demoted them for not bending the rules to hit aggressive sales targets.
Obviously, employees were trapped between a rock and a hard place when it came to doing their jobs. This sort of catch-22 is not limited to Wells Fargo or even the banking industry. Bankers outside Wells Fargo have called the deceptive sales practices systemic across the industry, and history shows that Wells Fargo is just the latest in a long string of companies that have seen employee incentive programs go terribly wrong.
So, what can sales managers and business executives do to keep performance goals from corroding the culture in their organizations?
The first step is to acknowledge that an incentive to perform brings with it a temptation to cheat. Then enact the following practices to offset the potential for negative behavior:
- Set strict controls: Combined with an ethics policy and training, strong internal controls will encourage good employees to stick to the straight and narrow. Management policy and practice should aim to ensure that all sales are recorded, made at correct prices, and fulfilled to customers’ satisfaction. Be sure to assign accountability to someone other than the affected parties.
- Enact realistic quotas: Check metrics over time to determine whether your employees are hitting their marks. If not, determine what issues are preventing them from meeting goals. Share findings so workers can adjust their efforts to align with incentive payout and stay motivated. Monitor and tweak the incentive program as the company and economy changes so it continues to support business objectives.
- Forge a strong company culture: Create a simple set of values and stick to them, specifying guidelines for inappropriate actions. Any idea that fails to live up to those values should be rejected out of hand. Failure to publicly and rapidly police any cheating will create a culture of willful ignorance, which will become systemic and cause many more people to join in the immoral and/or illicit activity.
Attaching a symbolic meaning, such as status, to incentives can also help reduce cheating and other adverse consequences, e.g., pay inequality (which can fuel turnover) and decreased intrinsic interest in the work being performed. To give incentives meaning beyond monetary import, consider having them delivered by a high-level executive and/or in public.
Keep in mind that the good results generated by financial incentives, including motivating higher levels of performance and productivity, need to be weighed against the bad.
Unfortunately for Wells Fargo, the scale tipped toward the latter. The bank has announced that starting Jan. 1, the sales goals for its consumer bankers will be eliminated.
Steve Brubaker began his career at InfoCision in 1985. In his current role as Chief of Staff and as a member of the Executive Team, he is responsible for HR, internal and external communications, and manages the company’s legal and compliance departments. Brubaker is a member of a number of professional organizations, including the DMA, SOCAP, and PACE. He also donates his time to serve on several university boards, including the Executive Advisory Board for The Taylor Institute for Direct Marketing at The University of Akron and The University of Akron Foundation Board. He is a frequent speaker for national events and has also been honored with a number of awards and recognitions for his contributions to the call center industry.