Quit Unrealistic Sales Goals - How the Wells Fargo CEO Got Fired
2016 was a dark year in the history of one of America’s prestigious banks, Wells Fargo. The reputation of this institution was shredded into pieces by a damning scam of opening over 2 million fake accounts without authorization by customers. Consequently, the bank had to part with $185 million in fines and additional $5 million as compensation to affected clients.
Owing to the mounting pressure from the National Congress, the then Wells Fargo CEO had no option but to step down. Today, we take a deeper look at practices that contributed to this inglorious turn of events in the history of one of the respected banks in the America.
Unrealistic Sales Goals and Unfair Treatment
According to investigations to the scandal, the troubles ailing the company originated from its sales goals and how it compensated the frontline staffs. Its ‘Gr-eight initiative’ targeted cross-selling of eight products to each of its customers. Their sales force was also subjected to unimaginable pressure to meet targets, as revealed by the 2015 Los Angeles lawsuit against the bank. Branch managers conducted four sales target review meetings with each staff on a daily basis.
As if this was not enough, those who failed to meet their targets were forced to work unpaid overtime for at least one hour per day. They would make night calls in an effort to try to persuade clients to take up more banking products. Although there were mechanisms to track the extra time, managers would threaten employees with termination of contracts if they dared claim their pay for extra hours worked. According to the U.S. Senate, the bank had seven lawsuits filed by former employees over unpaid overtime dating back to 1999.
Salespeople’s Response to the Mounting Pressure
As pressure continued to mount, all hell broke loose and staff began opening fictitious checking accounts and credit cards just to meet targets and get bonuses. The practice became so rampant that it spread across the whole country. A total of 1.5 million depositing accounts and 560,000 credit cards were irregularly opened between 2011 and 2015. The accounts attracted charges and earned the bank income just like any other banking products.
If clients complained, the involved sales agents would be implicated and eventually fired. They would be punished with negative remarks on their profile to make it hard for them to get employed elsewhere. Eventually, by the time things got out of hand, a total of 5,300 employees lost their jobs, as stated by the Chief Executive Officer.
When the bank appeared before the Congress, the CEO admitted to the existence of the malpractice and accepted full responsibility. Confirming the firing of the involved employees, the bank promised to do everything possible to repair its dented image and win back the public image.
But, this was not enough recompense for the evil that happened under his watch. So, the Senators wouldn’t hear of it and pushed for immediate sacking of the Wells Fargo CEO, further slamming him with forfeiture of $41 million, being proceeds from stock awards. He also lost a good portion of his 2016 salary and bonuses.
Whether this case was intentionally orchestrated or circumstantial, there are valuable lessons to learn from it in relation to:
- Incentives Offered to Sales Staff
The Wells Fargo saga is a classic example of what can happen when sales staff are subjected to unfair treatment. It negates the best practices in employee motivation. Although investigations are underway to establish whether the bank violated the Fair Labor Standards Act during this period, the fact remains that there are too many disgruntled former employees of this bank. It is this feeling that breeds contempt and eventually precipitates misconduct. If this feeling is shared by a great percentage of a sales force, then it won’t be long before its negative impact is manifested.
Every employee requires a favorable work environment to maintain a high level of motivation critical to their performance. Although managers should be strict in their supervision, they are expected to carry their mandate in a humane and fair manner. Also, staff should be allowed to execute their mandate without intimidation. This includes the right to fair pay for services rendered. No one should be denied their pay so long as they have earned it.
- Unrealistic Sales Goals
What was experienced by the sales staff at Wells Fargo was nothing short of a sheer demonstration of how institutions can force sales targets on employees. Also, discussing these sales targets every two hours, four times a day made the pressure at the workplace unbearable. Furthermore, the fear of losing their jobs pushed the staff to do the unthinkable.
According to Marcia Daszko of Marcia Daszko& Associates, in a publication on FEAR ERODES PROFITS: How Great Leaders Build Healthy, Productive Workplaces, “Fear is a motivator. It is an effective extrinsic motivator if a person is in immediate danger and needs to take action to be safe.” When fear is used as a controlling tool, employees can do whatever is at their disposal to survive.
For an organization to be successful, it is paramount to set practical and attainable goals. Though having stretching objectives can bring out the best in team members, this ought to be used cautiously. This is because such goals are meant for individual assessment.
When dealing with sales teams, it is wise to agree on targets that are realistic depending on the line of business and prevailing market conditions. These can be reviewed from time to time as conditions shift. They should not be too low or too high. Moderation must be maintained at all times.
Also, the pressure exerted on staff to meet agreed targets must be controlled to allow the employees the calm they require to do their work. This does not support mediocrity but maintains sobriety and ensures fairness to employees.