In the FCA’s most recent thematic review of firms dealing directly with retail customers, the body highlighted that inappropriate performance management practices could lead to products being mis-sold to customers.
“Performance management practices are likely to result in some level of pressure. This is normal,” it said. “However, pressure can increase the risk of mis-selling where excessively applied.”
The paper, entitled ‘Risks to customers from performance management at firms’, is the finalised guidance following a consultation with the industry in March.
Instances of poor practice – identified by whistleblowers and media articles – have been highlighted in the paper. The FCA emphasised, however, that it has not seen evidence that these issues are widespread.
Threatened
It said there had been instances where firms had policies in place indicating a supportive approach when staff underperformed against sales objectives, but in reality the culture of management is to “rule by fear” and use threats of disciplinary action.
The UK regulator said businesses should give staff objectives which focus on how they have arrived at client outcomes, instead of making the number of sales the dominant factor.
It also said “robust moderation processes” should be in place to assess the fairness and consistency of how staff performance is assessed.
Inherent risks
“Given the inherent risks in this area, we are taking a forward-looking approach,” the FCA said. “We will continue to focus on performance management and this report is the first step in a dialogue with industry on evolving practice in this area.”
The body also highlighted that, while it is not its role to prescribe how firms manage the performance of their staff, it expects firms to manage the risk of mis-selling effectively.
This, it said, includes identifying where poor performance management practice may be leading to undue pressure.
