Most people are ready to see the end of 2020 and are actively looking forward to the new year. As with any new year, many people will be setting personal and business goals for 2021.
I am a firm believer in the importance of setting goals. Many companies also believe in setting goals using the SMART goals framework. This requires the goals to be Specific, Measurable, Achievable, Realistic, and Timely.
One thing that many people rarely talk about is the pitfalls in setting goals and how goals cause unethical behavior or unintended consequences.
Wells Fargo is a perfect example of this. Sales employees who opened accounts for new customers were strongly encouraged to cross-sell credit cards and other banking products. They were under intense pressure by their managers to meet these very aggressive (and sometimes mathematically impossible) sales goals.
What happened? Employees under severe pressure to either meet those goals or be fired opened accounts without customer consent and issued credit cards without customer authorization. This was all fraudulent activity.
When the scandal broke, Wells Fargo fired 5300 employees because of fraudulent sales activities and discontinued its sales quotas. After legal costs, settlements, and regulatory penalties, this scandal cost Wells Fargo close to $3 billion.
Clearly, this is an example of goal setting gone awry.
Setting incentives for employees can be a good thing. However, the incentives need to be sensible.
I once watched a television show featuring a concrete truck driver trying to get through heavy city traffic to deliver a load of fresh concrete. If he got to the site too late, the concrete would have gone bad. He then would have been fired because it would have been his third late load. At his company, once you delivered three loads late, you were fired. The result was that he felt pressured to dangerously speed through crowded city side streets because he did not want to get fired. Luckily, he did not get involved in a traffic accident and no one got hurt. However, the pressure he felt to break traffic laws to save his job always stuck with me.
Companies do need to have goals and incentives for employees. But companies also need to make sure those goals and incentives do not encourage employees to break laws or safety rules just to protect their jobs. Companies must make sure they do not incentivize bad behavior. In this time of the pandemic and high unemployment rates, anyone with a job will do whatever he or she can do to keep that job.
Smart companies will put these steps in place to protect both the company and the employee:
- Create realistic goals and incentives.
- Watch for managers pressuring employees to meet unrealistic goals.
- Carefully consider rules and incentives to see if employees will feel pressured to engage in unethical conduct just to meet the goals.
- Analyze the goals and incentives to make sure employees do not feel pressure to break safety rules or laws just to preserve their jobs. Employees should not be penalized or fired for things that are outside of their ability to control.
- Listen carefully to employee expressions of concern about the goals or incentive programs and how realistic those programs and goals are. Do not just assume that the employees expressing concerns are disgruntled, low performers.
- Do not retaliate against or fire the employees who report problems with the goals and unethical behavior by managers and co-workers.
Putting these steps in place is just good business. Otherwise, a company risks being the next Wells Fargo.