In the wake of the fake account scandal at Wells Fargo, companies are rethinking how they compensate salespeople, reported The Wall Street Journal.
According to a report, companies are trying to overhaul how they compensate salespeople in an effort to improve customer service and prevent the bad behavior that did Wells Fargo in. Sure, commissions can motivate people to ink deals and boost sales, but they also have risks associated with them. After all, they can create a culture of infighting and prompt some people to work the system to have more gains, the paper reported.
Take GlaxoSmithKline as one example of a company that is rethinking sales compensation. According to WSJ, GlaxoSmithKline got rid of sales commission and instead is using employee knowledge and customer satisfaction as the basis for commissions. Meanwhile, the report noted, other companies are reducing their variable pay or focusing the bonuses on the performance of the entire company. Dan Walter, CEO of compensation consulting firm Performensation, told WSJ that, since the Wells Fargo scandal, current corporate clients and potential ones have questions about their own sales rewards. “They’re thinking about it. They’re talking about it,” Walter said in the report. “But there [are] only a few ways you can pay and reward people.”
In September, the Consumer Financial Protection Bureau announced Wells Fargo agreed to pay a $185 million fine and refund $5 million in fees that the bank wrongly charged customers. According to an investigation by the CFPB, Wells Fargo employees not only made fake deposit accounts but also submitted 565,443 unauthorized credit card account applications on behalf of unknowing customers. It’s estimated that 14,000 of those accounts accrued $403,145 in fees. Through its own independent investigation, the bank discovered a total of $2.6 million in unauthorized fees. At the time, CFO John Shrewsberry said it isn’t a systematic problem at the company, just some bad seeds — or, in this case, underperformers. Since then, the CEO of Wells Fargo has stepped down, and the company overhauled how it compensates its salesforce.