Wells Fargo Sales Abuses and Performance Management

Wells Fargo Sales Abuses and Performance Management

The rich detail in the Wells Fargo sales practices investigation report (here) by independent law firm Shearman & Sterling offers a wealth of lessons. The report addresses numerous problem areas, all of which can have implications for ethics and compliance education.  This is the first of seven blogs to assess the report’s findings and conclusions in context to what education can and should offer as part of a company’s efforts to demonstrate responsible business conduct.

The report focused on the following problem areas for Wells Fargo:

  • Performance management systems
  • Business model
  • Decentralized organization structure
  • Leadership’s oversight
  • Control functions
  • Sales culture
  • Board oversight

The Role of Performance Management

Performance management systems offer a critical tool for fostering achievement of any organization’s objectives. These systems can profoundly influence employees’ behaviors. When working properly, these systems help an organization to effectively meet strident goals because they focus employee attention on those that are critical to success.

Well-designed and implemented performance management systems are effective partly because their intent is to meet an organization’s multifaceted goals, not just a singular one, such as increased sales. Companies succeed for several reasons: well-designed products, quality service and customer support, efficient operations, continuous innovation and a willingness to stand behind its products, to name a few. An effective performance management system must take such goals into account.

Managers, especially senior leaders, need to understand how these systems work, how to implement and manage them, and when to identify problems with them, for operational purposes and well as other reasons. The intent is not to roll such systems out to an audience of robots who execute directives without consideration for their effects but, rather, to develop managers who see directives in context, implement as appropriate and call out problems.

Finally, all employees need to appreciate the goals the performance management system is intended to promote and behaviors that are contrary to these goals. Milgram’s obedience to authority studies in the early 1960s showed us the risks of unquestioned adherence to authority. Companies should want to encourage thinking employees who can operate beyond simple directives.

Performance Management at Wells Fargo

To begin, the Shearman & Sterling report found a significant disconnect between the bank’s business model and what the performance managements systems were designed to promote.

As time passed and leadership gained experience with the performance management system, they did not make the requisite efforts to see that the system was unlikely to responsibly achieve the business model’s results; over time, the system spawned lower quality sales, which went unheeded for a lengthy bit of time. Also, to maintain the business model over time, the performance management system had to “exert significant, and in some cases extreme, pressure on employees to meet or exceed their goals.”

According to the report, Wells Fargo’s performance management systems in its Community Bank organization were distorted by trumpeting employees with high sales without attention to the quality of these sales. This led many employees to focus overridingly on one aspect of their work rather than the totality of how the bank serves customers.

The Value of Education

These errors were preventable through numerous safeguards, not the least of which is educating senior leaders, managers, and employees about the purpose for, role of and process to manage performance management systems. Too often, we leave such education to “on the job” experience, hoping that staff learn the lessons before critical situations occur.

This need not be the case. Companies can provide at least some base-level training to help employees at all levels understand organizational systems, how they are intended to operate, how to implement them and what to do when they begin to break down. In Successful Onboarding, (Stein, Christiansen, 2010), the authors espouse the importance of ensuring all employees know how all parts of the business work and their interrelationships with other lines of business.   This has the effect of increasing employee engagement and loyalty and increasing effective coordination of business operations.   Business systems are only as good as the people who design, implement, manage and perform according to them.

Wells Fargo learned a difficult lesson, partly because its leadership was not well skilled at working with, evaluating the results of and calling out problems related to the bank’s performance management system. We expect corporate leaders of among the country’s largest and most sophisticated companies, who make very hefty salaries, to be competent in working with such systems, given the potentially grave consequences that can occur both to the organization, the public’s trust in it, and the potential ramifications to the financial system. It’s time for such companies to raise the bar on how these executives are schooled.

Part 2 of this series will address the role of the education pertaining to the business model in the Wells Fargo sales practices case study.

 


 Do you have questions about your current ethics and compliance training program? Contact us and we can work with you to make recommendations to augment and/or improve your current offering.

Syntrio is a leader in both the ethics and compliance field, as well as human resources and employment law, and is prepared to help your company implement a compliance program aimed at reducing the potential impact of compliance violations within the organization. Syntrio takes an innovative philosophy towards compliance program design and strives to engineer engaging, entertaining, and thought-provoking content. Contact www.syntrio.com for more information about our ethics and code of conduct online courses and remember to follow us on Facebook, TwitterGoogle Plus and LinkedIn for daily updates on employment law and compliance that impact your company!

 

Written by Jason Lunday, Vice President of Product Development, Syntrio

When Ships Collide: Implications of Context, Compliance, and Readiness

When Ships Collide: Implications of Context, Compliance, and Readiness

Last week, when the USS Fitzgerald collided with a Philippine cargo ship, many people wondered in this day and age how such things can happen. Doesn’t modern technology exist like radar and radio communications to prevent this? Weren't both crews alert and on watch? Even if the technology systems failed, couldn't the crews have maneuvered each ship out of the way of the oncoming ship? Further, what can such mishaps tell us about organizational ethics and compliance failures?

In catastrophic situations like these, typically no one error leads to the accident. Typically, a series of events occur: unheeded warnings, human and system errors, environmental errors, and other intangibles, which lend themselves to accidents like this happening. The US Navy’s protocol is for nearly constant training and drills to minimize the chance of this happening. However, it is nearly impossible to train for every potential circumstance or contextual situation.

I was on the USS Eisenhower (CVN-69), an aircraft carrier, returning from a six-month Mediterranean deployment when we ran into an anchored Spanish Collier (the Urduliz) at 0821 on August 28, 1988 near the Hampton Roads Bridge Tunnel, just 4,000 yards from our home pier.

How do I know? I was on the USS Eisenhower (CVN-69), an aircraft carrier, returning from a six-month Mediterranean deployment when we ran into an anchored Spanish Collier (the Urduliz) at 0821 on August 28, 1988 near the Hampton Roads Bridge Tunnel as we were sailing back to Norfolk, VA, just 4,000 yards from our home pier.

That morning, all crew were not on watch—instead, we were in our dress whites, preparing to man the rails. When a ship is underway, it tests a series of daily alarms, including general quarters and a collision alert, at the same time every morning. On that fateful morning after the scheduled test, at 0819, the collision alert sounded, and very shortly afterward the ship listed hard from port to starboard. Now, if you haven't sailed on an aircraft carrier, one thing to note is that unless you are in the roughest seas, you wouldn't even know you were underway. It's like walking around any office building. So, to feel the 1,092-foot ship move this way was unnerving, to say the least.

Luckily, no serious injuries occurred on either vessel. Millions of dollars of damage befell the Eisenhower, and we pulled into port with the evidence of the collision. Ultimately, the commanding officer lost his ship, and his naval career was basically ended. You can read a full summary of the report here. One of the major causes for the collision was the lack of a harbor pilot (the waterway and navigational buoys had been adjusted since the departure six months earlier) and a reliance by certain “officers of the deck” on the whims of the ship's navigator.

Let's think about the deadly collision of the USS Fitgerald with the Philippine cargo ship. What could have potentially caused this accident?

According to the Japanese Coast Guard, the accident happened around 1:30 AM, local time.

This is significant for a couple of reasons. The mid-watch on ships runs from 10:00 PM until 2:00 AM. You typically take the watch over at fifteen minutes before the watch and also want to walk through your watch station before you relieve your shipmate. So, this collision happened at watch turnover time from mids to the dog watch, or 2:00 AM to 7:00 AM timeframe. Also, this was at night. Note the reverse track the destroyer took after the collision. This would be standard after a collision as the crew circles back to search for any sailors who may have fallen overboard.

The combination of watch turnover, time of night and other factors likely were contributory of this fatality-producing accident. Because the Philippine cargo ship was three times as large as the US Naval ship, it created more damage to the destroyer. If you haven't been on board a combatant ship before, you may not know that much of the ship's crew sleeps at or below the waterline. This, I believe, is why our sailors perished. They were in berthing or other areas in the middle of the night, below the waterline, which was breached during the accident.  This caused the spaces to quickly flood, probably while the sailors were asleep.

Numerous investigations of this incident will continue for years to come, with lessons learned shared with others so, hopefully, similar accidents can be avoided.

If you work in the world of compliance or other risk-based training, these incidents offer important lessons:

  • Train in a variety of contexts, the more realistic the better. If the situations you train in aren't real or legitimate, or don't stretch the imagination of your learners, it is harder to prepare them for real-life situations.
  • Don’t limit training to optimal conditions; much of what goes wrong occurs when conditions are not ideal, when employees already are under stress or fatigued.
  • Design training around the weakest points in a process to test how employees respond when the process is most vulnerable. This may yield the best lessons and the greatest preparation for future situations.
  • Incorporate past failures into future training to reinforce prior lessons and test employees’ new aptitudes.
  • Don’t train just to the specific incident; many problems occur in situations not currently envisioned. Train employees to holistic problem recognition, evaluation and resolution so that they can apply skills learned in one situation to others that are unforeseen.

 


 Do you have questions about your current ethics and compliance training program? Contact us and we can work with you to make recommendations to augment and/or improve your current offering.

Syntrio is a leader in both the ethics and compliance field, as well as human resources and employment law, and is prepared to help your company implement a compliance program aimed at reducing the potential impact of compliance violations within the organization. Syntrio takes an innovative philosophy towards compliance program design and strives to engineer engaging, entertaining, and thought-provoking content. Contact www.syntrio.com for more information about our ethics and code of conduct online courses and remember to follow us on Facebook, TwitterGoogle Plus and LinkedIn for daily updates on employment law and compliance that impact your company!

 

Written by Darin Hartley, M.Ed., US Navy Veteran, Director of Marketing

Follow Up: Uber Board Member Takes Exit 666 on the Highway to Hell

Highway to Hell: Uber Gives 20 Employees the Last Ride Amid Claims of Harassment and Discrimination

Straight from the soundboard of rideshare giant Uber’s greatest rock and roll hits comes a remix to the compliance cover of AC/DC’s classic rock song “Highway to Hell.” Uber took the aforementioned “Exit 666” when its board member David Bonderman made a disparaging comment about women during an Uber meeting last week.

During the meeting, fellow Board member Ariana Huffington discussed the positive impact that can be made on a board of directors when one woman joins a board. In response to Ms. Huffington’s comments, Bonderman replied “[a]ctually, what it shows is that it’s much more likely to be more talking . . .” Unsurprisingly, nearly everyone in attendance reacted negatively to the comments, which came hot on the heels of Uber’s dismissal of over 20 employees and corresponding sabbatical taken by its CEO.


Learn more about Syntrio's Anti-Harassment and Anti-Discrimination Training


Although Bonderman was quick to apologize for his remarks and the board asked for his resignation quickly, the fact that the comments occurred at all demonstrate that the culture at Uber has not changed and is unlikely to do so in the near future. The ideal situation would involve Mr. Bonderman being replaced with another female board member; however, Bonderman’s company will play a large role in deciding who fills the seat. Given the company’s significant financial interests in Uber it is likely they will exercise significant discretion in filling Bonderman’s vacant seat and not necessarily limit their search to female candidates.

The dramatic shift in public perception caused by Uber’s string of public relations blunders surrounding it’s apparently misogynistic tendencies demonstrate the need for compliance officials to take a greater role in shaping the policy at large corporations. As noted in last week’s piece, when companies demonstrate a free-wheeling “bad boy” culture there are bound to be compliance problems flowing from the top down. Rather than remix classic hits and misses, it is time for Uber and other companies to get back into the studio and come up with material that is progressive, forward thinking, and will keep companies out of the courtroom and negative public eye.

 

 


 Do you have questions about your current ethics and compliance training program? Contact us and we can work with you to make recommendations to augment and/or improve your current offering.

Syntrio is a leader in both the ethics and compliance field, as well as human resources and employment law, and is prepared to help your company implement a compliance program aimed at reducing the potential impact of compliance violations within the organization. Syntrio takes an innovative philosophy towards compliance program design and strives to engineer engaging, entertaining, and thought-provoking content. Contact www.syntrio.com for more information about our ethics and code of conduct online courses and remember to follow us on Facebook, TwitterGoogle Plus and LinkedIn for daily updates on employment law and compliance that impact your company!

 

Written by Jonathan GonzalezEsq., Senior Counsel for Syntrio

Highway to Hell: Uber Gives 20 Employees the Last Ride Amid Claims of Harassment and Discrimination

Highway to Hell: Uber Gives 20 Employees the Last Ride Amid Claims of Harassment and Discrimination

Few companies have ingrained themselves into American culture faster or more thoroughly than Uber. Indeed, the ride-share giant is now one of (if not the most) common forms of transportation in this country. Unfortunately, Uber’s financial success has not been matched with compliance victories, as throughout the company’s history there have always been stories of inappropriate behavior within the company, both at the employee level and at the contractor (driver) level.


Learn more about Syntrio's Anti-Harassment and Anti-Discrimination Training


A Culture of Harassment

The current corporate crisis was set off in February 2017 when a former Uber engineer wrote a detailed blog post on her personal website detailing her departure from the company, the harassment that led to that departure, and the company’s failure to do anything about it. The next several months saw Uber embroiled in a public firestorm over it’s “bad boy” culture, and also saw a social media campaign to use other ridesharing services as a means of protest over the company’s culture of harassment.

Uber Takes Action: Too Little too Late?

According to a New York Times article, Uber fired 20 employees last week. These departures followed an investigation by the company’s law firm into Uber’s compliance culture, which revealed 47 incidents of harassment and 54 incidents of some form of discrimination. The report also revealed other categories of unprofessional behavior including retaliation, assaults, and bullying.

In response to the firings, Uber is conducting several different types of training for its employees in an attempt to change its compliance culture. Through its law firm, the company also acknowledged there is a serious problem within its culture.  Uber’s attempt at reform coincided with its CEO taking a leave of absence, beginning June 13, 2017, so its board of directors could more closely watch the company’s employees.

Can the Company Recover from its Downward Spiral?

Whether Uber recovers from its current crisis depends largely on how hard the company works to change its compliance culture. As we have advised for several years on this blog, top-down compliance failures often have a massive impact on a company’s overall ability to maintain the desired culture. In Uber’s case, the company appears to have long ignored its culture altogether and disregarded a need to hire employees who value differing opinions and different people equally. Moving the iceberg is not easy, but it is also not impossible.

As noted, Uber has begun conducting training sessions for employees. Ideally, these training sessions do not merely “check the box,” but rather take an actual attempt at displaying the benefits of a positive culture of compliance.  If Uber can instill the belief within its employees that it is committed to compliance it is entirely possible that the scandals of 2017 will become nothing but a memory and we will all continue to “Uber” across the country.  If not, it is highly likely the company has truly traveled too far down the Highway to Hell.


 Do you have questions about your current ethics and compliance training program? Contact us and we can work with you to make recommendations to augment and/or improve your current offering.

Syntrio is a leader in both the ethics and compliance field, as well as human resources and employment law, and is prepared to help your company implement a compliance program aimed at reducing the potential impact of compliance violations within the organization. Syntrio takes an innovative philosophy towards compliance program design and strives to engineer engaging, entertaining, and thought-provoking content. Contact www.syntrio.com for more information about our ethics and code of conduct online courses and remember to follow us on Facebook, TwitterGoogle Plus and LinkedIn for daily updates on employment law and compliance that impact your company!

 

Written by Jonathan GonzalezEsq., Senior Counsel for Syntrio