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Joanne Smith: Don’t let poor performance management lead to misselling


Despite recent industry improvements on staff incentives in a bid to reduce misselling, wider performance management techniques have been found to negatively influence the behaviour of frontline staff. The FCA has been clear in its stance that firms that offer staff incentives or use ‘pushy’ performance management techniques to drive sales are not operating in the best interest of their customers.

Performance management schemes should be set from the top. However, if not managed and monitored effectively, what is written in policy will not be achieved in practice. Firms are expected to have appropriate governance and controls in place to monitor and identify the risks their performance management schemes pose to their customers.

Once firms have established an effective performance management scheme, focusing on providing fair outcomes for customers, effective monitoring must be put in place to ensure ongoing adherence.

Firms should use effective practices and techniques to monitor performance management strategies. Monitoring should identify practices at management level that may lead to undue pressure on frontline staff, as well as instances of misselling at the point of customer contact.

  • Listen to employees

Staff at all levels hold valuable information and insight about the success of implementing performance management schemes in practice. Listening to frontline staff in particular is key to managing the risks of misselling. The pressures they feel from performance management will ultimately translate into poor behaviours and practices that may result in poor customer outcomes.

  • Monitor customer conversations

The FCA suggests firms use call monitoring to identify instances of non-conformity to company policy or practices that may lead to misselling. Many firms already monitor calls as a matter of course; however, the vast majority do not extend this to face-to-face conversations, instead relying on less effective mystery shopping or post-sale customer contact.  

Information gleaned from analysis of combined face-to-face and phone based conversations can provide comprehensive insights that can identify whether performance management schemes are resulting in inappropriate behaviour from staff across the breadth of a firm. Monitoring conversations can flag singular instances or behavioural trends. This could include pressurising customers to purchase products, omission of information and failing to make information clear.

For larger organisations, being able to identify common behavioural patterns across regions, branches or teams can be particularly valuable as it enables a firm to pinpoint whether an identified issue is company wide, indicating an issue with policy implementation or interpretation, or focused on a particular area or individual.

  • Use risk-based monitoring

Firms should adopt a risk-based approach to monitoring that places emphasis on areas that may be more susceptible to poor behaviours, especially in instances where individuals may come under more pressure than usual, such as when they are subject to an underperformance review or disciplinary action. 

  • Collect relevant management information

Information should be gathered from a range of sources about the performance of staff and effectiveness of the performance management scheme, not just based on statistics relating to financial goals. Complaints statistics and analysis of root causes can provide an indication of behaviours that have resulted in misselling or poor outcomes for consumers. Information should be complied so that comparisons can be made across functions, regions or teams, to identify emerging trends or risks.

  • Acting on identified risks

Firms should ensure they act upon the risks and trends management information and insights from conversation monitoring. A comprehensive understanding of how staff are performing and where there are gaps in knowledge or appropriate behaviour will enable firms to apply training to frontline staff more effectively. Monitoring will also identify the areas where middle management need improvement in assessing and identifying inappropriate behaviour. Firms should also use the information to inform recruitment practices so that when staff are recruited they immediately exhibit appropriate behaviour.

In the long term, the customers that are the most loyal are those that have received products suitable for them along with a service that is focused on their interests rather than pursuing sales.

The FCA is taking a forward-looking approach to ensure risks are managed effectively in performance management, and firms should expect this to be a key area of its supervision. Firms will be expected to have appraised their performance management schemes against the best practice in the FCA’s guidance consultation and make changes to mitigate risks and strengthen monitoring, governance and controls where necessary.

Joanne Smith is chief executive officer of The Consulting Consortium and RecordSure


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