Using Outdated Management Practices Can Be Very Costly
Readers of this blog are aware of the problems created by using quotas: Achieved the goal by not the aim (2013) – The Futility of a Numerical Goal (2014), Distorting the System, Distorting the Data or Improving the System (2013), Dr. Deming on the problems with targets or goals.
City and federal officials have reached a settlement of at least $150 million with Wells Fargo over allegations that the bank’s employees, driven by strict sales quotas, regularly opened new accounts for customers without their knowledge.
As I said in a post on my blog, in 2008, The Defect Black Market:
It is simple to blame employees for taking such action. But the management that setup such a system deserve more blame. This type of manipulation is what is encouraged by managers that think management means setting up such simplistic, senseless systems (Why Extrinsic Motivation Fails). This is one more example of forgetting the proxy nature of data (among other things).
As W. Edwards Deming said decades ago as point 10 in his list of 14 obligations for managers: Eliminate Slogans, Exhortations and Targets.
Maybe Wells Fargo executives should pay more attention to how the field of management has evolved over the last 50 years. The dangers of strict sales targets are well understood by those that study management and human behavior. Sadly our management practices often fail to advance even as those that do seek to understand how to better manage our organizations make great strides in advancing our knowledge.
Related: Another Quota Failure Example (2006) – Why ThoughtWorks Eliminated Sales Commissions (2013) – The Trouble with Incentives: They Work (2010) – Targets Distorting the System (2005) – Dangers of Extrinsic Motivation (2006)