wells fargo

Lessons from Wells Fargo: How to spot (and prevent) unethical sales practices

By Tina Irgang

Fallout continued this week from news that thousands of Wells Fargo employees, under pressure to make sales, had set up unauthorized accounts for customers. CEO John Stumpf told the Senate Banking Committee that Wells Fargo will do “whatever it takes” to compensate customers whose credit ratings were damaged by unpaid fees on accounts they didn’t know they owned. It’s a good time to examine your own sales organization to prevent unethical practices from taking hold.

So far, Wells Fargo has agreed to pay $185 million in fines, and has fired 5,300 employees who were involved in opening accounts without customers’ knowledge or consent, reports The Chicago Tribune.

Wells Fargo is far from the only culprit when it comes to pressuring employees to open fake accounts to meet sales goals, Time reports. On a Sept. 19 conference call, several former bank workers reported that pressure from management “led to pushing unnecessary, and at times harmful, services and accounts onto consumers,” the magazine says.

But here is perhaps the most troubling news for CEOs: “At a sales meeting in Florida in 2014, Wells Fargo & Co. regional executives scolded lower-level managers about an obvious problem that kept cropping up at the bank. Managers were told that their employees should never open accounts for people who don’t exist, people familiar with the meeting recall. One manager in the room saw things differently. In an email peppered with exclamation points and capital letters, she urged her employees to ignore the bosses and get sales up at any cost,” according to The Wall Street Journal. That particular manager was eventually fired, amid a years-long internal investigation into unethical sales practices, but unethical tactics persisted, and were “an open secret,” the Journal says.

The bottom line: Warnings from executives not to engage in unethical practices were ignored by managers working on the ground with sales representatives. Could it happen at your company?

Watch for neutralizations

One first step might be to watch your sales reps and managers for “neutralizations” when you attempt to discuss problematic practices. Neutralizations are the excuses we use to justify unethical behavior, according to Baylor University’s Keller Center for Research. Common neutralizations include denial of responsibility (“It was not my fault” or “I had to do it because…”) and denial of injury (“No one got hurt”).

“When neutralizations are employed, an individual’s ethical judgment and ethical intention may become incongruent; that is, salespeople acknowledge their behavior is wrong yet they continue to behave questionably,” Baylor notes.

While the Baylor research looked specifically at sales reps in real estate, it holds valuable lessons for CEOs in any industry, such as this: “If an individual is performing well, her sales record may overshadow the fact that she might be engaging in questionable behavior, such as failing to follow company policies. If an individual is generating profits by justifying unethical actions, then the individual’s real value to the organization should be questioned. … Make it clear to your sales team that unethical behavior and practices are unacceptable, and may result in dismissal from the role.”

More ways to prevent or root out unethical practices

  • Don’t hire sales managers based on their ability to close sales. “CEOs without a sales background need to understand that being VP of sales is fundamentally different than being a sales rep,” says Datanyze. “For example, coaching other people requires patience, humility and empathy — as opposed to the charisma and drive often associated with a top salesperson.” In other words, a VP of sales who can close sales but also has the qualities of a good manager may be less likely to encourage direct reports to close sales at any cost.
  • Use mentoring to guide high-risk managers or reps. “If you know an employee struggles with ethics, team them up with others who will set an example and motivate them to work cleanly. Peer influence can have great effect,” notes The Huffington Post.
  • Create (and make employees sign) a code of conduct. “A written code of conduct provides employees and managers with an overview of the type of conduct and behaviors the company expects. It outlines what behaviors are unacceptable and what measures are taken if an employee violates the code of conduct,” says The Houston Chronicle.
  • Bring in an ethics speaker to help make your point — especially if you’re worried that unethical practices aren’t just limited to one individual. Professional trainers can use role-playing, motivational speaking and other compelling tools to illustrate what you’re trying to get across, notes the Chronicle.

Tina Irgang is the managing editor of SmartCEO magazine and SmartCEO.com. Contact her at tina@smartceo.com.