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.
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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.