To stay on top of their game, ethical business leaders will find it pays to take a fresh look at their goals, and how to set them
The mundane routine of goal-setting gains fresh relevance when it prompts ethical business behavior. The wrong goal can do the opposite, placing an entire company at risk.
Wells Fargo bank learned the hard way how a not-fit-for-purpose goal can devastate an entire organisation. The once much-respected bank has accepted a stunning $3 billion fine. No matter how big you are, a penalty that size for bad behavior is no laughing matter.
Not only is the bank not laughing, it’s desperately hoping that paying the new monster penalty will resolve its ongoing criminal and civil liabilities. These stem from 18 years’ worth of fraudulent, misleading accounts. It’s also retribution for taking its loyal customers on an unwelcome, and expensive ride.
Over the whole period of customer deception various bank executives denied that it was doing anything wrong. They boasted they had achieved years of business success. This claim turned out to be a fraud, promoted at the highest levels.
Senior bank executives lied to anyone who asked about it. Including the regulators and the Wells Fargo Board of Directors. Thankfully, it’s rare for a large and prominent organization to engage in extended illegal practices.
With the benefit of hindsight what can the bank and the rest of us learn from the entire Wells Fargo disaster?
In essence the corporate shame comes down to the selection of a not-fit-for-purpose, and unethical goal. This goal was: To make money from “cross selling” additional and unasked for services to customers. Putting this differently, the chosen goal was not “SMART”.
Getting SMART about SMART
Goal-setting in business remains one of the most researched and applied theories in the field of organizational behavior. The art and science of doing it have made a big impact on research, management education, and corporate practice.
The SMART Goals method is a familiar guide to setting fit-for-purpose goals. That is, a goal should be: Specific, Measurable, Achievable, Recorded, and Timely–or time-limited .
A slight variation on this is that a sensible goal should also be ACCEPTABLE”. That is, acceptable to those tasked with reaching the goal.
Today much business goal-setting assumes that choosing specific and challenging goals will increase peoples’ performance. Recent research though contradicts this popular belief.
High performance goals may motivate performance, while also encouraging unethical behavior. In Wells Fargo, employees knew the potential for damage from the imposed goal to pursue cross-selling. As the pressure from management for results grew, employee behavior began to go badly wrong–and the resulting warped behavior went on for nearly 20 years.
To meet the unrealistic goals, fearful employees resorted to unethical strategies, at the expense of customers. These became pervasive and even acquired a name: “Gaming”. Employees would regularly:
- Forge customer signatures to open accounts without authorization
- Create PINS for unauthorized debit cards
- Move money from customer accounts to unauthorized ones
- Open credit cards and bill pay products without authorization
- Alter customers’ true contact information to prevent them from learning of the unauthorized accounts
“Wells Fargo traded its hard-earned reputation for short-term profits, and harmed untold numbers of customers along the way,”
Nick Hanna, U.S. Attorney for the Central District of California
Learning the lessons
Ethical business leaders would therefore be wise to remain cautious about the claimed benefits from enforced goal-setting: The systematic harm caused by goal-setting has been largely ignored.”
The numerous examples of goals that were not fit-for-purpose offer valuable lessons about what works and what doesn’t:
Ethical goal-setting affects whether a business and the individuals within it behave in a socially responsible way. In response to this reality, some companies offer employees general guidance about what is an ethical goal.
For example, Texas Instruments tells its employees and its other stakeholders:
“Our culture is driven by our core values of integrity, innovation and commitment. We believe in doing the right thing, and are unwavering in our commitment to maintain a safe environment and uphold human rights and ethical practices.”
Other companies prefer to rely on their written codes of practice to explain what is an ethical goal. Neither general guidance, nor more specific codes of practice though will ensure that people behave in a socially responsible way.
Much depends on how business leaders themselves behave. Do they show the way, talk about company values, and regularly explain what they mean by ethics and “doing the right thing”?
Is your goal fit-for-purpose?
How do you know if your goals are fit-for-purpose? Many company leaders possess a blind spot. Although they set goals these may be at the expense of the company’s culture, or trigger unethical results.
Fit-for-purpose goals tend to resonate with employees. With acceptable goals, people may feel able to speak up when they encounter unethical practices.
Google for example has some of the most committed employees it’s possible to hire. Yet in 2019 more than 20,000 of them from around the world walked out of the company’s offices. They protested that Google had chosen to ignore its own goals about avoiding sexual harassment in the workplace. Instead the company had paid over $100 million to multiple executives accused of exactly this unacceptable behavior.
Responding, the tech giant apologized. It agreed to adopt a new goal of an overhaul of its sexual misconduct policies. This included a commitment to become more supportive of workers who raise concerns about problems at work.
Performance versus learning goals
Rather than choose goals based on specific or quantified targets, leaders may achieve a better outcome by relying instead on learning goals. These aim to increase peoples’ knowledge or ability. They can influence ethical behavior, yet without decreasing performance—even with difficult goals.
- Wells Fargo settlement: part 1 – it’s even worse than imagined, FCPA Compliance and Ethics, 23rd Feb 2020
- Wells Fargo Fined $3 billion Over Fake-Accounts Scandal, CFO News, 24th Feb 24, 2020
- S. Silverthorne, When Goal Setting Goes Bad, HBR Research and Ideas, 2nd March 2019
- L. Ordóñez et al, Goals Gone Wild The Systematic Side Effects of Over-Prescribing Goal Setting. HBR 09-083
- Business Ethics: 15 Examples for Setting Performance Goals, Employeepedia, https://tinyurl.com/vkr4qzw