Initially the bank estimated up to 2.1 million customers may have been affected by the practice, which dated back to 2011. In March, however, it revealed the search for unauthorized accounts had broadened to the period from 2009 to September 2016, and that the number of customers affected could be higher.
Bad behavior costs money. Consulting firm (cg42) estimates that Wells Fargo could lose US$212 billion in deposits and US$8 billion in revenue over 18 months due to customers avoiding or leaving the bank.
Sales teams will always be under pressure to get good results, but they shouldn’t have to be unethical to achieve them. There are ways firms can create a positive sales culture that is well within ethical boundaries.
Reward the how, as well as the what
Participants in a recent Governance Institute workshop in Australia identified an excessive focus on short-term financial targets as a key trigger for organisational bad behavior.
That’s certainly true of the Wells Fargo scandal. Not only were staff members under pressure to meet unrealistic sales targets (the aim was for each customer to have eight accounts), their performance was measured daily, and their bonuses were directly linked to results.
“If you focus on sales and just sales, people are going to hit targets no matter what,” says Dr Eva Tsahuridu, CPA Australia's policy adviser on professional standards and governance.
“What we measure and what we report on is a very strong indicator of what we value.”
Dr Attracta Lagan, principal with Managing Values, a business ethics and workplace values consultancy, adds that: “What gets rewarded gets done, and gets repeated.”
However, rewarding behaviour, as well as results, can motivate sales teams to achieve without stepping over the line, and reinforce an ethical culture.
“It’s taken decades to build the culture and reputation we have today.”
Do the right thing, in the right way, with the right people, and the results will come. Rather than focusing on the numbers we really focus on the behavior.
Make good behavior part of the daily conversation
Employees don’t intentionally set out to perform unethically, but it can happen by accident. Corporate stress and pressure on resources can lead to people taking shortcuts.
When an organisation tolerates small breaches of rules, unethical behavior can snowball. To counter this, organisations should arm their staff with the skills to recognize a risky situation.
That could mean sales training that teaches people to identify the top rationalizations for unethical behavior. If a person hears themselves or another team member using one of those rationalizations, that immediately raises a red flag.
“If you focus on sales and just sales, people are going to hit targets no matter what.” Eva Tsahuridu, CPA Australia
Appoint a board that takes full accountability
Good corporate governance is critical to creating a positive sales culture, and that governance comes from the top. It requires the direct engagement of board members, who must know how staff are motivated and how customers are treated.
Boards should be held accountable; they appoint the CEO, they are the guardians of the culture. They need to be very close to the dynamic of the organisation.
Board accountability is demonstrated through a group-wide cultural audit every two years. Use global bench-marking to identify best practice, put in place measures for continuous improvement, then communicate key findings and follow-up actions to staff.
Employee surveys can also gauge the mood of an organisation. “The biggest insight is the difference between the two reviews [the cultural audit and employee survey]. You get a sense of what’s working and what’s not.
Reviews and surveys can drive change, but it needs to be part of a long-term commitment to cultural improvement. We need leaders who are brave enough to say. We are building a sustainable business and we need to measure that, not short-term performance.
There’s nothing like a spate of corporate wrongdoing to trigger a wave of corporate ethics talk. Yet unless those good intentions become part of a lived behavioral change, they would have no effect on improving ethical culture.
Governance models on a piece of paper don’t change the culture of an organisation. An organisation’s policy for dealing with ethically ambiguous behavior should be part of employee induction. Staff members need to know it’s OK to speak up, and companies should consider the channels employees can use to raise their concerns.
For example, a company could provide a hotline for employees to blow the whistle on bad behavior. Once channels are in place, they should be monitored, and changed or improved in line with use and feedback.
If you say you have a hotline, then [ask] how many people are using it, what’s the feedback. How the organisation refines the way it does things based on that feedback is hugely important.
Beefing up the role of human resources (HR) and appointing an ethics officer can strengthen the governance framework.Creating a corporate culture that promotes good behavior takes time. “It’s taken decades to build the culture and reputation we have today.
However, as Wells Fargo discovered, it can come crashing down in the blink of an eye.
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