Recap: Brian Claridge, VP of consumer insight for a regional bank, leads a team that provides data to its various marketing teams—including one lead by new colleague, Janice Storms, VP of credit card marketing, whose goal is to increase the number of new credit card holders. Her compensation reflects that goal without reference to risk.
During lunch with Janice, Brian learned that she was targeting high-risk customers who would likely churn once their first late fee hit—a strategy that would earn Janice a large bonus but put the bank at risk for losses. He discussed the risks with her, but she dismissed them saying that it would be the collection department’s problem; that she was hired to acquire, period.
Should Brian report Janice to the CMO or CFO, look the other way, or take some other action? What would you do?
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October winner: Greg Price, cofounder/internet marketing specialist, Oasis Web Marketing
Brian, as an officer of the bank (along with its directors), has a fiduciary responsibility and is held to a higher standard of conduct in dealing with the affairs of a financial institution. The most basic duty of a fiduciary is the duty of loyalty, which obligates the fiduciary to put the interests of the beneficiary (employer/shareholders) first, ahead of the fiduciary’s self-interest, and to refrain from exploiting the relationship for the fiduciary’s personal benefit. This is clearly what Janice is doing.
Brian could try and talk to her again but [it] will do no good because: 1) they are in fact “peers”; and, 2) you tend to get the behavior you incent. There are only two things that can get Janice to change her practices: Refine her incentive to include profitability and risk, and/or revise the bank’s credit extension guidelines for credit cards and [ensure] that all marketing programs comply. That can only come from higher up. Brian should contact the CMO and the CFO to tell them that Janice’s plans violate the bank’s lending/credit criteria. Brian should document and keep copies of his communications to and from the CMO and CFO because, as luck may have it, the CMO may have the same bonus arrangement as Janice (disregarding profitability and risk).
Having this documentation may help Brian if somehow the finger is pointed at him, or if he needs to sue the employer for “wrongful discharge” for mentioning it to superiors. That will all depend on the climate of that particular bank. That’s what Brian should do as officer of a bank. However, the reality of it is that if the culture of the employer encourages risky behavior and punishes people for attempting to do the right thing, Brian may just want to start looking for another job while he still has one and get out of there.
Other responses:
Mark Cohen, owner, president, broker Eyemark Realty Inc.
There are three questions asked about this situation: “Should Brian report Janice to the CMO or CFO?” “Should he try to reason with her again?” and “Should he look the other way making it the CMO’s problem?”
I think [Brian] should go to question two first. It’s always worth a try to convince someone that they should change their mind or operate differently. If [ Janice] agrees that she should change her emphasis and attract quality credit card users, then the problem is solved. If she again refuses, he should proceed to question three.
To do so, he must ask himself the following: How much do I want to keep this job? If I’m rebuffed, will they make it difficult for me to keep working here? Can I easily find a comparable position with another company? Is my loyalty to this bank or to myself? Am I an ethical person?
If he decides that he wants to keep or needs to keep this job, then he might decide to look the other way. However, there’s a risk that passivity could backfire on him when someone in power realizes the bank is losing money. They could blame him because he didn’t go above her and look out for the bank’s best interests. Also doing nothing is not an ethical decision.
So that brings Brian to question one. Because the CMO hired Janice and gave her the parameters for her job performance, Brian should report to him first. If the CMO realizes there is a conflict between quality and quantity and corrects it, the problem is solved.
If the CMO refuses to do anything, then Brian must ask himself: “Who really has the power in this bank?” “Who really makes the decisions?” “In this type of situation is it the CFO, or the CEO?”
He should then report to the person who he believes can look at the matter objectively, effectively, and has the bank’s best interests at heart. If he believes that the CFO can correct the situation, then he should report to that person. If he doesn’t trust the CFO, then he should report to the CEO. Even if nothing gets changed, at least Brian can be comfortable with himself that he did his best.
Fred Landis, CRM, marketing, and competitive strategist
Two questions Brian should ask are who are the bank’s target segment customers and what is the strategy to reach them? Is Janice’s initiative consistent with that strategy? This would take the discussion up a level and help avoid the “shootout” that could otherwise occur. It sets the ground for future initiatives that everyone, including Janice, is on board with. The underlying assumption is that no one wants new customers that will attrite quickly, but likely those they can cross-market to. Mechanically, a simple change in the comp plan to incent on minimum retention time instead of pure acquisition weeds out the deadbeats and builds a base at the same time.
Ron Swift, executive-in-residence and senior lecturer, University of Georgia
This is a great case example, and there could be a win-win-win solution. First a gentle re-discussion with Janice, highlighting that the bank strategy is low risk and there might be other opportunities for high-value, low-risk new customers. One suggestion might be to segment present customers into value groups and select a top percentage of present customers and offer them to refer your bank to their friends and associates and, of course, family members. If Janice isn’t open to collaborative decisions, then second is to inform the CMO of the potential risk, as well as the degradation of his marketing attainment versus the bank’s risk.
Third is to define opportunities through the combination of marketing, sales, and finance to drive greater customer growth and also higher margins per new customer. Sometimes brainstorming with motivated people generates improved campaigns—and all parties are in the boat together working on common goals.
