Salz Review - Wall Street Journal

Salz Review
An Independent Review of Barclays’ Business Practices
138
Retail Incentive Schemes
11.32 Many retail staff participate in branch network incentive schemes. 219 These
employees are not eligible for a discretionary bonus. For them, incentives comprise a
relatively small (approximately 11% for UK Personal Bankers in 2012) portion of
total compensation, although a few staff achieved relatively high bonuses in relation
to salary. Research shows that even incentives of relatively small magnitude impact
employees’ behaviour – good and bad.
11.33 Prior to 2007, the Barclays UK RBB sales force worked under a discretionary bonus
scheme where points were allocated for each type of product sold. After 2007, the
scheme linked bonuses formulaically to individual sales performance, with different
incentive payments for each product sold; for example, as we noted earlier in the
report, loans sold with PPI had an incentive value of two and a half times that of a
loan without PPI. Over time, additional customer service elements were added,
although a number of sales focused features remained in place through 2012 – most
notably an “accelerator” 220 feature that disproportionally increased the value of
incentive payments as an individual sold more.
11.34 There has been much debate on the moral hazards of basing the incentives of a retail
bank sales force on achieving sales volumes thereby underemphasising customer
needs and suitability. We have concluded that the sales focus of the incentive
schemes in place at UK RBB and Barclaycard were likely to have contributed to
alleged mis-selling of certain products, such as PPI. Incentive schemes signal what
matters to management – and so how staff should behave in order to be regarded
as successful.
11.35 A new retail incentive scheme was introduced by Barclays in the UK in December
2012. 221 It is focused on customer satisfaction, with no direct link to sales. This move
is intended by management to put Barclays ahead of many peers in encouraging
greater customer focus. Importantly it also puts significantly greater emphasis on
collective efforts; customer satisfaction is measured at a branch and area level – there
are no individual key performance indicators (KPIs). This is an encouraging step in
reinforcing appropriate behaviours in the branch network.
11.36 The new incentive scheme may need to evolve further still. Currently it is not well
aligned to the bank’s people management tools. For example, performance objectives
are not well reflected in pay structures (the objectives are based on five dimensions 222
but incentives are based only on customer service). Sales incentives may have gone,
but it appears that sales targets still exist at both a branch and individual level (either
formally or informally). Such contradictions need addressing. If staff see sales targets
(such as internal branch league tables) to be important, removing sales-based
incentive pay may not succeed in changing individual behaviour. Narrowly defined
219 Some staff in contact centres also participated in sales incentive schemes.
220 The ‘Accelerator’ in Barclays’ retail incentive schemes resulted in commission payments per product sold
increasing as an individual’s sales increased during a month.
221 Europe and Africa retail branch networks continue to have incentive schemes which are sales focused,
both in language and content, with customer service comprising a smaller part of the incentive formula.
222 The 4 Cs: ‘customer’, ‘colleague’, ‘citizenship’ and ‘company’; in addition to a further ‘control’ objective.