Companies Just Don't Seem to Learn

It seems another bank's plan to boost business from existing customers tripped up on perverse incentives. Citizens Financial, after bragging at an investor conference that it had contacted 300,000 customers and scheduled 80,000 "Financial Check-Ups" saw its stock skid when a number of current and past employees disclosed that a lot of those meetings had been faked.

If your people are gaming the system, blame the system, not your people

Faking appointments is hardly on the same level as faking accounts and clearly this overstatement doesn't land Citizens anywhere near Wells Fargo in the ranks of banks behaving badly. (See this earlier post and this post on Wells Fargo) But both stories represent a rational, if desperate, employee response to perverse incentives. And both stories point out what should by now be obvious management lessons:

  1. It's not about what you want, it's about what your customers want. Branch employees made cold calls to current customers inviting them in for a "financial check-up," but apparently, many customers weren't interested in having that little chat. Why should they? What had the bank done to engage them first on their terms? People assumed, quite rightly, that this was a telemarketing effort, designed to sell them more banking products.
  2. You have to earn trust, you can't claim it. I applaud any company that decides it wants a consultative relationship with its customers rather than a transactional one. But no one hands over their personal information unless they trust you have their best interests at heart. And you don’t earn trust by asking for it. You earn trust by demonstrating trustworthiness and offering something of value. Ways to demonstrate trustworthiness include doing something that benefits the other person more than you, and (oh! yes!) telling the truth, even when it’s hard.
  3. Reward results, not activity. Citizens Financial staked a lot on the idea of getting customers to come in for a meeting. But if I were a shareholder in Citizens Financial, I’m not sure I would be impressed about meetings. Of course you need to get meetings if you’re going to upsell a client, so meetings are an important indicator of strategic progress. Moreover, management probably believed that asking employees to book appointments was a benign, even customer-friendly, approach to business-building that mediated the pressure to produce actual revenues. (Employees reported that they felt ok about claiming false meetings because they weren’t hurting the client). But meetings are not results and the pressure to record meetings may have produced the worst of both worlds. They generated the appearance of activity whose very effort may prove to have cut the time branch teams could put into producing actual results. Even if employees were not fudging the numbers, putting pressure on them to log meetings was bound to produce a lot of spurious activity that led nowhere. A measure that evaluated the productivity of those meetings (for example: meetings-to-conversions) might have led to more accurate reporting – and perhaps more thoughtful cold-calling strategies. It goes without saying that you should only reward results achieved in accordance with your values.
  4. Don't underestimate the extent of the problem. Like Wells Fargo before it, Citizens Financial is dismissing the extent of the problem, claiming it is isolated to a small number of people, and pointing to their monitoring protocols that would bring to light any widespread malpractice. While there are always individual actors who cut corners. But history and personal experience suggests that when a group of employees across a range of geography are all engaged in the same practices, you can bet the behaviors are widespread and fairly well embedded in the culture. The stock market clearly reached that conclusion. Despite Citizen's assertion that their appointments weren't overstated and the faking problem wasn't widespread, the stock dropped as much as 3.3% on the news.
  5. If enough of your people are doing it, it's not them. Perhaps the most disappointing aspect of this story was to see management once again blaming the employees for getting it wrong, attributing the misconduct to the fact that change is hard. According to the bank, the people who faked appointments were those who “struggled in making the transition to having deep needs based conversations.” But it doesn’t sound as though those people even got to the point where they could have those conversations for which they may indeed have been well trained. The bank had failed to create the necessary conditions for getting these meetings and then blamed the employees for not having the conversation. When behaviors reach a certain critical mass (and 11 employees over multiple states suggests critical mass), you know the company is rewarding those behaviors, even if unintentionally. Rather than blame the people, look to the system and fix it.

Change is hard. Especially when you are trying to move your culture from an emphasis on shallow transactions to one that values deeper consultative encounters that lead, over time, to more – and more profitable -- business as trust and confidence grow. All the more reason it is incumbent upon management to do more than demand that employees undertake hollow gestures toward relationship building. Only management can put in place the practices and incentives that support trust-building behavior and reward the high quality business that results from it. 

If your people are gaming the system, check the system, not your people.

Could the Board have helped?

Ordinarily, I wouldn’t say that a “financial check-up” promotion would rise to the Board level of discussion. But if Citizens’ management thought it important enough to feature in its investor presentations, they must have believed it sufficiently material to raise at the Board. That would have been a good moment for someone to ask if the processes, support and reward systems were really in place to produce not just the right behaviors, but the right results.

Culture counts. Getting it right takes constant work to match you practices to the outcomes you claim to value.

Citizensfinancial #wellsfargo #fakemeetings #fakeappointments #financialcheckup

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