Best Practices

Best Practices


Last month, information was released on the investigation into errant sales practices at Wells Fargo, in which employees fraudulently opened bank accounts for customers without their knowledge. I think there is something useful to reflect upon here with regard to how pressure is applied on employees in order to improve individual and company performance.

Setting the right level of pressure is critical to performance; too little pressure can lead to complacency and coasting, while too much can lead to stress, poor decision making and even legal issues. Another key point is the end or purpose for which the pressure is applied, as focus on the wrong metrics or outcomes can have unintended consequences, including customer dissatisfaction and business loss. Lets look at some techniques to ensure you apply pressure to incent the right behaviors and outcomes with the right intensity.

At the heart of the Wells Fargo situation was the belief that so-called cross-selling would be a major contributor to bank growth and profitability. Toward this end, Wells Fargo set goals and awarded compensation for the cross-selling of eight products per household, while such goals for most large banks was in the range of two to three. Employees felt the pressure to attain these goals, and in the case of over 5,000 employees, the goals were met by fraudulently opening bank accounts that customers didnt need or know about. I suggest that we take the following lessons from this:

Be sure the goal you are setting is, in fact, the right goal. Beware goals that could result in negative customer reaction or dissatisfaction.

If you do set some goals that could provoke a negative customer reaction, such as raising pricing or eliminating unprofitable products, be sure to set up a process to monitor customer reaction and overall satisfaction. Provide this customer feedback to management to assess and deal with.

Setting tough and aspirational goals can be a good technique to spur higher levels of performance or innovation, but emphasize to employees that ethics and laws override any other considerations. Ensure that employees have a place to go for advice on any gray areas, including sources such as human resources, legal counsel and other management.

There are some other interesting aspects to the Wells Fargo case. In particular, the emphasis on cross-selling and incentive schemes to promote it was in effect for up to 15 years. It is clear the community banking section that promoted these schemes had developed a certain culture in which such practices could survive and thrive. An example of this is reference to bank branches as stores, emphasizing the selling aspect of the branch rather than its role of providing service to customers.

The investigation also noted that the company had a decentralized corporate structure, which encouraged deference to business units that housed their own risk and human resource management systems. Leaders were unwilling to change the sales model or recognize it as a root cause. They resisted and impeded scrutiny from corporate risk management and the board of directors.

There were also some rather odd behaviors and practices going on. For example, some employees opened up numerous bank accounts for relatives. In one area, they had a promotion called Jump into January, and employees ran a gauntlet to kick this off and set their individual commitments. Some employees gamed the system and postponed sales from December into January in order to boost their numbers. Here are some pointers resulting from all of this:

Periodically assess the culture in your organization and whether it is aligned with your company goals, strategies and customer satisfaction. Recognize, too, that corporate language can be a manifestation of the culture. Question unusual activities and traditions that dont seem appropriate.

Ensure that human resources, legal and risk management are empowered to question and scrutinize company practices. Recognize that areas which resist scrutiny should raise a red flag. Audits, employee surveys, customer surveys, customer or employee focus groups and other means should periodically be used to get candid feedback.

Put in place a process for employee complaints and for exit interviews when employees leave. Signs and causes of employee stress and dissatisfaction should be evident through such processes. Leadership should periodically review such materials and act if there are worrisome patterns.

It is clear from the Wells Fargo case that pressure can be both too heavy and directed at the wrong outcome. But of course, we also know from experience that a workplace without some positive pressure is unlikely to produce the best results. In my experience, it is a best practice to set some high-level company goals and metrics and cascade them through the organization. Goals and metrics can then be set at each functional level and guide individual goals. I believe it is good practice to have some level of remuneration dependent on corporate and individual goal achievement. Keep the goals attainable but challenging. (You may want to refer to a previous article I wrote on the topic of SMART goals in the November 2014 issue of LubesnGreases.)

There may come a time when you want to set a very difficult goal in order to put the company on a path of change or reinvention. You may not know how to achieve the goal or even if it is achievable. In these situations, I recommend that you outline the vision and set it up as a longer term goal (such as a three- or five-year goal), and that you reward significant progress or breakthroughs along that path. Encourage brainstorming sessions and employee suggestion processes to gather new ideas. Provide extra resources and space so employees can spend sufficient time working on ways to achieve the new goals.

In the Wells Fargo case, perhaps cross-selling eight products per household could have been achieved in the right way if employees were encouraged to develop new ideas about products and services that customers really wanted and that would add value, and if customers were asked about how their needs could be better served.

I hope you will take some time to assess the pressure points in your organization and adjust them as needed both in intensity and direction.

Sara Lefcourt of Lefcourt Consulting LLC specializes in helping companies to improve profits, reduce risk and step up their operations. Her experience includes many years in marketing, sales and procurement, first for Exxon and then at Infineum, where she was vice president, supply. Email her at or phone (908) 400-5210.

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