Do Incentives Really Incentivize the Right Behaviors?
Corporate greed: is it driven by shareholder value, e.g. earnings per share, stock price, dividends in a public company, equity valuation in preparation for an IPO or selloff in a private company? Perhaps all of the above. Do senior executives, including sales leaders unknowingly contribute to this greed or is there a willful disregard of laws and regulations in pursuit of higher personal earnings & reward, i.e. incentives?
A case in point is Wells Fargo Bank and its Community Banking Division. Last week, the Consumer Financial Protection Bureau, working with the Office of the Comptroller of the Currency and the city of Los Angeles imposed a $185 million fine on Wells Fargo for defrauding customers in order to generate more revenue.
Much of that fraud took place in the retail banking and credit card units of the community banking division. According to Wells Fargo, over 5,300 employees were fired in the past 5 years for the unauthorized opening of accounts. These accounts were fraudulently opened in customer names in order to hit unrealistic sales goals. Astonishingly, it would appear that Wells Fargo was aware of this practice for five years, but did nothing to willfully stop it.
So what will be the fallout of this debacle? Loss of confidence in the consumer banking industry and likely, a new wave of regulations from DC. Whether or not future regulatory stipulations are enacted, SPM vendors should take note.
Would a Sales Performance Management tool have further enabled this activity or could SPM have prevented it? Regardless of the technology used or not used, it comes down to the people in charge who allowed this gaming of the system to occur.
Many questions still remain:
- Where were the checks and balances in terms of variable pay to assignment allocations for the sellers and their managers?
- How were the performance bonuses for sales management measured and who oversaw this?
- Why weren’t alarm bells going off and red flags raised over the fact that 5,300 people were terminated over a 5-year period? No one thought to ask why?
- How was the leadership team able to game the system?
Can SPM tools, with all their analytic capabilities, advanced workflow and communication features, be a solution to help prevent this from happening again? Or, is it just a sad reality that no matter what technology exists, simple human greed and despicable executive behavior will always triumph over the best of code and firewalls.