Sales Practices - Don't Do This to Your Business

What happens when a sales organization is not managed thoughtfully and effectively? Potentially, severe damage to the company's reputation and the loss of customer confidence. More so even when the failures of that company become public.

That's exactly what happened with Wells Fargo. Their "Sales Practices Investigation Report," issued by the company's board in the aftermath of the company's sales management failures, is fascinating.

Approximately 2 million bank accounts or credit cards were opened or applied for without customers' knowledge or permission from May 2011 to July 2015. When theConsumer Financial Protection Bureau (CFPB), the Los Angeles City Attorney and the Office of the Comptroller of the Currency (OCC) fined Wells Fargo bank $185 million in 2016, the public began to learn about the scandal involving the bank.  Between 2011 and 2016, more than 5,300 Wells Fargo employees lost their jobs.

Most of my readers work for organizations far smaller than Wells Fargo. But there are plenty of lessons to be learned from this report.

Lack of Oversight

Wells Fargo adopted a decentralized system after it merged with NORWEST, giving local banks autonomy for determining revenue quotas and managing the sales effort.  The locally-based executives set high sales goals. With little oversight from their superiors at corporate, these executives put a lot of pressure on bank reps to achieve the inflated goals. This pressure forced reps to close low quality sales and engage in unethical behavior.

In some smaller companies I see a sales model where one or two reps report into the CEO, a few report to a sales manager in another part of the country and a manufacturers rep independently handles another area.

While there's nothing inherently wrong with a decentralized system, all salespeople serve as the face of the company.  Therefore, the overall corporate vision and sales department policies and procedures need to be clearly communicated from the top on a regular basis.

With loose or no oversight, sales reps start to interpret rules differently. As time goes on, valued clients may inquire about questionable orders and/or return unwanted merchandise. Company reputations get damaged and customers start to buy elsewhere.

Periodic audits of how salespeople conduct business need to take place routinely. Red flags of any type should generate prompt attention.

Unrealistic Sales Goals

In the new decentralized system, local Wells Fargo bank executives began setting very high sales numbers. When questioned by regional leaders, these executives insisted the inflated revenue goals were absolutely achievable.

Companies of varying sizes and industries set aggressive sales revenue goals all the time. That's fine - so long as leadership has a plan for reaching those numbers - and communicates it effectively. Whether it involves:

  • increasing advertising budgets
  • generating more white papers
  • improving webinars
  • launching new products
  • prospecting into untapped markets
  • offering sales skills training
  • hiring an outsourced appointment setting group

potential new customers have to come from somewhere. 

Once companies reach those potential new customers, realistic expectations must be set around close ratios and initial new order sizes.

If aggressive sales goals get set with no corresponding increase in supporting activities, another problem occurs...


Companies often contact me and say, "We have a turnover problem." I think to myself, "No, you have a problem and it's causing turnover."

Sales reps at Wells Fargo watched their peers achieve high sales numbers - and receive lavish praise for their efforts.  They saw other reps fail to reach the inflated sales quotas (or refuse to use unethical tactics) and either quit or be terminated.

As a result, between 2007 and 2013, turnover increased steadily. To counter this problem, Wells Fargo hired more and more inexperienced reps. Many "did as they were told" and the culture of opening fraudulent bank accounts and credit cards continued.

When given unreachably high quotas, reps in smaller companies either get terminated for failure to achieve their goals or become discouraged and quit. Over time, companies start to get a reputation as a high turnover organization. When this happens, fewer applicants express interest in open positions.

Final Thoughts

What happened to the financial services company that Henry Wells and William Fargo founded in 1852 carries a lot of drama: coverage on the national news, expensive fines, derailed or ruined careers, damaged reputations, and diminished profitability.

Most companies don't see their sales woes exposed to this degree. But what happened at this prestigious bank serves as a reminder about creating a system of checks and balances within the sales organization and holding strong to ethical business practices.