Wells Fargo fraud offers lesson on incentives
Banking giant Wells Fargo was recently fined $185 million by the federal Consumer Finance Protection Bureau for widespread employee fraud intended to inflate business results at hundreds of branches.
The scheme involved incentives for employees who opened new accounts—new business meant bonuses for go-getter employees. They responded with great enthusiasm, but without something that was crucial—the consent of their customers.
More than 5,000 employees engaged in the fraud by opening 1.5 million checking or savings accounts and over 564,0000 credit card accounts in the names of existing bank patrons—all without customers’ permission and in violation of multiple federal laws. All the employees were fired.
There’s a lesson here for other employers: Be sure to build accountability into your bonus or incentive programs.
In Wells Fargo’s case, it appears that mid-level supervisors weren’t particularly careful to monitor their employees’ supposed productivity.
Even a cursory examination of the accounts should have revealed a problem. None of the accounts contained any fresh deposits. Instead, they relied on the employees moving money from existing accounts into the new accounts and back again.
Some customers were charged overdraft fees when there was insufficient money in their accounts at the time funds were moving into and out of the phantom accounts. Managers surely should have noticed problems when customers complained about overdraft fees and asked for an accounting of where the money went.
Advice: Think about how you might detect similar shenanigans that could corrupt your incentive program and harm your business. Rewards based on building new business, for example, might benefit from safeguards that including random audits of transactions. For incentives pegged to productivity, develop independent systems for making sure workers aren’t sacrificing quality to improve quantity.
And in all cases, pay attention to customer complaints that might indicate inappropriate employee activity.
