The FCA's Focus On Incentive Schemes; A 'Brand New Animal'

The FCA's Focus On Incentive Schemes; A 'Brand New Animal'

It is understandable that each time someone answers their phone and is greeted by an automated voice, droning ‘Have you been mis-sold PPI?’, they hang up. We seem to have lost faith in anything to do with that acronym. This is most likely a reaction to the ‘culture of putting profits before treating customers fairly’ which emerged with the Payment Protection Insurance scandal, but in its aftermath there is a valuable opportunity to revolutionise how managers incentivise their employees.

In our previous whitepaper, ‘The Puzzle Of Motivation’, we outlined the evidence that people are not in fact motivated primarily by money, but by intellectual stimulation and autonomous working environments. However, it is hard to envision this in a world of cold calling and hard sales, where it is much easier and quicker to offer financial incentives than to get involved in an employee’s enthusiasms and drive.

In February 2014, a household name received a £30.6m fine from the Financial Conduct Authority (FCA); the largest they have ever imposed. In their 18 month investigation, the FCA found unfair complaints handling, a pay structure which rewarded their staff based on the quantity rather than the quality of their sales, and technical issues which resulted in inaccurate data upon which staff made misinformed offers. Despite promises of ‘peace of mind’, 69,000 customers were mis-sold insurance plans which didn’t suit them.

Although The London School of Economics found that ‘financial incentives can result in a negative impact on overall performance’, adding the threat of losing up to 20% of your sales bonus if you don’t meet criteria makes it unpleasantly simple. In one case an advisor ‘sold protection products to himself, his wife and a colleague to prevent himself from being demoted’.

Businesses that take time to help their customers, and thereby help themselves, can prevent problems before having to cure them. The kind of short-term thinking displayed here forces businesses to put customers second, but in the long run, building trust and investing time in people attracts the loyal customers which are so vital for a well-established, financially secure business.

This is where HR plays a part. An HR department which concerns itself with future-proof solutions is the tortoise to a sales-driven hare. By applying customer-centric sales measures, a good HR department can feed the way it deals with its employees into how its employees deal with customers; exactly the proactive, transformative steps in which high quality HR is currently heading.

This is where HR professionals can seize the opportunity to be part of the solution. They can take a main role in reshaping and rebuilding trust with customers, so that their immediate reaction is not to hang up the phone.

To discuss these issues and more, we will be hosting a round table dinner 19th June, lead by Steve Pratt, Interim HR Director at Swinton Insurance. The best minds in HR are currently debating the role HR holds in organisational change; if you want yours to be one of these voices, then contact Caroline Beer on or 07772 136 284.

Author: Caroline Beer

Posted on: Thursday 29th May 2014