Virtually every recent scandal, including Wells Fargo, has featured noxious pressure to reach ambitious goals © Reuters

My first job was in sales. In a grim rented flat above a row of shops, I worked through a pile of “leads”. I phoned people who had entered a competition and fixed meetings for “prize reps” whose real aim was to flog double glazing and fitted kitchens.

Every time I reached my goal, our hyperactive team leader would ring a bell, heralding a later bonus if the meetings I had arranged resulted in a sale. (They never seemed to.)

In line with my then employer’s Hobbesian view of the greed of sellers and buyers, the job was nasty, brutish and — for me, a holiday temp — short. But I doubt I would have got it done at all in the absence of any target.

Goals and rewards are an important ingredient of sales motivation. Pick virtually any recent scandal, though, and pressure to reach an ambitious goal is also a noxious part of the recipe for disaster.

The current poisoner-in-chief is Wells Fargo, whose executives urged staff to aim for the “Great Eight” — cross-selling eight products to clients. Many created accounts without customers’ consent. Some 5,300 staff have been sacked.

Recent reports have singled out the mishandling of goal-setting as a factor in the failure of UK bank HBOS (“aggressive growth targets”), Barclays’ Libor manipulation and mis-selling of payment protection insurance (staff blamed “a culture of fear”), and even increased deaths in the 2000s at Stafford hospital in Britain, which suffered from “a focus on reaching national access targets . . . at the cost of delivering acceptable standards of care”.

Abolition of product sales goals — the radical action announced by Wells Fargo’s chief executive John Stumpf — seems the obvious solution.

As US senator Elizabeth Warren pointed out acidly in her excoriation of Mr Stumpf last week, Wells Fargo’s target was set “not because you ran the numbers and found that the average customer needed eight banking accounts. It is because ‘Eight rhymes with great’”.

A similar oversimplification led to the disastrous Ford Pinto project in the 1960s. Ford boss Lee Iacocca challenged his team to produce a car weighing under 2,000lb and costing less than $2,000. Under pressure to meet these goals to a tight deadline, Ford managers pushed the car out with a flawed design, later blamed for a number of deaths and injuries.

Scrapping goals, though, can leave teams aimless. Maurice Schweitzer, of University of Pennsylvania’s Wharton business school, is co-author of a 2009 paper, “Goals Gone Wild”, which included the Pinto case and warned about the dangers of overprescriptive goals. But he maintains they are “an essential managerial tool”. He told me: “If a manager hopes to motivate employees, goal setting has got to be part of that process.”

A second option then would be to adjust targets to avoid their sometimes lethal consequences. In the vexed area of executive pay, for instance, if boards spent less time focusing on the amount paid and more on the period over which managers were rewarded, they could encourage them to act for the longer-term success of the business.

The ghost of targets past has a habit of haunting staff. After investigating Barclays’ culture in 2012, lawyer Anthony Salz warned the bank not to replace individual sales goals with indirect targets such as branch league tables that may still encourage bad behaviour. At Wells Fargo, how teams hit targets should have been as important as whether it reached them.

A third way of improving goals is to augment them with conditions on, say, customer care or satisfaction.

New ways are emerging to measure goals such as these, which are harder to quantify, using surveys, social media and other information. But a strictly numerical approach requires caution, too. With their false promise of clarity, data have a mesmerising effect on executives, even in areas that are harder to quantify than mere revenues.

Goals are extraordinarily powerful. Abolishing them disarms a company’s sales team. Adjusting or augmenting them can dilute or even pervert their impact. But companies really court catastrophe when they set unrealistic goals and oblige staff to chase them.

One brutal extreme of sales culture is summed up in a famous speech from Glengarry Glen Ross — the 1983 David Mamet play that budding salespeople still analyse for tips about the good and the bad of selling. In it, a star salesman, played by Alec Baldwin in the 1992 film version, offers his charges expletive-laden advice and three prizes in a contest to determine who is best: a Cadillac Eldorado, a set of steak knives, and “Third prize is you’re fired”.

As in many scandals where hard goals trump softer but better priorities, the shame of the Wells Fargo case is that by urging staff to go for first prize, the bank forced many to act in ways that ensured they would come third.

Twitter: @andrewtghill

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