Building a sales culture that doesn’t cross the ethical line can help protect your company from a costly ruined reputation. Just ask Wells Fargo.
By Rachael McKinney
The fallout from the Wells Fargo bank scandal continues to resonate. Wells Fargo sacked more than 5300 staff in 2016 for fraudulently boosting their sales figures by signing up customers for credit card and cheque accounts without their consent.
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 unauthorised accounts had broadened to the period from 2009 to September 2016, and that the number of customers affected could be higher.
Bad behaviour 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 behaviour.
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.”
It’s a tactic Dr Lagan says used by life insurer AIA Australia, which is part of AIA Group Limited, a pan-Asian life insurance group headquartered in Hong Kong. The AIA operating philosophy is “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 behaviour,” says John Murray, head of enterprise risk, retail and compliance at AIA Australia.
Murray doesn’t claim to have all the answers or to be an example of industry best practice, but he says always being aware of doing the right thing is working for his team.
In practice that means 50 per cent of staff bonuses are tied to how they do business, evaluated against a set of metrics drawn from the AIA Code of Conduct.
Make good behaviour part of the daily conversation
“Employees don’t intentionally set out to perform unethically, but it can happen by accident,” says Lagan.
Corporate stress and pressure on resources can lead to people taking shortcuts.
When an organisation tolerates small breaches of rules, unethical behaviour can snowball. To counter this, organisations should arm their staff with the skills to recognise a risky situation.
That could mean sales training that teaches people to identify the top rationalisations for unethical behaviour, says Lagan. If a person hears themselves or another team member using one of those rationalisations, 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
At AIA Australia, the idea of doing the right thing is reinforced by continually refreshing the message. “We started off messaging through posters, videos and emails, then we put photos of the execs and made it their message,” says Murray.
AIA uses interviews with executives as part of its internal training effort. The executives explain why doing things the right way is important to them and illustrate this with examples aligned to their business objectives.
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,” says Lagan.
“They need to be very close to the dynamic of the organisation.”
At AIA Australia, board accountability is demonstrated through a group-wide cultural audit every two years. They use global benchmarking 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],” says Murray. “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’,” says Lagan.
Create a strong governance framework
There’s nothing like a spate of corporate wrongdoing to trigger a wave of corporate ethics talk, observes Tsahuridu. Yet unless those good intentions become part of a lived behavioural change, they would have no effect on improving ethical culture.
As Lagan points out: “Governance models on a piece of paper don’t change the culture of an organisation.”
An organisation’s policy for dealing with ethically ambiguous behaviour 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 behaviour. Once channels are in place, they should be monitored, and changed or improved in line with use and feedback.
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“If you say you have a hotline, then [ask] how many people are using it, what’s the feedback,” says Lagan.
“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 behaviour takes time. “It’s taken decades to build the culture and reputation we have today,” says Murray.
However, as Wells Fargo discovered, it can come crashing down in the blink of an eye.
ASIC’s take on corporate culture
From a regulator’s perspective culture matters, says Australian Securities and Investments Commission (ASIC) chief John Price. That’s because poor culture can be a driver of poor conduct, and its ASIC’s job to regulate conduct.
Identifying the practical steps boards and directors can take to promote a more positive culture, Price emphasises the importance of a company’s board setting the “tone at the top”.
- Developing desired organisational values and behaviours
- Appointing a CEO and management team who will drive that culture
- Holding the executive to account when they see misalignment
- Board members modelling their own actions accordingly
In his address in November 2016 to the 33rd National Conference of the Governance Institute of Australia, Price outlined how ASIC incorporates cultural factors into its risk-based surveillances.
ASIC may assess:
- Reward and recruitment incentive structures
- Recruitment and training policy
- Whistle-blower policy
- Nature and level of complaints
- Remediation policy and procedures
- Corporate governance framework
Prevent unethical behaviour taking root