Tag Archives: Wells_Fargo

Wells Fargo Disinfects Its Sales Culture. Will Other Companies Follow?

I’ve never taught corporate strategy to second graders, but I sometimes think about how to approach the challenge. I’d begin by representing a company as hodgepodge of contraptions. Maybe, a school bus with feathered wings on top, a boat anchor dragging behind, and wheels of various sizes and materials randomly positioned underneath. “Pretend this is a company. How far do you think it could go? Would it sink or crash? Can it reach Profit Land before everyone jumps off?”

Or, maybe I’d just give the kids a dark, real-world example. Say, Wells Fargo, circa 2016. “The top executives are bullies who believe rules don’t apply to them. They scare the sales staff on purpose, and they tell them to lie to customers – all so the stock price will go up! That way, the executives can get paid lots and lots and LOTS of money!”

I envision an eruption of giggles and laughter. “That’s dumb! And it would NEVER be sustainable, silly!” Every corporate board needs at least one seven-year-old to call out the obvious.

Wells Fargo wants to change that narrative. In the wake of their recent scandal, the company replaced its senior management, and announced its intention to disinfect its infamous sales culture. That effort began in January through a new compensation plan for employees, and success measurements that reflect customer value delivered. Wells Fargo employees will say goodbye to “stretch” goals, low base pay, individual bonuses for entry-level sales employees, and onerous demands to open new customer accounts. They will say hello to higher base salaries, less variable pay, and team incentives. Yes, you read that correctly: team incentives. No more divide and conquer as a daily tactic for employee intimidation. And, probably less employee intimidation, too.

You won’t find “salesy” behavior here! Under the new management regime, Wells Fargo will monitor growth in the number of customers who rely on the bank as their primary financial institution. And branches will be measured on customer retention. Meet the new Wells Fargo, where consumer bankers, loan officers, and financial planners cooperate, collaborate, and support one another. Go team, go!

Wells Fargo’s new plan “will focus on customer service, customer usage and growth in primary balances,” Emily Glazer wrote in a Wall Street Journal article, Wells Fargo to Roll Out New Compensation Plan to Replace Sales Goals . These new objectives are light years from what they were less than one year ago, when the company’s goals included having every customer hold eight accounts, even if it meant browbeating the sales team to open accounts surreptitiously. And by browbeating, I mean threatening to ruin careers for noncompliance, then conspicuously enforcing the threat.

Such reforms are instrumental for building an ethical culture, improving customer experiences, and keeping customers happier, longer. By forgoing an aggressive sales environment with harsh punitive measures, Wells Fargo can also close the chasms between their written Corporate Vision and Values, what their employees do in the field, and how management recognizes and rewards their efforts. Can is the operative word. It won’t happen automatically, and it won’t occur overnight, but I predict for Wells Fargo, the outcome will be greater revenue, profits, and higher investor returns over more quarters. And for the same reasons, Wells Fargo’s customers will feel good walking into a branch and talking to a banker who now is far more likely to have benign intentions. That’s huge, and it doesn’t happen on its own.

These changes seem so pragmatic and sensible that I’m surprised they are not more widely adopted. But in the sales world, they compare to a diamond in the rough. Similar initiatives are rare, so whenever you discover one, savor it by examining it closely. One of my clients, a global cloud software developer, deviated from a widespread industry practice that provides reps commissions on seats sold. Instead, my client’s plan compensates reps not for seats sold, but for usage. They go even further. Their plan penalizes reps for dormant seats. The reason? Nothing puts a vendor in a financial buyer’s crosshairs more than writing checks for stuff that nobody uses. “I see we’re paying Squishysoft $400,000 every month for supply chain software that only 10 of our employees log into daily. They told us we’d save money by going to the cloud!” No vendor wants that conversation taking place in the buyer’s offices. My client was shrewd in recognizing the risk lurking in an attractive revenue stream, and they mitigated it through their pay plan.

Some might dismiss Wells Fargo’s new sales strategy as an obvious choice to restore customer and employee trust. No doubt that’s a motivator. But I think their kinder, customer-centered selling approach is an astute competitive maneuver, and long overdue in revenue strategy.

Why does Wells Fargo today appear at the vanguard for a sales model that should be commonplace? I don’t know. But I have a theory that specific forces impede companies from jettisoning practices that consistently antagonize and alienate customers and employees:

1. Demands on CXO’s to grow shareholder value. For the investment community, stock price and potential revenue growth are connected. Unfortunately, many senior executives operate under the misguided notion that growing shareholder value is not only their primary responsibility, but an obligation. In turn, their demands for short-term revenue growth seeps into selling strategy, undermining the delivery of longer, more sustainable value to customers.

2. Sales managers today are unable to adapt to evolving needs, because they began their careers in “revenue-driven” organizations. Customer loyalty, customer retention, and user satisfaction have emerged as value drivers for vendors. But sales managers are slow to change their expectations, along with their coaching and mentoring.

3. Many outside the sales profession stereotype salespeople as “thriving on pressure.” As we learned from Wells Fargo, they can also be sickened by it. Accountants, lawyers, and logisticians don’t thrive on pressure any more than salespeople do. But for salespeople, the stereotype leads to dysfunctional pay policies and incentives.

4. Hiring managers still believe money-motivation as integral to selling success, and strategies are built around that assumption. Further, firms that provide psychographic testing for sales candidates perpetuate obsolete traits deemed essential to a “sales personality.” But these were formulated at a time when “individual contributor” was a synonym for “salesperson.” That doesn’t cut it today. Yesterday’s competencies won’t fill tomorrow’s sales needs.

5. In many organizations, sales operates as a stand-alone entity, with procedures, goals, targets, and objectives that are disconnected from other parts of the organization. By contrast, Wells Fargo has developed a model built on collaboration and goal congruity between departments.

Wells Fargo’s new sales culture is a risky move, but if successful, it will be a powerful competitive differentiator. Much can go wrong. Will a company with a heritage of individual revenue production make a successful conversion to competing as a team? Will the new customer retention measurement backfire? For example, what will happen when a customer wants to close an account because he’s combining assets with his fiancé’s at another institution? Will he encounter a gauntlet of red and gold-clad bankers hellbent on preventing that from happening? By now, Wells Fargo’s management knows about Comcast’s retention debacle. Will they commit the same error? The answer depends on how tightly Wells Fargo adheres to its Vision and Values, the incentives it provides to its sales force for meeting goals, and the penalties it metes out for failing.

I applaud Wells Fargo’s board for addressing a daunting selling challenge, and for setting a worthwhile example that others should follow. For many, the concept of paying team bonuses and rewarding reps for outcomes tangential to direct revenue production might seem as heretic as NASCAR including fuel economy and safe driving as additional criteria for who wins a race. But promoting positive customer outcomes and fostering ethical practices requires companies to change the strategies underpinning their business development activities. And that means reforming sales pay and incentives.

If you need advice starting out, ask a second grader: “When a person buys something they should feel good. And they should always be happy that they did, because that will mean the person did a good job deciding, and the person who sold them something did a good job, too!”

Thanks, kid. You have a great future in business development. I know you’ll go far.

Is the Voice of Risk Being Heard?

“If only HP knew how much HP knows, we would be three times more productive,” Hewlett-Packard CEO Lew Platt said.

Had Mr. Platt been talking about his sales organization, he would have pumped up the multiple. Sales teams possess a trove of valuable commercial knowledge. It’s not unusual to find reps who are fluent in finance, marketing, strategy, product engineering and customer support. Some have lived or studied abroad. Some are multi-lingual. Add street smarts about customer behavior, and you’ve got formidable brainpower.

Good for customers, but a mixed bag for employers. Knowledge and risk awareness go hand-in-hand. That can threaten mangers, especially when assigning individual quotas and sales targets. A bit less knowledge makes team members more compliant. Naivete makes management’s fuzzy planning numerology and “stretch goals” easier to swallow. “Team! Get out there and nail your quota!” Woe to the salesperson who tells her boss, “I have a 70% chance of making my number.” In sales culture, determinism is revered while probabilistic thinking gets ravaged.

More! Faster! Better! In this make-your-number-no-matter-what environment, the voices of risk get stifled. Problems don’t surface. Issues remain under wraps. Objections aren’t discussed. “We need to keep meetings short and use our time efficiently,” senior sales executives tell me. “Besides, we aren’t interested in dealing with stuff we can’t change.” Yes . . . But . . . There are significant hard costs when management cannot assess vulnerabilities, let alone, even know what they are.

More than ever, organizations need to be intelligent about uncertainty and risk. Something that former Wells Fargo CEO John Stumpf didn’t appreciate before he landed in a hot seat in front of Senator Elizabeth Warren, who eviscerated him with questions about his company’s widespread abuses. Stumpf got so flummoxed, he could hardly speak. Senator Warren provided most of the answers, too.

In fact, Stumpf’s management team brutally crushed the voices of risk as a way to insulate themselves from what was happening in the field. Using a cudgel called U5, management silenced internal dissent, enabling Wells to implement practices that exploited its customers and employees. U5, a federal form, was intended to prevent financial services employees who commit fraud and other violations from hopping from firm to firm and repeating their transgressions. But Wells Fargo’s management warped U5’s beneficial purpose to intimidate sales employees into submitting to their heinous demands.

When slapped onto an employment record, U5 carries serious consequences. To hiring managers, it means “don’t hire this candidate.” To employees, it means “Move to a Caribbean island and open a sunglasses stand because you’re not working in financial services. Not now. Not later. Not ever.” U5 made it possible for Wells Fargo’s Management to deliver an ominous message to its staff: if you have the temerity to speak out, blow the whistle, complain, resist, or express unhappiness or unwillingness, we will ruin you. And they meant every word.

We will never know with certainty which statements got silenced, but here are a few possibilities:

“These goals are impossible.”

“My customers don’t like our policies.”

“I’m uncomfortable doing this. It’s unethical.”

“The stress here is burning me out and making me sick.”

“No. This is wrong.”

The voice of risk, U5’d. A well-known verb in the bank’s HR Department, I am sure. With U5 and the repressive sales culture at Wells Fargo, untold millions of similar comments never reached the vocal chords – and keyboards – of its employees. A tiny few seeped out. Just not enough to awaken regulators and Wells Fargo’s board of directors from their slumber. It took an outsider’s report – an investigative article in the LA Times – to goad anyone into action. If you want to crush the voice of risk, here’s your model!

Voicing risk, pushing back, calling out red flags, blowing the whistle – use any terms you want. Wells Fargo used the threat of severe punishment to systematically turn off every communication management didn’t want to hear. An extreme case, for sure, but far from isolated. Where there’s disdain for knowing the truth, a company’s sales culture will reveal it:

“Sell what we’ve got!”

“I don’t want to hear how you aren’t going to make your number, I want to hear how you are!”

“Don’t give me problems. Give me solutions!”

“Stop making excuses!”

“Quit whining!”

One of the most effective ways to shut down the voice of risk is to brand an employee “not a team player,” or “doesn’t believe in the company’s potential.” It’s not U5, but punitively, it might be the next best thing. Try getting promoted or landing a better sales territory with those tidbits embellishing your personnel record. Management’s message: “if you want to stay here, do as we say, and don’t rock the boat.”

“But . . . nobody wants a department full of Chicken Littles, either!” Fair point. There are clear strategic advantages to being picky about the information one accepts before making a decision. Managers must be granted the flexibility to determine what’s useful and valuable, and what to eschew. After all, in sales and selling, there are no universally recognized standards for framing the truth. Look at any B2B sales organization, and you’ll see different managers using different dashboards, and no two turning the same dials and knobs. Vive la difference!

Yet, there’s a distinction between healthy selectivity and willful ignorance. Sales culture should never be an accomplice to the latter, yet the problem is epidemic. The annals of corporate failures are littered with companies that subdued the voices of risk, and created horribly skewed versions of reality. “Employees are our greatest asset! Amazing that none of them are doubters or naysayers!”

Make sure the voices of risk are not silenced at your company. That begins with the board. In an article, Culture: The One Element Most Critical for the Board’s Management of Risk , Jay Taylor, CEO of EagleNext Advisors, recommends six questions to ask:

• Is the CEO active in creating the culture for the organization? Is he or she modeling the right behaviors?

• Is there appropriate tone at the top, both during and outside of board meetings?

• During strategy, product, and investment discussions, is there transparency around business assumptions, openness to respectful but challenging views, and identification of emerging risks to the business model beyond the immediate planning horizon?

• Is there a willingness to bring forward bad news? Is there an understanding that failure may occur, but the business cannot grow and prosper without taking smart risks?

• Has the board established clear expectations for timely identification and handling of risk, particularly those around business goals and objectives? Is there clear risk ownership?

• Not everything should be filtered through the CEO. Are other executives and risk owners present at board meetings and allowed to take questions directly?

The answers to these questions directly influence the culture within the sales force. They influence the strategy, tactics, compensation, and measurements under which business development teams operate. When salespeople believe that the board views risk management, governance and compliance as a crucial responsibility, an ethical environment can be established within the sales organization. The converse is also true: when it’s evident the board doesn’t want to be bothered with protecting the company’s stakeholders, [stuff] will happen. We saw how that works at Wells Fargo.

In addition,

1. It’s understandable that not every anecdote from the sales force constitutes an “action item,” but make sure it’s clear that salespeople will not be penalized for voicing issues to management.

2. Don’t limit account reviews to “wins.” In meetings and internal communication, allow frank discussion about what impedes selling, and make sure no person or department is held sacrosanct in the conversation.

3. Don’t condemn people for probabilistic thinking. Instead, embrace the approach! That won’t make anyone less determined, resolute, or rabidly goal-focused. In fact, the sales team and its managers will become more risk-aware.

4. Appoint at least one board member to serve as a direct point-of-contact for salespeople who want to elevate concerns about illegal or unethical practices, or any other activity that endangers the company, its employees or its customers.

Uncork the knowledge that exists in your sales organization. Giving risk a voice, and a safe way to express it, provides a measurable financial return. And in the case of Wells Fargo, it could have saved the company from itself.

Wells Fargo’s Restitution Must Include Its Fired Sales Employees

Today, there’s a bold headline featured in full-page ads in newspapers across the US. In case you missed it, it’s printed in Wells Fargo red: “Moving forward to make things right.” Contrition, superimposed on a beautiful Western backdrop. In the foreground, a team of six strong horses in full stride pulling a stagecoach. No ethical feces anywhere to be found. All have been skillfully Photoshopped out of the picture. Great job!

“We are deeply committed to serving you and your financial needs . . .” the ad says.

OK – go on . . .

“We have provided full refunds to customers we have already identified and we’re broadening our scope of work to find customers we may have missed. If we have any doubt about whether one of your accounts was authorized, and any fees were incurred on that account, we will contact you and refund fees.”

As an IT professional, reading this makes me proud. Darn proud! – because I know that algorithms, flowcharts, decision boxes, and lines of code will rectify the filthy mess from human greed and poor managerial judgement. Geeks win!

But conspicuously missing from this humble outreach is any mention of the 5,300 or so employees who were fired because they “didn’t honor the bank’s values,” as Wells Fargo’s former CEO John Stumpf, phrased it. That’s wrong, because they, too, were victims.

In many instances, the bank hired young people just beginning their careers. Then, they manipulated their behavior through the Wells Fargo sales compensation plan – a tactic that included a sinister triad of low base pay, aggressive selling goals, and a menacing punitive cudgel for those who failed to “perform to expectation.”

Last week, NPR’s Planet Money podcast with Chris Arnold and Robert Smith made this agony visceral in their interview with Ashley, a former Wells Fargo employee who did not wish to reveal her last name.

When Ashley didn’t meet her quota, she recounted that two managers would show up at her desk. “They said ‘come with us.’ So I walked with them, followed the two of them through the large lobby, you know, past all my colleagues, whatnot – you know, it’s like being called into the principal’s office – sit down at the large conference table, no windows in this room. They shut the door, locked the door and put me on formal warning and say, ‘here’s your formal warning. You have to sign this. If you don’t meet your solutions, you will be fired, and it’s going to be on your permanent record.’ I mean, it was real, like, you were stuck. And it was the feeling that no other employer is going to want you because we will ruin you . . . I got sick to my stomach, and I threw up under my desk. Like, it really made me physically sick.”

For this, Ashley made about $35,000 per year working in a branch located in Wells Fargo’s corporate headquarters building in San Francisco where she regularly saw then-CEO John Stumpf. She became disenchanted with the ethical compromises her employer demanded of her. Most poignant was the price she continued to pay long after she was fired, as this excerpt describes:

ARNOLD: As far as Ashley, she started to refuse to meet her quota. She was just saying, look, I can’t ethically do this. She was calling the Wells Fargo ethics line trying to explain this, but eventually Wells Fargo fired her.

SMITH: Ashley tried to get another job in banking, but she found that she never made it very far past the initial interviews. She suspected that Wells Fargo had put some sort of black mark on her record somewhere. And it turns out that is exactly the case. Wells Fargo wasn’t joking around when they said they would make it hard for her to find work again.

ARNOLD: No. Wells Fargo wrote her up on what’s called a U5 document. It’s like a report card for bankers basically. We tracked it down, and we asked Ashley to read what it said.

ASHLEY: Failure to perform job duties.

SMITH: Any bank – any bank that Ashley applies to will see this line, failed to do job duties.

ARNOLD: The form does not mention that those job duties were the sales goals that everyone we spoke to said were unrealistic and that are at the center of a series of ongoing investigations at the state and federal level.

SMITH: It just says failed to do job duties. It was the first time Ashley had seen it in print.

ASHLEY: It’s like having a black cloud that’s kind of looming behind you. And I’m always trying to get in front of the cloud, out of the cloud, into the sunshine, but it’s always there.

How many Ashley’s are there? I’m estimating around 5,300, which is the number of employees Wells Fargo said it fired over several years for not succumbing to the bank’s seedy values. In the coming weeks, I expect we’ll hear from many of them. What restitution are they entitled to for their wrecked careers, lost wages, financial stresses, marriage difficulties, and broken dreams?

Yesterday, John Stumpf resigned his position as CEO in shame, after relinquishing millions of dollars in bonus, and having millions more “clawed back” by the board. But he still leaves the company a very wealthy man who will be comfortable in his long retirement. His grandchildren are all but ensured of attending college and graduating debt free. Future generations of Stumpf’s will live in decent homes in good neighborhoods. Health emergencies won’t send them into bankruptcy. Sadly, even that modest future eludes the families of many of Wells Fargo’s wrongfully-terminated employees. That includes those who stood by their convictions, and refused to accede to management’s deviant will. No good deed goes unpunished.

When it comes to restoring customer trust, algorithms and adjustments in credit scoring will patch management’s wrongs. Bogus credit card accounts will be discovered and closed. Fees will be refunded, making customers feel better. People will move on, and loan money will flow once again. But restoring what was ruthlessly taken from Wells Fargo’s employee victims will be much harder to accomplish.

Testimony from a Lesser-known Consumer Scam

Last week, Wells Fargo CEO John Stumpf faced members of Congress about his company’s fraudulent sales practices. His lengthy testimony in front of the Senate Banking Committee last Thursday was particularly difficult, not only for Stumpf, but for the committee members, too.

When the hearing ended, I was in the lobby at the US Capitol. The Senate committee chair approached me, explaining that there was another inquiry to conduct that day, but all the senators and staff were ready to leave. He was clearly flustered. “It’s the hearing about the Plotzbank scam,” he said, expecting that I’d be familiar. Of course, I was.

“Could you help us by running this inquiry?” the chairman asked me. “We need to hurry back to our home districts to tell our constituents how tough we were on Stumpf,” he said, adding, “there’s an election coming up in November.” I needed no reminder. I glanced across the lobby, and noticed Plotzbank’s CEO, James J. Shmivelblatz, waiting nearby.

I saw this as an opportunity to avoid the throngs of workers heading back into Virginia. Washington’s Metro system was experiencing more service outages, and I had no plans for that evening, anyway. “Sure,” I said. “I’m happy to help out.” I introduced myself to Shmivelblatz, found a seat in the hearing room, and adjusted my mic to avoid any sound distortion. Shmivelblatz followed me in.

The following is an exclusive transcript of Shmivelblatz’s testimony at the Plotzbank hearing. Any similarity to Wells Fargo is coincidental.

Rudin: I have read the allegations concerning Plotzbank, and like many Americans, I am appalled – absolutely appalled – at the terrible fraud your company has committed. My purpose in running this inquiry is to provide answers to the American people, and to help all of us learn how this travesty occurred. More importantly, I want to help us take steps to ensure it never happens again. You have said you are accountable, but your actions suggest otherwise. You committed widespread customer abuses, and canned 5,300 of your staff. But you, and all your senior managers, have not suffered even a reprimand. My first question is, specifically, what do you think you are accountable for?

Shmivelblatz: Thank you for the question. First, I want to say how terrible I feel right now . . .

Rudin: Yes, yes, I know. You have apologized repeatedly, but what I am asking is . . .

Shmivelblatz: What do you mean apologized? Just now, I banged my head on the door frame walking into the hearing room.

Rudin: That’s unfortunate. But Mr. Shmivelblatz, I must keep to my allotted time, so I’ll move this along. We’ve heard a lot recently about the culture at Plotzbank, and its role in creating and sustaining fraud over many years. Mr. Shmivelblatz, what does the widespread fraud at Plotzbank say about your company’s culture, and why didn’t you do anything to stop it?

Shmivelblatz: Regarding our culture . . . you know, we’re really, really rich people here. We’ve made hundreds of millions of dollars. Many hundreds. Me, and all my direct reports. Lots of money. And we’re smart, too, because we’re on track to make millions more. That’s how great our culture is.

Rudin: Well, that answers both parts of my question. Turning to your Vision and Values Statement – the one that was in place while Plotzbank was busy scamming its customers. It says, “We are the trustiest company ever trusted in the bank and trust business. All of our employees are trustworthy. You can trust us with anything and everything. No competitor is trustier.” Did you approve these statements?

Shmivelblatz: . . . The board . . . The board will . . .

Rudin: I’ll take that as a yes. . . . Mr. Shmivelblatz, how will you – you personally – restore a clear, unambiguous meaning for trust?

Shmivelblatz: That question has entered my mind countless times since I learned about how our low-level employees flouted Plotzbank’s impeccable values. And I have given it deep thought. I don’t deny Plotzbank has made mistakes. I’ve made mistakes. Right now, I can assure you that as an organization, we will never, ever misspell the word trust.

Rudin: Mr. Shmivelblatz, what’s difficult to understand is your claim that you weren’t aware of the deceit taking place between your sales staff and your customers. Especially because your VP of Sales, Connie Shmeckley, was known internally as the Nanotechnologist for her meticulous attention to minute operational details, such as your operating statistics and sales compensation plans. At any time during the past eight years, did Ms. Shmeckley inform you about what she was doing?

Shmivelblatz: I don’t recall . . .

Rudin: As CEO, didn’t you meet with Ms. Shmeckley? Wouldn’t you have discussed operations and performance metrics?

Shmivelblatz: I’m sorry. I can’t recall anything specifically. But I do remember that before every staff meeting, we watched the kitchen scene from the movie, Jerry McGuire.

Rudin: The kitchen scene . . . the one where they shout, “show me the money!”?

Shmivelblatz: That one. Yes. Ms. Shmeckley and I are big fans of Tom Cruise and Cuba Gooding Jr.

Rudin: That’s nice . . . Mr. Shmivelblatz, do you know the amount an entry-level sales employee earns at Plotzbank?

Shmivelblatz: They earn a base salary, plus . . . plus . . . we offer regular contests and fun incentives for our sales staff. They just thrive on pressure! Thrive!

Rudin: You didn’t answer the question, but we’re getting to the end of our time. Let’s talk briefly about metrics. Plotzbank has been accused of high-pressure sales tactics. I haven’t seen any evidence that you care about customer satisfaction. You don’t measure it. You don’t track it. What do you measure?

Shmivelblatz: I disagree. First of all, we measure customer passion and engagement, and our analytics people tell me that we deserve to be proud. For example, we call one of our measurements Decibels, which tracks how loudly our customers talk when they call for support. High decibels means high customer passion, and we do very, very well. Another measurement, Engagement, tracks how many times a customer calls Plotzbank to chat with our friendly and helpful staff. Forty-eight percent of our customers call us over 100 times every week, and here we lead the industry. Bar none.

Rudin: Do you think you might be drawing false conclusions?

Shmivelblatz: There is no doubt that we have some . . .

Rudin: I’ll take that as a yes. Moving along – let’s talk about how Plotzbank exploited its sales force. Tell me about your sales incentives and commissions.

Shmivelblatz: Sure. Our most enduring – and I think our most endearing – contest, the one that we proudly mention in our annual report, is called Eight Rhymes with Fate. It sets demanding stretch goals, and the winners get to keep their jobs. The most flexible are nominated for membership into our Stretchers Club, and I’ve never heard any complaints. But I want to make one thing very clear: at Plotzbank, we believe strongly that there’s no I in Stretch Goals. And there’s no I in Clean Out Your Desk.

Rudin: You’ve used stretch a few times in your answer. Can’t you have goals, minus stretchiness? And at Plotzbank, how stretchy are your stretch goals?

Shmivelblatz: Stretch goals are one of Ms. Shmeckly’s many fine innovations. But you’re asking me details I don’t know. Ms. Shmeckly always said, ‘what happens in sales stays in sales.’ Who am I to argue?

Rudin: I see . . . So what happens to your staff who don’t achieve their goals?

Shmivelblatz: Thank you for the question. We’re very proud of our industry-best track record! Plotzbank fires more than twice as many sales staff as our closest competitor.

Rudin: Have you ever been fired?

Shmivelblatz: No, not yet. Why?

Rudin: In the remaining time, I’d like to know what you would say to one of your sales staff who might have been fired for not making your stretch sales goals.

Shmivelblatz: I’d say, Let them eat cake.

Rudin: Let them eat cake? Really?

Shmivelblatz: Yes! And then I’d give them a slice of real cake. Since news of this scandal went public, I instructed our staff to make things right, no matter what.

Rudin: And what about your customers – the ones you defrauded – what would you say to them?

Shmivelblatz: The same thing. Then, I’d give them a slice of cake, too! Except theirs would have our venerable red and gold logo in frosting, right on the top. As I have said, we will make things right for everyone, and no expense will be spared!

Rudin: Thank you, Mr. Shmivelblatz. I have no further questions.

At the end of the hearing, the courtly, silver-haired Shmivelblatz smiled politely, and thanked me for my questions. Putting his arm on my shoulder, he said, “It’s been a great conversation. By the way, I heard you say your Metro isn’t working. My limo driver is parked out front. Is there anywhere you’d like to be taken for a ride?”

Cross-selling Is Not Evil!

You can’t read or hear anything about Wells Fargo without cross-selling popping up.

“At Wells Fargo, apparently, the solution in recent years was aggressive ‘cross selling’ of its existing customers – that is, urging them to open credit card accounts to go with their checking accounts, and so on, in order to generate more fees,” The Washington Post said in a September 22d editorial, Accountability at Wells Fargo.

OK. Now, tell us what Wells Fargo did wrong.

That’s a longer sentence. Here it is: “At Wells Fargo, apparently, the solution in recent years was to reward senior management with enormous bonuses tied to stock price appreciation regardless of the strategic and ethical risks, allowing them to set excessively high performance targets for low-paid sales staff, align pay incentives with sales goals unrelated to customer satisfaction, crush internal dissent, and emasculate internal audit controls.” Yep – That pretty much sums it up!

But that’s complicated, and it doesn’t sell newspapers, or bring eyeballs to a webpage. So cross-selling stays in lead sentences and headlines, carrying disdain that will now be hard to shake. If I were unfamiliar with business development, I might mistakenly think of cross-selling as a deviant or manipulative behavior, like getting the prospect to say ‘yes’ three times, or the reviled assumptive close.

That’s unfair. Disclosure: I’m a cross-seller, and have been for many years. Cross-selling is “the action or practice of selling an additional product or service to a customer,” according to Wikipedia. As a software salesperson, I cross-sold hardware, software, services and third-party products. As an account executive with an auto-ID manufacturer, I cross-sold products from different divisions in my company. And I cross-sold services that my VAR’s (Value-added Resellers) provide. No one was harmed. Laws were not broken. In fact, my customers loved the convenience, and the revenue was credited to my quota. My W-2 and 401K became flush with dinero. Life is good!

Cross-selling offers substantial benefits for vendors, especially for large, diversified companies with multiple-divisions calling on the same buyers or decision makers. With cross-selling, they can reduce overhead and redundant systems. Buyers gain efficiencies, too. With cross-selling, they can work with account teams that have a “big-picture” view, and don’t need to schedule multiple meetings with reps from uncoordinated business units within the same company. What makes Wells Fargo’s actions reprehensible wasn’t that they engaged in cross-selling, it was how they did it.

Expect more cross-selling, not less. When customers implement projects and systems, they buy many interdependent technologies and services. Some vendors provide end-to-end solutions, but their complexities mean that few salespeople can possess all the required knowledge. They must collaborate internally and externally, and for that reason, cross-selling makes sense. So does paying salespeople for engaging in it – when customers benefit. That’s touchy, so I’ll widen the strike-zone: as long as customers are not harmed.

The right question to ask is not, “how do we restrict cross-selling,” or even “how do we prevent cross-selling from hurting customers?” It’s “how do we identify and mitigate situations when management has the opportunity to gain substantial compensation, but might unfairly harm employees and customers in order to obtain it?” Put another way, “when management has access to a cash cookie jar, how do we prevent them from screwing everyone over when they’re stuffing their hands into it?” Boards – are you listening?

One of the rules regulators are now considering is a “requirement for the biggest firms to claw back bonuses from employees engaged in misconduct that results in significant financial or reputational harm or any fraud. Those proposed rules would require banks to take back pay for wrongdoing for at least seven years after the executive receives the payment,” Yuka Hauashi and Christina Rexrode wrote in The Wall Street Journal on September 20th (Hearing to Amplify Ruckus Over Pay). It’s a good rule that makes sense not only for financial services, but for any industry.

A failsafe regulation would be peachy, but I’ll settle for reducing the risk that no more John Stumpfs (Wells Fargo’s CEO) will be allowed at the controls of a major company. As Holman W. Jenkins Jr. wrote in his column, Wells Fargo’s Incentives Go Awry, “All companies operate on incentives and systems that are not perfect. Comcast means for its ‘retention specialists’ to win back irate customers, not bully them in ways that end up on YouTube. Yet it happens.”

Consumers won’t be protected through more scrutiny over cross-selling, or from curtailing it, but we can make things better by getting rid of some damaging practices:

1. Committing to lopsided bonus structures that enrich individuals, not the company.

2. Providing low wages for wages for salespeople, and making subsistence income contingent on achieving “stretch” goals, or on meeting performance metrics that are extraordinarily difficult.

3. Heaping sophomoric praise on salespeople for “busting quotas” and “crushing their numbers,” without considering whether they have been ethical.

4. Assuming that salespeople “thrive” on pressure, as one popular blogger wrote. That’s a myth. Plenty of salespeople face pressure, but when there isn’t an upside for them, it’s hard to describe that as “thriving.” More accurately, salespeople with pay at risk (commission) have – or should have – a congruent tolerance for uncertainty.

5. Assuming that good salespeople will always find a way to make goal – no matter the odds. The sentence is mostly correct – just change good to clever.

6. Letting what happens in sales stay in sales. Companies must begin to have ongoing governance over their sales processes, or suffer the consequences when poop hits the fan.

Concern over cross-selling is misdirected. If you’re looking for the real culprit in Wells Fargo’s case, you will find it in the emergence of a trend: executive pay tied to stock price appreciation. “Changes like these are directly responsible for CEO’s seeing a 15-fold increase in comp in the last 40 years,” said Bobby Parmar, professor at the University of Virginia’s Darden Graduate School of Business Administration.

Parmar says that boards rationalize for fulfilling an obligation to grow and protect shareholder value. But he says this is based on flawed assumptions. “Shareholders don’t own the corporation. Public companies own themselves. Shareholders own a contract called a share. There is no legal reason to put shareholder interests above anyone else. It’s a choice, but not mandated. There is no legal duty to maximize profit. As long as executives aren’t violating the law, the courts won’t interfere with their decision making . . . Across hundreds of studies, there is no evidence that companies that maximize shareholder value are more profitable.”

That’s not what I was taught in B-school, and I have little doubt that many vociferously disagree. But Parmar is right. It’s the relentless goal of growing revenue and the myopic pursuit of share price appreciation that ultimately creates substantial stakeholder wreckage.

A huge relief to cross-sellers. Now, you can come out from your hiding places. Be proud of what you do, and who you are!