Sales and Cross-sell Goals versus Performance Measurement
It is obvious to anyone following the Wells Fargo debacle that when a sales goal program runs amuck REALLY bad things can happen. The $185M fine, plus others, are a pittance compared with brand and reputation damage, billions in deposit and investment money pulled out, and pending lawsuits from both former employees and customers.
Goals are not bad in and of themselves. Management 101 teaches that goals are a necessary part of creating and maintaining a productive and profitable operation. Sales goals are not inherently bad either. Many financial institutions are successfully utilizing sales goals in some form or another. Consider that red wine has proven health benefits when drunk in moderation, but has terrible consequences if consumed in large quantities on a frequent basis.
The danger with sales goals is that they are a narrow view of what is a much larger picture. When they are evaluated only within their own context, it is very easy to lose perspective. "More is better" feels true to both management and employees tasked to make the goals -- until it isn't. Long term growth and profitability are sustained when all the stakeholders: customers, employees, management and shareholders benefit in a balanced way.
Not only is there nothing inherently wrong with cross-selling, it can be beneficial to both the customer and financial institution. A recent personal experience is illuminating. My wife and I sold our home this summer and are renting while we build our next home. We parked the equity in our savings account since it is not going to be there long once construction starts. When depositing additional funds from another source, the drive-up teller noticed the large balance. She politely asked, "Would you mind if I asked someone from the financial planning department to give you a call?" Since we are going through a lot of changes I agreed, and after a couple of meetings the bank has us as financial planning clients. Win-win.
As with sales goals, cross-selling goes bad when the emphasis shifts from what makes sense for the customer to the number of products opened for the institution. Wells Fargo's "Eight is Great" cross-selling theme reflected an arbitrary goal having nothing to do with what is best for the customer. When financial institutions forget their fiduciary responsibility over a prolonged period, it will eventually be exposed. The surprise is how long it took for the negative consequences to reach critical mass at Wells Fargo.
Performance measurement (PM) programs differ from sales and explicit cross-sell goals in two ways. First is scope. A good PM program will include several, perhaps many, metrics and capture a larger slice of the institution's cultural objectives. The second is that PM incentives work from the opposite side of the equation. Instead of a stick created by setting a specific bar (sell X products per week or else), PM is a carrot by recognizing and rewarding performance that meets a broad set of institutional objectives.
There is no reason that performance measurement systems cannot be every bit as quantitative as sales goals. The difference is they provide a better opportunity to include multiple metrics across all the contexts that matter. In fact, sales goals and employee performance against them may be one of the metrics included in performance measurement. A good performance measurement system would potentially include some or all of the following:
- Sales goals versus products opened
- Products opened relative to demographic growth or shrinkage in the market
- Organic deposit growth compared with rates of new deposits/products opened
- Profitability which includes both expense control and revenue (fee and interest)
- Customer retention compared with new customer growth
- Customer satisfaction
- Use of alternative channels such as mobile and online, compared with in-branch activity
- Employee retention and satisfaction
- Teller transaction throughput and accuracy
- Fees charged vs. waived
- And so on . . . .
History and trend analysis are important benefits of a comprehensive performance measurement program. The ability to see how different metrics compare with each other, and how their balance shifts over time, can be more illuminating than the results in any given month. When one set of metrics changes disproportionally relative to the others, it is important to figure out why. Something may have changed for the better that can be replicated at other locations, or something negative may be starting and can be corrected before it becomes serious.
We have written this before. It is difficult to improve what you cannot see, and the more you see the better the chances for improvement.
Like most endeavors, the devil is in the details. Comprehensive performance measurement means pulling and analyzing data from many sources. Different data points then have to be normalized so they can be compared, distributed and understood in a way that is meaningful to the audiences that need the information. There are different groups of employees that either should not see, or would not want to see, or may not understand different aspects of the output. That means having the ability to both tailor and control the results.
Sound like a lot? It is. However, well designed performance measurement is effectively automatic once implemented. Data should be gathered and analyzed, and results distributed and archived automatically. The benefits of comprehensive performance measurement can far outweigh the cost of implementation through improved productivity, more efficient processes and better employee morale. Costs will tend to be front-loaded, but benefits are recurring. Performance measurement at both the employee and branch level, can and should be a good business decision.