It's Not Just Wells Fargo - How Sales Targets Can Encourage Wrongdoing (bloomberg.com)

The revelation of Wells Fargo employees opening more than two million unauthorized customers accounts to hit the sales target might have come as a shock to many, but they are just the tip of a very old problem the industry has been facing. Bloomberg has an article today in which documents several similar incidents when employees went a little inventive to keep their jobs afloat. Marc Hodak, an adjunct professor of business ethics at NYU's Stern School of Business and managing director of Hodak Value Advisors says, "Companies tend to forget that an incentive to perform is identical to an incentive to cheat." In the early '90s, Sears "switched the compensation system in its auto centers from an hourly wage to a system that had more upside potential based on commissions and sales quotas." In the wake of this program, Sears customers were reported to keep running to the store for cheap brake jobs. The Bausch & Lomb scandal was also similar, with the employees were found manipulating earnings to reach financial goals using a trick called "channel stuffing" (in which someone ships goods and then book them as sales without having actually sold them. There are several similar examples in the story. From the artic;e:"Every large organization in the world has got these land mines of perverse incentives," said Hodak. "It's just a matter of degree to which of these things are allowed to run amok" because of those three factors. Barry Schwartz, an emeritus professor of psychology at Swarthmore College, goes farther: "Incentives poison people's will to do the right thing. It's the worst way to get people to do the things you want to do."

Comments

It has a name: Campbell's Law

[acroyear]

"The more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor."

https://en.wikipedia.org/wiki/...

it has impacts in a great many areas, including the test-based teacher and school evaluations.

Re:This is banking you know

[Ol Olsoc]

Sales aren't the only area affected by the need to keep the money flowing. Research grants work the same way. In order to keep your job you have to produce the data the people with the money are looking for.

I've worked in sales with a quota. I've worked in research.

They don't remotely work the same way. The sales were sales, nothing particulary difficult. My sponsors wanted correct answers, not something that corresponded with their desires. There were no "wrong" outcomes, just abandoned avenues.

For the occasional rogue researcher, there's a path to find out their transgressions. Most take this very seriously, and disgrace can be forever http://time.com/3084494/japane...

Andrew Wakefield lost his career permanently after his conman anti vaccine conspiracy came to light.

Malcolm Pearce did fraudulent work on ectopic pregnancies - presumably transplanting the out-of place embryo into the uterus and resulting in a full term healthy infant A man who signed on as co-author because of being the head of the medical department where Pearce worked, one Geoffrey Chamberlain also lost his career in disgrace.

Dong Pyou Han was sentenced to 4.5 years in jail, and a fine/repayment of 7.2 million dollars.

Now if you will, let us compare disgrace ending in suicide, disgrace ending in lost careers, with the treatment of the head of the unit of Wells Fargo that was doing this sandbagging, Carrie Tolstedt. http://fortune.com/2016/09/12/...

She made the decision to retire after 27 years, and is getting 125 million. Nearly the amount of the fine levied against Wells Fargo. Toltsted profited off the sandbagging, and although Wells Fargo could have elected to demand the fraudulently received money in a device named "clawback", she is keeping the money that was illegally obtained.

And finally, who was punished? It's pretty difficult to call retiring with a 125 million bonus punishment. But the employees who fell to the pressure to do this industry standard dandbagging? Oh - they were fired. Seldom happens to the technicians involved in a research fraud case, unless they were highly complicit

Fscking identical treatment between scientists and the banking industry - damn near exact, eh? Meantime the stockholders are picking up the Wells Fargo tag.

And that's the really weird thing. A huge amount of fraud going on, and people committing the fraud getting away stock free, and people who might have an issue with scientists act like they should be lined up and shot for their malfeasance.Yet appear to think that the bank fraud is just business as usual. I dunno if that's you or not.