With the aftermath of the recent Wells Fargo incident, incentive compensation for banking institutions is under great scrutiny.
By creating a sales culture rooted exclusively in growth, Wells Fargo misaligned company goals with selling behaviors and rewarded on one metric: number of accounts grown. This misalignment resulted in employees falsifying the creation of millions of customer accounts.
Wells Fargo’s actions resulted in a $185 million federal penalty and the firing of over 5,000 employees. The institution is also currently under federal investigation in both New York and San Francisco. Since discovering the illegal practices, the state of New York has imposed strict guidance and monitoring regulations for incentive compensation arrangements by the Department of Financial Services. These new regulations impose guidance and monitoring on plans that could have a conflict of interest, such as cross-selling or referral bonus arrangements.
Wells Fargo has since moved away from sales goals and is now focused on customer satisfaction surveys as it “works out a new incentive-compensation system,” effective January 1, 2017.
With organizations like Wells Fargo capable of falsifying millions of accounts, NYDFS will focus on and crack down on any other similar organizations.
As demonstrated by the behavior at Wells Fargo, now, more than ever, it is important to align your sales goals with agent behaviors and not focus solely on results-oriented metrics, such as number of accounts opened. With incentive compensation under the microscope and company reputations on the line, there is no better time to ensure your compensation plan is balanced and fair.
So, is it possible to create effective sales goals while preventing falsified sales and unethical behavior? Absolutely. Here’s what we can learn from Wells Fargo.
1. Structure your incentives with balance. Focus on the metrics that matter to your customers and align with business goals. Transparency is key, giving leadership insights and allowing support from risk management. Create incentives where bonuses rely on a variety of metric goals, and avoid incentives heavily weighted toward one specific metric, unless paired with an auditory process to monitor these efforts. By focusing on customer satisfaction and good customer service, you will naturally create a plan that has more variety and balance.
2. Don’t be afraid to make adjustments to incentives.
By focusing on the right metrics and allowing transparent insight into these numbers, it will become clear what’s working and what isn’t over time. It is important to understand that many incentive plans are not 100% balanced and perfect right out of the gate. Don’t be afraid to make changes to your incentive plan after testing it in the real world, for the benefit of your sales teams and your customers.
3. Set aggressive, yet realistic goals.
After public scrutiny, we have learned that Wells Fargo had a pattern of setting aggressive daily goals for their sales teams. These new account opening goals weren’t easily achievable in organic measures, and with such a sales-focused atmosphere employees felt pressured to meet unrealistic expectations from management in unethical ways.
By setting realistic goals and carefully crafting a culture that values real results for customers, you can avoid mistakenly incentivizing shortcuts and unethical or illegal sales tactics. It’s important to establish dialogue between management and representatives to ensure fairness and effectiveness when establishing sales goals.
4. Encourage training and coaching opportunities.
Take opportunities to coach behaviors that are aligned with your big picture company goals instead of focusing on specific numbers only. By helping staff understand the root of your sales goals and looking at customer-focused behaviors, you can ensure that your customer-centric company is fair and doing what’s best for the customer and the company, while still rewarding your team for their successes.
5. Provide for metric transparency.
Allow for transparency between middle and upper management into your numbers and incentives. Incentive programs that champion transparency result in healthy competition, good communication, and allow management to spot unhealthy trends and issues with balance that may require adjustments.
Transparency also benefits your sales team, because they have clear visibility of their performance, and can gauge themselves against their peers.
Do you feel your incentive plan is unbalanced or contributing to a bad sales culture? If you need to recalibrate your incentive compensation plan for 2017, our experts are here to help.