When Incentives Kill Culture
The recent news of the Wells Fargo scandal of employees who opened various credit accounts without customers knowledge in order to meet assigned quotas shows a major failing in leadership in the company. Many customers had various accounts and/or lines of credit opened without their consent in order for the employees to achieve imposed-upon quotas from upper management and shareholders.
While the termination of over 5000 employees may have been warranted (after all they did choose to open these accounts unawares to their customers), that fact that it was a system-wide behavior shows the lack of ethical leadership that created this culture in the first place.
I am a huge proponent of bonuses, sales goals, and other incentives to enable people and organizations to both attain goals and be rewarded for the hard work that goes into it. But as with everything, there needs to be a balance of realistic goals and ethics to avoid the pressure and temptation for impropriety and compromising of laws. Setting incentives must be made with checks and balances built into the organization – as should everything else – in order to maintain integrity.
I my career, I’ve seen warehouses short order products to keep costs in line for the period, thus shortchanging customers who need the product. Restaurants run tight to make monthly bonus so that service times suffer. Retail locations hound patrons to open credit cards or push them to “round out” their shopping and walk away with a complete wardrobe, even in spite of their customers’ protests. Auto repair shops replace parts with the cheapest possible, or even sand and paint to make the old parts look new, just to make their quarterly costs bonus.
These are only a few examples of how the wrong leadership behind even the best of incentives can lead to unethical behavior. In most cases, and especially in Wells Fargo’s case, leadership is ultimately to blame.
In order to prevent a culture of cheating others to gain personally, here are some things to keep in mind when setting incentives for your organization:
- Why is there an incentive, what is the benefit to the organization and it’s people? Are bonus and sales growth initiatives for incremental business, or are they a reaction to declining sales (if so, then your company has bigger problems than focusing on incentives). Any sales initiative or bonus program must align with the core business model of the company, and not detract from it.
- Is the quota set by a realistic metric and data? Stretch goals are fine, but if the goals are so unrealistic (even to customers) that employees have to cheat, then there is a major problem. Is the quota a dump-and-run from upper management in order to grow on the backs of already stressed-out staff? Goals for business growth must be rooted in long-term realism and not short-term gain.
- Is the benefit to upper management more disproportionate than the employees? Do the upper management make thousands of dollars while employees make a few hundred AND have the privilege of keeping their job or not being written up?
- Can employees have a realistic chance at making this goal, or will they need to cheat or bend the rules? Are they set up to succeed at the goals, or set up to fail?
- What will your customers think of the focus on the products/services foisted upon them? Will the “hard-sell” be a put-off of your brand? Will the customer experience fall short?
- Will your customers suffer from shortcuts to make bonus, such as cutting labor or skimping on product quality? Will corners and services be cut just to make a bonus for achieving costs?
- Is your incentive plan instilling a culture of success, or fear of losing jobs? What is the resulting culture stemming from the new initiatives? Does it promote fear or teamwork? Ethical behavior or cutthroat strategies?
- Is this a knee-jerk reaction to sluggish sales performance? If the quotas established are due to sluggish sales, then there are some foundation issues to address internally first – product relevance, business model, pricing, or execution.
- What are the checks and balances to ensure culture and ethics are not compromised? How can you and your company guarantee that impropriety is curtailed? Are there checks and balances to ensure the integrity of the initiative?
- Run through the quotas – is there potential negative impact to the employees and/or customers? Is there risk, and is the ROI worth that risk? If the trajectory looks like it could have negative repurcussions, then scrap your palns and create a new method.
Company bonus goals and incentives are great ways to boost sales and reward individuals in the organization. As with any other business strategy, it must set your people up to enhance your culture, brand, and standing before any other benefit – such as sales or bonuses – are considered.
Make incentives work for, not against, your vision.