What does your cross-sell and incentive program promote?
By now we’ve all read or heard about the Wells Fargo incident and their infamous cross-selling and employee incentive plan. It’s easy for some to blow this off as a “big bank” thing, thinking your cross-selling program is different and this would never happen to your bank. This is most definitely not something reserved just for big banks and you may want to reevaluate that thought process.
With more than 20 years of experience implementing successful cross-sell and incentive programs in over 100 community banks, we know there are plans that can stand up to any regulatory audit. We know this because our plans have stood up in thousands of audits without a single write up. We also know of many community banks that are playing with fire when it comes to programs with similarities to Wells Fargo. Whether your plan is a loan officer incentive or a retail cross-sell incentive program, you must make sure the plan is based on the right philosophy or you will be destined to future regulatory headaches and fines. You’ll also end up losing some of your best customers because they do not like the customer shakedown. Here are a few problem areas to look out for in your community bank’s program.
Quota Based vs Goal Based
One of the main problems with Wells Fargo was that they were threatening the food, shelter, and clothing of its employees. Quotas may be fine at the Merrill Lynch’s of the world or at your local automobile dealership, but in a community bank, it’s unacceptable and frankly kind of stupid and lazy. Quotas have consequences and when an employee’s job is threatened for not meeting some ridiculous quota, like selling 20 checking accounts or sending 10 referrals to the investment rep each month, you’re just asking for the exact thing Wells Fargo got… manipulation, gaming the system, cheating, and fraud. Top that off with stretching quotas for those that actually hit them and you’ll compound the problems by running off your best employees. The rubber band will eventually break.
Smart community banks have a cross-sell program that is goal based. These goals should be low and attainable and should be based on the job (branch manager, teller, etc.) and not on experience or lobby traffic. The object of the goal is to get employees off the starting block and to provide a measure to recognize successes. Goals should be based not only on products cross-sold but also on customer service excellence and innovations.
Pitching Based vs Needs Based
Are you a “hot apple pie with that shake” bank? We get enough of that at the McDonalds drive-thru. Your customers don’t want it at their bank and are unlikely to respond positively to this sort of tactic.
Are you a “product of the month” bank? It’s fine to focus on a product to raise awareness and knowledge, but it’s beyond stupid to put a quota on a branch and the employees to sell 50 checking accounts this month or you’ll lose your bonus, be written up and eventually fired.
Who is in charge of your cross-sell and incentive program? Are they experienced in sales? When you make the mistake of putting a person that has never sold anything, in charge of your program, you get crazy tactics, adverse selection, quotas, and consequences that will do the opposite of motivating your employees. Activity such as cold calling and pitching will generally create one sale and result in 20 complaints… and the sale is usually not that good.
Smart banks are needs based. They focus on the relationship first. These banks have a philosophy of offering the right product to the right customer at the right time. Cross-sells in a needs based program will correlate closely with the employee’s relationship with the customer. If the customer doesn’t need a HELOC then don’t offer it.
Putting the customer first
A $185 million fine to Wells Fargo is like a $50 fine to the average person for not wearing a seatbelt. However, the problem for the typical community bank is the fallout of this. Red flags have been raised in the industry and regulators are now going to make the assumption that most banks do business this way. Unfortunately for many community banks, they are now under the spotlight. While you may not have meant any harm, a poorly run and managed cross-sell program can put your bank in a bad spot. Wells Fargo can afford their fine… How many millions can your community bank afford?
To avoid the problems, put the customer first. Everything about your program should point to doing what’s best for the customer, your bank, and your employees. Your employee cross-sell program should generate revenue, strengthen customer loyalty, and enhance the customer service experience. It should not feel like a customer shakedown.
