Lessons from the Wells Fargo scandal
At NFU, we have been working actively with the topic of performance measurement systems since last year when we launched a Nordic wide survey on the subject. It has been on our radar ever since, but this month the issue really blew us away with the news of the US bank Wells Fargo.
In the beginning of September, Wells Fargo was fined for opening over 2 million new accounts without the customers’ permission, a result of too high sales targets (sales targets that have been removed since). The bank also fired 5 300 employees for setting up these fake accounts. All good and redeemed it seems?
As you all know, two wrongs do not make a right. Wells Fargo did wrong both by pressuring employees to the extent that they felt the need to start creating unauthorized bogus accounts and then firing the employees that did so. I think that most of us can agree on that, and as the dust settles I am wondering what we can learn from recent events. Because the Wells Fargo scandal exemplifies some important points that never should be forgotten when discussing the case of performance measurement systems and sales targets.
First, performance measurement systems and sales targets can never replace good leadership. Evaluating employees based on monitoring and measuring systems is a management practice, meaning that it highly affects the way employees carry out and conduct their work. It needs to be subject to constant attention by management to ensure that the systems and sales targets do not put excessive pressure on employees or create an unhealthy work life or unethical sales culture. And most importantly, it should be clear that the systems and the conduct that they create is the responsibility of the management.
Also, finance employees are neither robots nor super humans. They want to do their best to meet customers’ needs and expectations, but if they are not provided with sufficient time and resources it will be near too impossible. In the Wells Fargo case the sales target not only pressured employees to pursue unauthorized cross-selling but also punished the ones who did not reach the sales targets. This creates both a stressful working environment as-well as a conflict of interest among the employees who are forced to sell more than they possibly could have the time for or being at risk of losing their job.
The recent events also highlight the need for safe and accessible whistle blowing practices. Testimonies from former employees at the bank tell us that both those who did not reach the goals as well as those who tried to voice an opinion of the unethical sales target were terminated. It is a classic “Catch 22” that puts employees in an impossible and, frankly speaking, unacceptable position. Employees who try to blow the whistle should never be subject to retaliations. It is therefore crucial that both internal and external whistle blowing systems are in place as they can help to stop these types of practices.
At NFU we will continue our work on the topic with the NFU Guidelines on Performance Measurement Systems. The Guidelines aims to provide recommendations on what to consider when discussing the use, design and implementation of performance measurement systems. The Guidelines will be published later on this year, hoping to boost a constructive and transparent dialogue on the issue.