We have numerous metrics for tracking performance, but very few for evaluating behaviour. In the advent of so many corporate scandals and with organisational trust at an all time low, is it time for a new measurement?
What would happen if you walked up to your boss and punched her straight on the nose? Or strutted around your office, dishing out lewd and inappropriate gestures? The chances are, you’d most probably end up being fired or perhaps even arrested. But beyond these levels of extreme, unacceptable behaviour, what else is likely to get you the boot?
How about defrauding customers, by selling them products they don’t need, or even ask for? Many organisations would be quick to say that this conduct wouldn’t be tolerated. But how true is that? With a blinkered focus on performance metrics, and a mounting pressure to deliver strong quarterly earnings, is doing the right thing sometimes shelved in favour of getting the right result? Worse still, can it develop into the accepted norm?
Rotten to the core
It’s hard to imagine, that a bank that’s still in business after 164 years, started out with the objective of swindling its customers. After all, you only get to build a company that survives for over a century, by doing something right. Yet somewhere along the way, Wells Fargo appears to have gotten a little confused as to what its priorities are.
Licking its wounds after recently being slapped with a $185 million fine, and subsequently laying off 5,300 ‘bad apples’, the financial giant (it was the world’s largest bank by market cap in July 2015) is desperately attempting to rebuild trust, and to persuade its customers not to take their money elsewhere. Its new TV commercials tell viewers that “Wells Fargo is making changes to make things right”. Part of making things right, will be to “eliminate product sales goals for our retail bankers, to ensure that your interests are put first”.
It was the product sales goals that landed the company in such a mess. Employees were expected to open as many accounts as possible: meeting the target is what mattered, not how someone achieved it. Wells Fargo staff pressured customers into opening accounts, and even opened accounts without their knowledge. In all, it’s estimated a total of two million accounts were created, without any prior authorisation from a customer.
But that’s not all.
In a stunning breach of consumer trust, employees also submitted credit card applications in customers’ names (without their consent), enrolled people in online banking services they did not ask for, in some cases using email addresses that the customers themselves did not create; and ordered and activated debit cards – and PIN numbers – using customers’ information without their knowledge or approval.
It’s easy to make an example of the 5,300 ‘rogue employees’, once you’ve been found out. But that doesn’t change the fact, that you allowed it to happen on your watch. In an interview with the LA Times in 2013, Wells Fargo’s Chief Financial Officer, Timothy Sloan was quoted “I’m not aware of any overbearing sales culture.” Pretty worrying. Even more worrying, is that Tim’s bagged himself a new job since then: he’s now the CEO.
A failure to honour the culture
I find it hard to believe that Wells Fargo made such a fundamental hiring mistake. That its recruitment process was so broken, that it unwittingly welcomed over 5,000 wrong’uns with open arms to wreak havoc on its corporate reputation. Ironically, this was the argument put forward by departing CEO John Stumpf to the US senate banking committee. Stumpf claimed that his employees “had failed to honour the bank’s culture.”
I think the opposite is true. That these employees did whatever it took, to align with the culture: to hit their numbers, so they could avoid being publicly humiliated in front of their peers, and hold on to their jobs. The Wells Fargo website describes “a culture of working together to help our customers.” A more accurate description would be “working against each other, to help ourselves”. Stumpf’s argument demonstrates a blatant lack of understanding of organisational culture. Your culture isn’t what you say, it’s what you do.
I can’t imagine that Wells Fargo deliberately set out to defraud and deceive, but that’s where it has ended up. My conclusion, is that a blinkered focus on sales performance, driven by short-termism, is what allowed unintentional behaviour to develop. Because that behaviour drove performance, it quickly became an accepted norm. This led to the slow erosion of its company culture, which is what ultimately landed it in hot water.
What gets measured, gets done
We’ve all heard the famous proverb, “what gets measured, gets done.” And when it comes to measuring results, we certainly don’t have a shortage of reports, metrics or analytics. In particular, the Key Performance Indicator (KPI) has been a regular feature inside our companies for decades. We use it at the organisational level, the departmental level and even the individual level. From the time that it takes to fulfil an order, to the number of calls answered within 30 seconds, it appears we have every scenario covered.
In order to impel performance, it’s common to drop in a sweetener: if you achieve that result, then we’ll give you this reward. But things don’t always turn out the way we expect.
In the spring of 1902, the French colonial government in Hanoi discovered that they had a vermin problem. Their newly introduced sewers had become infested with rats, and the little critters were starting to spill out and terrorise the entire city.
In order to address the issue, the government put up a bounty for the successful disposal of a rat: just bring along its tail for proof, and they’d pay you a handsome reward. You can imagine how delighted the officials were when a flood of rats tails started to arrive at their offices. Looking at their impressive indicator of performance, they congratulated themselves for quickly bringing the problem under control.
Of course, that was until they started to spot tailless rats scurrying about the streets.
Twigging that lopping its tail off didn’t actually kill the mammal, the resourceful locals had been releasing them back into the sewers so that they could live on and breed. More rats equalled more tails, which equalled more reward. Some entrepreneurial residents, had even setup rat ‘farms’ to maximise their income potential.
On realising they’d been duped, the embarrassed officials immediately scrapped the bounty scheme. And on hearing their rats were worthless, people simply released them onto the streets, leaving the government with a bigger problem than it had started with.
Rewarding for A and B
Forty years ago, Steven Kerr wrote a famous article titled, “On the Folly of Rewarding A, While Hoping for B” that’s now widely regarded as a management classic. The paper (updated in 1995) puts forward the observation that in many cases, reward systems actually encourage the opposite behaviour of what management desires.
In Kerr’s words: “Whether dealing with monkeys, rats, or human beings, it is hardly controversial to state that most organisms seek information concerning what activities are rewarded, and then seek to do (or at least pretend to do) those things, often to the virtual exclusion of activities not rewarded….Numerous examples exist of reward systems that are fouled up in that the types of behaviour rewarded are those which the rewarder is trying to discourage, while the behaviour desired is not being rewarded at all.”
Kerr cites the example that in sports, most coaches aren’t keen on discussing individual accomplishments, preferring to speak of ‘teamwork’, ‘attitude’ and a ‘one-for-all spirit’. However, rewards are usually distributed based on individual performance. The college basketball player that passes the ball to teammates instead of shooting, will not compile impressive scoring statistics and is less likely to be drafted by the pros. It is therefore rational for the player to think of themselves first, and their team second.
In business it’s no different. Your people will take notice of how they and their colleagues are rewarded; regardless of what your employee handbook states. To quote former IBM CEO Louis Gerstner Jr, “People don’t do what you expect, but what you inspect.”
There’s no doubt, that measuring and rewarding results is an important part of any organisation. But without measuring how people achieve those results, are we unintentionally rewarding negative or even toxic behaviour? Behaviour that could cause long-term or even irreparable damage to the trust and reputation of our organisations?
Instead of just rewarding for A and hoping for B, is it time to reward for A and B equally?
Let’s get fanatical
When Dirk Elmendorf, Pat Condon, and Richard Yoo founded Rackspace in 1998, they had an interesting approach: they called it a ‘denial of service’ model. It basically meant that they wouldn’t answer the phone if a customer called. And if they did answer it accidentally, they would quickly get rid of the customer by saying they couldn’t help.
Clearly this kind of behaviour wasn’t good for business, so when VP of Customer Care David Bryce joined a year later, he set about changing a few things. Faced with the challenge of getting employees obsessed with treating customers right, Bryce created the highest award and honour that a Rackspace employee could receive: the fanatical jacket.
Bryce wanted employees to be over-the-top dotty – aka ‘fanatical’, about delivering exceptional service. And what better way to recognise someone who demonstrates such behaviour, than a straightjacket! The fanatical jacket is the one thing that stands above everything else at Rackspace. It’s the ultimate symbol of what the company is all about.
Receiving the fanatical jacket has nothing to do with performance. It’s not about closing the most help-desk tickets, or handling the highest call volume. It has nothing to do with selling the most hosting contracts. The fanatical jacket is a recognition of demonstrating behavioural traits that are inherent with who the organisation is, and what it represents.
Of course Rackspace cares about the result. You don’t get to scale a company to over 6,000 people, and serve the majority of enterprises in the Fortune 100 without doing so. The difference, is that Rackspace cares about getting the result, the right way.
Making behaviour measurable
The scandal at Wells Fargo is projected to lose the company $99 billion in deposits, and $4 billion in revenue over the next 18 months, according to a study released by consulting firm cg42 (it estimates that as much as $212 billion in deposits and $8 billion in revenue could be at risk). Only time will tell whether it’s able to recover. Britain’s biggest-selling newspaper ‘The News of the World’ never did. The 168-year old institution was brought to its knees five years ago by a phone hacking crisis. Then Chairman, James Murdoch blamed the closure on “wrongdoers turning a good newsroom bad”.
Averting your eyes and allowing unintentional, toxic behaviour to take root (because it drives performance) will ultimately destroy trust, credibility and even your organisation itself. As business leaders, we cannot afford to continue to measure and reward people based on an unbalanced metric; the long-term risk for our companies is just too great.
We have to make behaviour as measurable as performance. As well as the Key Performance Indicator (KPI), we need to create the KBI (Key Behavioural Indicator).
Having a KBI would provide us with a benchmark, a measurable metric through which to hold people accountable. But just like a KPI, we first of all need to understand what is important. Unlike Rackspace, very few organisations have defined what behaviour is expected, and what behaviour is never tolerated – beyond the obvious that is.
For example, is constantly arriving late to meetings acceptable? Is shouting loudly at a co-worker in the office? What about putting undue pressure on a customer to buy? As a leader, what are the behaviours that make you feel uncomfortable or frustrated?
In reverse, what are the behaviours that make you feel most proud of your organisation? If you were to think of your top five employees, what do they all have in common? What behavioural attributes do they exude? Are they always upbeat and positive? Do they embrace new ideas with ease? Do they bring a sense of humour to their work?
What are the collective ‘characteristics’ that you would never want your organisation to lose? How do you want your employees and customers to feel? What is it that you want your organisation to be known for? In the majority of businesses, the product is a commodity and the experience is the real differentiator. That experience (and how an organisation is perceived), comes largely down to how its employees behave.
“Performance more often comes down to a cultural challenge, rather than simply a technical one.” – Lara Hogan, Engineering Manager of Performance, Etsy
In order to be effective, a KBI needs to be as quantifiable as a KPI. Therefore, the non-negotiable behaviour of your organisation needs to be defined in observable terms. Not tolerating ‘lazy people’ isn’t enough; it’s too subjective. Someone who ‘completes work ahead of schedule’, and ‘never arrives to a meeting 30 minutes late’ is objective.
Beyond definition, it’s vital to hold people accountable for displaying the behaviours. Expressing them in measurable and observable terms is a start, but allowing your star salesperson to get away with belittling a co-worker, communicates something far more dangerous: if you hit your numbers, you can do anything you want. You have to be willing to let a top performer go, if they continue to break your behavioural code of conduct.
But the biggest lesson overall is that the real measurement of the ‘KBI’ will be you, the leader. You can’t expect your employees to behave in a certain way, if you behave in the opposite. For an organisation to embed and maintain a set of core behavioural attributes, its leadership must consistently champion and role-model those behaviours.
Measuring results will always have a place in our organisations. However, results only tell us what has been achieved, not what will be achieved. But behaviour does. Focussing on maintaining the right behaviour is what will drive predictable, long-term performance.