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“We Could All Be Wells Fargo”: Why the Language Around Incentive Programs Matters

by Ann Allsopp

Yesterday, Kirsten and I headed to the University of Denver for Corporate Integrity 2017, presented by the Institute for Enterprise Ethics. One topic the panel discussed was the Wells Fargo Incentive Pay and Whistleblowing Scandal and how employee incentive programs can incentivize the wrong behaviors.

Cindi Fukami, Professor of Management at the Daniels College of Business, told a story about her own experience with Wells Fargo opening an unauthorized account in her daughter’s name. When she saw the account, Fukami immediately suspected the reward system in place for the employees.

“If someone is doing something, there’s a reason for why they’re doing it,” Fukami said. “There’s something compelling that behavior.”

Employee incentive programs rely on what psychologists call “operant conditioning,” or, as Fukami put it, “What gets rewarded gets repeated.” As was the case with Wells Fargo, if employees’ behavior seems surprising or flawed, “the first place to look is the reward system.”

Of course, rewards aren’t all bad. Incentive programs can be an effective way to motivate employees to meet their goals and to grow the company. The challenge, however, is measuring and rewarding the right behaviors.

“A lot of these problems are because we measure the wrong thing,” Fukami said, “because it’s too difficult to measure the right thing.”

Incentive programs tend to focus on “easy measures” like sales figures or time spent on the phone with a customer. Such tactics neglect the means for the end. In Wells Fargo’s case, company leadership set unrealistic sales goals that forced employees to “choose between keeping their jobs and opening unauthorized accounts." Employees weren’t rewarded for customer satisfaction or for acting in accordance with Wells Fargo’s stated “vision and values”; instead, former employees claim they were retaliated against for calling the ethics hotline or even fired for refusing to open unauthorized accounts. Such actions from leadership sent the message that the company cared more about sales figures than acting ethically.

So where do compliance professionals fit into all this? Here are a few takeaways from the Corporate Integrity discussion:

  1. Include the “how” with the “what.” One audience member pointed out that cross-selling and upselling are valid goals for growth, but it’s the message that follows—the how, not the what—that we in the compliance world must focus on. Communications around incentives should specify how employees are expected to meet their goals so that there’s no room for unethical interpretations. And the Code of Conduct should clearly state that unethical behavior is never acceptable, even when the company or the employee stands to benefit from it.
     
  2. Goals should have boundaries. Another audience member pointed out that some companies have created effective and ethically minded incentive programs by including parameters around goals. For example, instead of just dangling a bonus in front of an employee, say, “You’ll get a bonus for meeting this goal, but only if you also meet this safety/regulatory standard.”
     
  3. Be on the lookout for incentives that neglect long-term goals. Rewards should be aligned with a company’s long-term strategy. As Fukami explained, “If we say quality is what we’re offering, we need to reward quality—even if it’s difficult to measure.” Any time short-term and long-term goals conflict is an opportunity for unethical behavior. As compliance professionals, it’s our job to address any ethical conflicts before employees are in those tough situations.

The Wells Fargo scandal was the culmination of many issues, including a lack of tone from the top and a fear-based company culture that pitted employees against each other. Addressing any of these issues requires company leadership to value and prioritize an ethical company culture. But it’s also important to recognize that the language we use with our employees matters. As one audience member put it, “We could all be Wells Fargo.”

Want to make sure you’re conveying the how? Sign up for a free consultation with the Rethink Compliance experts.

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