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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."
In my personal experience, these boneheaded metrics and goals are the sign of an manager, organization or company seriously lacking in competency and even self-awareness of their intended goals.
And software development, alas, isn't free of managers and companies pushing such boneheaded stupid goals that get the contrary of what they intend to.
My default response to a manager pushing you to pursue a stupid/easily gamed goal is to leave ASAP.
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.
~ People that think they are better than anyone else for any reason are the cause of all the strife in the world.
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I worked a retail job that was all sorts of f'd up (pay wise) fresh out of high school.
It was commission draw, which means you're guaranteed minimum wage, but once your commissions exceed that any time you were performing below was taken out of your earnings to repay it.
E.g assuming a $10/hr minimum wage (easy math):
you worked a sloooooow day for 8 hours and sold only $40 worth of commission; you're paid $80 ($40 commission + $40 draw)
next day was a lot better and you sold $120 worth of commission in 8 hours; you're paid $80 ($120 commission - $40 draw from yesterday).
While in theory this was okay, the problem was that when you were working and the store was closed you effectively were not paid.
Add to that some of the products had negative commissions...
So, the game that was used: on a slow day buy a product for cash that was on incentive (high commission for short time) that was due to be off before 30 days were up.
Wait between two weeks and 30 days for it to clear your paycheck *and* the spiff to go away, return for cash under generic ring number.
Naturally this resulted in arrests for fraud, which resulted in countersuits for unfair pay. All in all a total F* fest.
Old way of straight pay (above min wage) for hours worked and *stores* getting a bonus for good performance worked a lot better.
-nb
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I've asked lots of cops about ticket quotas - and every one of them says they don't have quotas, but their chief wants them to meet or exceed "performance metrics" similar to other districts.
So yeah - that cop isn't "required" to write you that ticket, but if he wants his promotion - he will.
I once worked for a publicly traded company that was in the PBX business, but generally in the "communications" business since they adopted the PBX gear to work as a nurse-call system in hospitals.
To make their quarterly numbers look good, the upper-management had the nasty habit of borrowing from future sales to make THIS quarter's numbers look good. Once a contract was signed, they would ship the equipment even if the equipment wasn't needed until a year or more later, for example, a new hospital is being built but ground-breaking won't happen for another six to nine months at least. The equipment would get shipped, it would get placed in a shipping container on-site and the sale would get put into the books for THIS quarter.
Of course, it may have started small and somewhat innocently. Maybe the first one was scheduled to ship a month later in the next quarter. Putting that sale into THIS quarter would look good for the investors and the stock price would do well. But now three months later with that sale missing from THIS quarter because it was placed in LAST quarter's sales, somebody has to come up with way to fill that gap, short of actually making real sales THIS quarter. So they borrow yet again from a future sale. And so on and so on.
It got to the point that we would get service support calls from the techs installing the equipment in new hospitals and they couldn't get things to work with the current software we were shipping. It turned out they had firmware that was two or three years old and it wasn't compatible with the new software. It cost a lot to get current firmware out into the field. No, things were dial-up modems back then, so you couldn't just "push" the updated firmware over the Internet.
A new CEO eventually came in and when he found out about this little book-keeping scam, he proclaimed with very loud voice and a lot of table pounding "THIS SHIT ENDS NOW!" The company doesn't really exist anymore at this point. Each of the divisions were sold off to other companies.
Not directly in sales, but I have a personal anecdote on point about how such bad "targets" destroyed an entire department (and ultimately the company).
Years ago I took a summer job working at a collections department for a small cell phone company (back in the days when there were more independent companies around). Horrible job, but paid better than some other options I had at the time. You had the folks working the 30-day delinquent files, the 60-day delinquents, and then the 90-days and 120-days+ files.
Anyhow, when I first arrived there, they had an bonus incentives for two goals: (1) covering the most accounts, and (2) bringing in the most collections money. What did this system do? Well, it made the 30-day and 60-day delinquent account folks do a sort of "triage" to find the accounts that were most advantageous or easiest to take care of. So, they'd try the easiest and quickest methods to contact each account and then move on as fast as possible.
(The dirty secret was that something like 25% of accounts were set up incorrectly in the first place, usually by haphazard handling during the sales process -- a product of bad incentives in that department too. The collectors avoided these "problem accounts" like the plague.)
After my training was over, I optimized my computer for handling accounts as fast as possible, creating various computer shortcuts that could allow me to handle about 3 times the average number of accounts per day. My boss was so shocked when she saw how I was doing things that she insisted I show her how to implement my shortcuts and tools for everyone else in the department (roughly 30 people, as I recall).
Because I was doing so well, I got put on the 90-day/120-day+ accounts then, since they were supposed to be "harder." I soon found out what made them "harder" -- roughly 75% of them were disasters left over because the 30-day and 60-day people didn't have the time to figure out what was wrong. There were loads of accounts with all sorts of things screwed up... so over half of these weren't just simple cases of people not paying a bill for a few months. They were cases where accounts were shut down incorrectly, cases where account had been incorrectly set up by sales people and weren't billing correctly, cases where customers had phones still active 6 months after they should have been shut off, cases where customers had shifted to a different account (usually by someone in sales) but no one had fixed the old one, cases with VIPs who were basically given unlimited phone usage and never were supposed to receive bills but were flagged wrong in the system, even outright cases of fraud, etc. I even uncovered a complex fraud ring in my few months there, which likely saved the company many times what the other collectors earned in collections.
Anyhow, despite the complexity of cleaning up these "messes" with most accounts, rather than just doing the normal collections job, my numbers for account handling were still pretty good. But I wasn't bringing in a lot of money, because... well, mostly I was cleaning up messes left by the way the incentive system was set up. And let's face it, people whose bills are WAY overdue and likely had their phone service shut down for at least a month were unlikely to pay.
So, even though I had been highly praised by my boss (and even the boss's boss) for all of the great work in optimizing the entire department's computers (not my job description), tracking down fraud and other weird cases that required a bunch of detective work to "correct" the many account errors, my "numbers" didn't look good on the spreadsheets for the higher levels of management.
The last straw came when they instituted a system where we had to "log into our phones" when at our desks, supposedly to prevent people from taking long breaks or something. Well, obviously a lot of folks just didn't even bother to log out then for breaks. But I did, because I was a "good" person who obeyed the rules.
About a week af
A non-profit is just that, non-profit. It means their revenues and expenses at the end of the year balance, hence no net profit.
That doesn't mean they can't make a profit, it's just that profit is spent before the fiscal year ends so it's back to zero. Now, some non-profits are arranged so they make very little profit on what they do - thus giving lower prices to everyone, and the profit is then used to pay salaries and all that. But it doesn't have to be that - it can be making ridiculous amounts of profit and they then spend it on something else.
For an example of this, look at the College Board - they are the makers of many of the academic tests out there, and they charge an arm and a leg (ask any student who has to take the SATs). But any other standardized test is probably administered by them as well. They rake in the money, both in the tests, the study guides they sell, and many other things. So much so they spend their profit on luxury hotels and other things - as a non-profit they have to spend it all to even it out.
Of course, most credit unions are less evil and spread any profits as dividends to the members.