Wells Fargo and catching flies

By Mac McPhail - Contributing columnist

Mac McPhail

What does catching flies at Aunt Betty’s house and Wells Fargo have in common? Actually, it’s not a stretch. Let’s just say sometimes things don’t work out the way you plan.

I’ve shared this story about Aunt Betty before. Betty Davis had been an elementary school teacher for years. She knew how to motivate and handle kids. She knew how to use incentives to her advantage, or she thought.

My sister and I had spent the night with my cousin, Retta. Being children, we were naturally looking for something to do to occupy our time. And Aunt Betty was looking for something to keep us busy and out of her hair.

Back in those days, very few people had air conditioning in their home. In the summertime that meant open windows, in order to try to keep the home from being so warm. Even with screens in the windows, flies could get in the house. So that summer morning, Aunt Betty had an idea to keep us busy and get rid of some flies that had gotten in the house.

“I’ll give you one penny for each fly you kill,” she said. She gave each one of us a fly swat and sent us out on our mission. The mission soon became a competition, and besides, we were getting paid for it. OK, a penny wasn’t much, even back then, but it was an incentive.

There weren’t that many flies in the house, so it didn’t take long to get rid of them. We would stack our deceased flies in a little pile and keep track of how many we had killed. Pretty soon all the flies in the house had met their maker. We needed more flies to kill if we were going to make any more money.

This is where Aunt Betty’s plan backfired. We kids decided if we were going to kill more flies in the house, we needed more flies in the house. So we opened up the back door and the door under the carport so more could come in. A few came in. But we needed more flies so we could make more money. It took quite a few pennies to get enough to buy a drink and a candy bar. So we went outside and started fanning the flies into the house. When we got as many into the house as possible, we shut the doors and the hunt began again. When Aunt Betty came back home, she couldn’t believe how many flies we had killed. We just took our payment and counted to see if we had enough for that drink and candy bar.

You see, incentives do affect behavior. The problem is that they may not affect behavior in the manner desired. The incentive Aunt Betty offered us, a penny for each fly killed, enticed us to kill all the flies in her house. But it also tempted us to let more flies in so that we could make more money.

This is where the connection to Wells Fargo comes in. You may have heard that the bank has reached a $185 million settlement with the federal government over bank practices, and over 5300 employees have been fired. (I wonder how many of them are in upper management.) Federal officials state that Wells Fargo employees created fake bank accounts, fake PIN numbers, and used other practices where they knowingly opened millions of unauthorized accounts.

How bad is it? William D. Cohen writes in “The New York Times,” “According to the Consumer Financial Protection Bureau, the employees opened something like 1.5 million unauthorized deposit accounts in the name of unsuspecting customers and made 565,000 unauthorized credit card applications, generating $2.6 million in fees and enabling the employees to qualify for bonuses.” It was the culture of aggressive incentives at Wells Fargo that led Cohen to tell the bank in his article, that “you deserve all the Elizabeth Warren you get.” (They don’t want the liberal Massachusetts senator, who made her name going after the banks after the bailouts, on their case again.)

Incentives are used often in business, government and organizations. While sometimes achieving their goal, quite often those incentives are ineffective. Why? Because it is often hard to predict beforehand how people will react to those incentives, especially in a business culture that may encourage unethical behavior.

Misunderstanding incentives only cost Aunt Betty some small change and a pile of dead flies. Misapplying incentives has cost Wells Fargo $185 million and 5300 employees. But in the mega corporate world, that $185 million is just small change. And those mostly low level employees and the unfortunate bank customers might as well be a pile of dead flies to a bank as big as Wells Fargo. Maybe they do deserve all the Elizabeth Warren they can get.

Mac McPhail
http://www.clintonnc.com/wp-content/uploads/2016/09/web1_general-pics-025-3.jpgMac McPhail

By Mac McPhail

Contributing columnist

Mac McPhail, raised in Sampson County, lives in Clinton and can be reached at rvlfm@instrstar.net

Mac McPhail, raised in Sampson County, lives in Clinton and can be reached at rvlfm@instrstar.net

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