Sales targets at Canadian banks should be scrapped, says former U.K. bank CEO

Canada's major banks should scrap employee sales targets because "forcing staff to sell things" can lead to unethical behaviour where customers lose out, says a British banking consultant.

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John Berry, the former CEO of the retail bank of the U.K.'s Abbey National — now part of the Santander Group — has spent the last decade working with banks around the globe, helping them improve their performance.

The behaviour of banks these days is often wholly inappropriate.- John Berry, former retail bank CEO, Abbey National

"The behaviour of banks these days is often wholly inappropriate," says Berry. "Senior teams need to move away from measuring numbers and focus on delivering customer experience."

Berry contacted Go Public after reading a series of stories featuring bank employees from TD, RBC, BMO, CIBC and Scotiabank who say they are pressured into upselling customers or risk losing their jobs.

Some said they acted illegally — doing things such as increasing customers' lines of credit, or sending unsolicited credit cards in the mail — to generate sales revenue.

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At annual general meetings with shareholders in the past week, the CEOs of TD, BMO and Scotiabank all downplayed the reports of wrongdoing.

Berry says by rewarding staff for hitting sales targets, "you create the wrong type of environment."

"There's no doubt that incentive schemes will dictate behaviour," he says.  

He points to U.S.-based Wells Fargo, where employees admitted to opening over two million fake accounts and other products in customers' names in order to reach sales targets.

After the controversy erupted and Wells Fargo was fined $185 million US last fall, the bank announced it would eliminate all sales targets.

Berry suggests banking clients take a page from successful retail stores, like Apple.

"Apple stores are hugely successful, but their sales staff don't have any sales targets. So sales targets aren't an immediate correlation with achieving profit," says Berry.

"Yes, they have a great product, but it's also the experience you get. You meet people who are enthusiastic, who want to help you learn, help you understand the products themselves. That's what needs to happen in the world of banking."

Successful bank with no sales targets

A bank that's embraced this philosophy is Sweden's Handelsbanken, which has 12,000 employees and operates in 20 countries. It has never had sales targets, even as the practice became common amongst banks in the 1970s and has ramped up in recent years.

Despite the lack of sales targets, the bank has been more profitable than its competitors in Sweden, Norway, Denmark, Finland, the U.K. and the Netherlands for 45 consecutive years.

We don't have sales targets ... we're interested in satisfied customers.- Johan Wallqvist, Handelsbanken spokesperson

Spokesperson Johan Wallqvist says Handelsbanken's motto is, "We always give our customers our best advice."

"It means we don't have sales targets," says Wallqvist. "We don't look at market shares. We're interested in satisfied customers. That is what we are measuring."

He admits that looking after customers' needs can sometimes be "bad for the bank in the short term", but says it's still worth it.

For example, says Wallqvist, a bank employee might recommend that a customer pay down a high credit card balance instead of pressuring that customer to buy a bank product.

"If we give good long-term advice to a customer," says Wallqvist, "we build trust."

Many bank employees in Canada have told Go Public that they are "berated" or "threatened" by managers if they tell customers to pay down credit card debt, because that doesn't generate any sales revenue for the bank.

"I'm not in a position to judge other banks," says Wallqvist. "But from a customer perspective … if you get bad advice and don't feel good about it, it's no good for your relationship with that bank."

Focus on advice, not sales targets 

Andrew Teasdale, a Toronto economist, investor advocate and independent financial consultant, says sales targets get in the way of giving good advice.

"If you have a sales target to sell … [such as] $500,000 of mutual funds for a particular client, you're going to be selling stuff that you shouldn't be," he says.

"Because if you focus on advice, part of your advice might be, 'Don't do anything, you're fine' — even if that clearly conflicts with a target."

'Goals gone wild'

In a paper called "Goals Gone Wild" in the journal Academy of Management Perspectives, lead researcher Lisa Ordonez found that setting goals can actually motivate risky and unethical behaviours.

"If you're given goals or sales targets," says Ordonez, who is professor of marketing and vice dean at the University of Arizona, "you can become so focused on that outcome, you put up mental blinders to the ethicality of your behaviour.

"Then, if you're in a culture where everybody else is doing things you might otherwise have seen as unethical, suddenly this seems like normal."

Another problem, she argues, is that the drive to achieve certain goals — such as selling a certain number of credit cards a day — can overshadow other important features of a task, such as analyzing whether a customer can afford to take on debt.

"When you set a goal, you have to carefully think through what it might mean," says Ordonez. "How will these goals actually be obtained? What will an employee have to do, to reach a goal?"

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History provides many examples of goal-setting run amok, says Ordonez, who cites Ford Motor Company employees who overlooked safety testing to rush the Pinto to market.

"When you put people in an intense, pressure-cooker situation, such as bank employees who have to meet sales goals and their job is on the line … important values get overlooked," says Ordonez.

Go Public asked TD, RBC, BMO, CIBC and Scotiabank whether they had considered eliminating sales targets. All of the banks declined to comment.

With files from James Roberts