New Approach and Bonus Schemes in Group Distribution
The recently announced changes to all of the bonus schemes in Group Distribution (including Financial Solutions) mark a significant development in the operation of the organisation. These new schemes move away from rewarding employees based on sales volume and value targets, focusing instead on the importance of delivering good customer outcomes.
The Union welcomes the general direction of these changes and believes they represent a major turning point in creating a more positive working culture – one where employees are empowered to do the best for their customers rather than working in the shadow of sales target achievement. They also represent an opportunity for the Society to once again refresh and reaffirm the values of a mutual organisation that are so important in distinguishing Nationwide from the banks.
Financial Conduct Authority (FCA) – Guidance on Sales Incentives
The changes to the bonus schemes are a response to the guidance issued by the FSA (now split into the FCA and PRA) regarding the “Risks to customers from financial incentives”. (A copy of the guidance can be found at www.fsa.gov.uk/static/pubs/guidance/fg13-01.pdf). The guidance recognises that sales driven bonus schemes (and the performance management culture that underpins a target led approach) can lead to risks of mis-selling and highlights a number of common elements of sales schemes which heighten these risks. The guidance has signalled a major change across the financial services industry as pretty much all of the large organisations have publicly jettisoned sales bonuses.
Nationwide has, like everyone else, had to respond to the Regulator’s concerns but we recognise that the Society has acted swiftly to develop these new schemes and to take important steps towards strengthening relationships with its customers. This has been a challenge and it will inevitably take time for the new schemes to properly bed in, to develop a new approach to performance management and for a new working environment to emerge. We don’t underestimate the scale of this task and will continue to influence and challenge the Society as the schemes evolve to ensure that these changes deliver a positive working environment for our members.
Performance Management is Key
The new bonus schemes will be based on a quarterly assessment of how employees have carried out their role in delivering good customer outcomes. This will be assessed in a number of ways and is no longer about the number of products ’sold’, but about behaviours and outcomes. Surely, something all our members will welcome.
The importance of good performance management is crucial to the success of these schemes. If performance is to be assessed on a monthly basis and rewarded quarterly, then employees and managers must have confidence in the outcome of the process. This requires a forward looking approach to ‘calibration’, where everyone is clear about the level of performance required, where ratings are assessed against clear objectives and local managers are empowered to agree ratings with their teams as part of a genuine two-way discussion. If changes to these ratings are imposed by more senior managers as a result of a retrospective calibration, all confidence will be lost in the integrity of the process and the bonus schemes.
We recognise that a major challenge for everyone involved is the move away from using a set of targets to measure performance. The Society must be clear about what the job roles are, set quarterly and annual objectives that are SMART and that are appropriate to the contractual arrangements of the employee and then ensure that the assessment of behaviours and outcomes are consistent and fair. As these judgements will be much more subjective, we believe that the Society must make a substantial investment and commitment to providing training and support for managers. This is crucial if this is to succeed, as managers are going to need help and support as much as the ‘sellers’.
I make specific mention of contractual arrangements as already there appears to be a conflict with model behaviours for branch staff implying that attendance at the ‘branch energisers’ is now a requirement. However, the contractual position, as confirmed in the Branch Working Arrangements Policy, is clear – that attendance is voluntary. Any employee who believes their behaviours have been ‘marked down’ because they are unable to attend ‘energisers’ should use the appeal process (details will be available shortly) and seek further advice from the Union.
Employees will receive a flat bonus payment linked to their rating for the quarter. Each job role has its own bonus structure. In the future, the available ‘bonus pool’ may be adjusted to reflect Corporate and/or local Area performance.
The financial investment in the bonus scheme remains broadly the same as the old schemes but the distribution of bonuses will be different. It is anticipated that more employees will participate in the new schemes but there will be a reduction in bonus earnings for some employees who have previously been able to drive high payments through sales achievement. Senior Managers in all parts of Group Distribution should be talking to employees in this position to explore the implications of the changes with them.
Doing the Right Thing for Customers AND Employees
One of the reasons that we support these changes is that over the past few years we have been dismayed by the way the focus on sales and target achievement has been such a destructive and damaging force for employees in parts of the business. Some of the behaviours that have surfaced in some areas have given rise to unfair treatment, such as inappropriate use of PIPs and disciplinary action, and left far too many people suffering stress and anxiety as they worry about achieving a target or losing their job.
We believe that the replacement of individual and team targets by an approach that rewards employees for “doing the right thing” for customers will begin to lift the very real fear culture that has been allowed to develop in some parts of the business.
As previously stated we expect that these new approaches will take time to bed in and that some may struggle without sales targets to manage by. This is where we need members to feel that it is genuinely safe to ‘speak up’ about issues of concern in their Team, Department, Area or Branch – and to do so. Creating an open and honest culture is described as a ‘model behaviour’ for managers and we will be interested to see how the Society defines and measures success in this area over the coming months.
We are clear that “doing the right thing” needs to apply to both customers and employees. Failure to do so will expose the Society to the risks that result from inappropriate performance management and behaviours that have been identified by the Regulator. If we see that happening we will support our members by reporting areas that fail to treat employees properly to the attention of Executive Management and, if necessary, directly to the FCA.
The Union welcomes these changes and wants to work with Nationwide to maintain an organisation that is successful and one where employees want to work and they are treated fairly with dignity and respect.
April Draw Winners
First Prize: £10,933
090037: Jennifer Darby of Pension Fund Members
Second Prize: £5,000
126204: Coral Murphy of SID (Swindon)
Third Prize: £2,000
125838: Dayshon Bennett of Loughton
Fourth Prizes: £500
126482: Jennifer Griffiths of Kings Lynn
119366: Thomas Bolton of RSM North
117889: Louise Brooker of Lancaster