What is the problem?

The five biggest problems with target pay can be:

While target pay rewards individuals for their results, a whole team normally achieves those results. Target pay undermines teamwork and morale. It hurts people’s willingness to cooperate and to share their successes or mentor each other. Do you believe it makes good business sense for a bank to reward internal competition between staff rather than external competition with other banks?
Performance targets often cause people to do things that can be easily measured rather than what works or is really relevant to success. They also undermine creativity and risk-taking, because there is no reward for doing things differently if they can’t be easily measured. Target pay can not measure less quantifiable issues such as if a customer was happy and likely to remain a lifelong customer.
Finance companies often argue that target pay allows people be paid ‘what they are really worth’, however they can and do increase targets without agreement, or apply the same targets across a number of different economic regions, because it saves them money. Once target pay is introduced it is easy to make the criteria for an increment or a bonus increasingly less achievable.
Finance companies are pressuring inflation through their lending practices. The major banks are driving inflation and attempting to grow their market share by imposing ever increasing sales targets on their staff. Finance companies and banks often compel staff to focus on up-selling products to customers. Customer service can be sacrificed for sales as targets are incrementally raised to cover understaffing and grow market share. While most workers resist this approach to ‘up-sell’ they still face pressure from their employer to encourage customers to buy more than they otherwise would.
Not only are pay target systems increasing the amount of money that New Zealanders are borrowing each year, they are placing significant stress on staff to sell more and more products in an increasingly competitive and tight market. Finsec believes that stress is widespread among workers in the finance industry because of serious understaffing and unreasonable demands placed upon those staff in the form of sales targets. Companies force their profits up by setting sales targets for staff to meet. Those targets grow each year to match the bank’s need for larger profits, but the number of people employed to meet those targets often falls.