Something In The Water?
The Wells Fargo episode shouldn’t be a reason to write off cross-selling altogether said Frank Cespedes, a professor in Harvard Business School’s entrepreneurial management unit. Cross-selling is a perfectly legitimate business objective, and compensation and incentives are a perfectly legitimate tool to help achieve those objectives. “Compensation and incentives clearly influence behavior but they’re one influence among many,” he told Banker & Tradesman. “What are the other things that influence behavior for sales? What are the relevant metrics that are not discussed? What is the behavior and norms that I see going on around me? What does my boss pay attention to, and what does my boss not pay attention to?” Moreover, Cespedes points out that given Wells Fargo’s size, the number of employees estimated by the CFPB to have partaken in those nefarious activities matches up pretty closely with other reports of employee malfeasance at other institutions. He cited a report from Oversight Systems that found just 5 percent of employees were responsible for 82 percent of fraudulent activity at an organization. The 5,300 employees Wells let go over the scandal represent far less than 5 percent of its more than 200,000 employees in total, he noted. Cespedes said that “the real rot” in the Wells Fargo incident comes down to two areas: a lack of clear values from the top and a lack of control systems that failed to catch or punish this behavior for years. “You begin with clear values, with controls, with modeling behavior. And the first time this happens, somebody’s fired and now everybody knows what happened,” he said. “Apparently that clearly didn’t happen early enough and often enough.” Incidentally, this is where community banks shine. “It has to come from the top. It has to be modeled through your behavior, through your dealings with your customers, through your honesty,” Thurlow said. “None of those people at Wells had ever had an opportunity to meet their CEO in person. We do that every quarter. We talk about who we are, where we’re going and everybody understands they’re on a team together.” Modeling and incentivizing that good behavior can also include paid time for community service and rewarding employees for things like volunteerism and years of service – not just for meeting sales goals. If you’re ladling out soup to the homeless alongside your CFO, community bankers say, that sends a clear message about what kind of behavior is rewarded and what isn’t. “Our CEO is so clear and direct in his communications and so transparent about things,” Eastman said. “He told us the story about Wells when it first came out and he underscored the fact that this isn’t our culture and this isn’t going to happen here, but customers may have concerns and questions. It was just like a friend talking to you.”
This article was originally posted on Banker & Tradesman.