Finance Committee on June 12th, 2017

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Fine.

Do I understand that the issue of high-pressure sales was never raised on a regular basis, or with some insistence, let's say, over the past year, with the exception of reports broadcast on CBC, and what is being said today?

[Lucie Blanchet]

That's correct. To my knowledge, there were no allegations against the National Bank as such. We took the situation very seriously nevertheless, because this undermines the credibility of our industry, which is important to us. So my answer is no.

We also did some work within our enterprise. Of course we cannot remain indifferent to this situation. Our work confirms that there is no systemic problem regarding sales practices at the National Bank.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Mrs. Blanchet, thank you very much for your testimony.

[The Chair, Liberal, Wayne Easter]

Thank you to both.

Mr. Dusseault, you have seven minutes.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Chair.

I will also make a brief remark: the National Bank was not mentioned in the CBC reports.

That said, I'd like to go back to what I was saying earlier to our other guests representing the three other large banks. The testimony we heard outlined a highly problematic internal culture. On the one hand, bank representatives tell us that their culture puts the client first, but on the other hand, employees tell us that the culture puts profits, rewards and reaching sales objectives first.

I am trying to reconcile the two points of view, to understand what the real culture is when you work in a bank. I'm not talking about what people tell us and how they want things to appear.

I wonder if you could confirm that your respective banks have sales objectives, a reward system, and sales objectives for employees. Can you tell us whether this is or is not the case in your enterprise?

[Kirk Dudtschak]

We set objectives, as I said earlier, across client experience, activities, and behaviours; client loyalty; and sales or business outcomes. It's a combination of those three elements that we believe are more controllable by the employee but ultimately are the recipe to create a client experience that keeps our customers' interest at the centre. As others have referenced, every one of us is held to a code of conduct that places our customers at the centre of all that we do.

We also believe that providing the advice and solutions to clients that they need to achieve their goals today and over their lifetime, and helping them, are key ingredients to building long-term relationships with our customers. We can't do that without highly engaged and highly enabled employees. As has been talked about before, and as I referenced in my opening, we spend a lot of time listening, monitoring, and making ongoing adjustments to our programs to preserve that balance of building long-term relationships with our customers and enabling our employees to be successful.

[The Chair, Liberal, Wayne Easter]

Madame Blanchet.

[Lucie Blanchet]

It is important to put the financial objectives in context and to talk about our performance management framework. It is completely aligned with our corporate priorities.

One of the fundamental elements of our corporate culture is to ensure a balance among stakeholders. We know that giving preferential treatment to one stakeholder to the detriment of another may generate short-term benefits, but it will jeopardize the sustainability of the organization in the medium and long term. There are five dimensions to our performance management framework. I can explain them to the committee, if you like.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

In fact, I think we should stick to...

[Lucie Blanchet]

I will be brief, but it's important to put the financial objectives in perspective.

The first component of the performance management framework is client satisfaction.

The second is operational quality and risk management.

Corporate values constitute the third element.

The fourth is employee engagement.

Financial objectives are the fifth element.

The financial objectives are not given more weight than the other elements. In fact, our corporate values are considered the most important thing in our enterprise.

[The Chair, Liberal, Wayne Easter]

Mr. Auerbach.

[Andrew Auerbach]

Monsieur Dusseault, we do have goals, and the goals are very much balanced. To go back to my vision about being the bank to define great customer experience, a strong focus for us is tied to the actual satisfaction of our customers. We're trying to earn their loyalty over a long period of time. To that end, as we think about goals, we make sure that the goals are balanced between the CE, risk measures, performance, and of course the “how”—namely, making sure they're being consistent with our values and our articulation of what we call “being BMO”, which is about how we achieve this great customer experience.

My final comment about this is that we do find in our business that people want to know what's expected of them. They value our culture. They like what they do in our bank. They want to know what is expected—i.e., “How am I successful in this role?”—and it's the balance of the measures I've described.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

So according to your replies, you are unaware of the fact that sales objectives being imposed in financial institutions could create a problem. In order to reach those objectives, some employees are forced to do things that are more or less acceptable. According to what some witnesses told us, this becomes a systemic problem, to the extent that these objectives encourage employees, in a way, to disobey certain rules.

Mrs. Blanchet, do you recognize the problem posed by bank culture when it is too focused on sales objectives, and the rewards related to the sale of certain financial products?

[Lucie Blanchet]

In fact, it is crucial to ensure that financial objectives are not overrated or given more importance than the other dimensions.

Another fundamental aspect is the fact that the performance management framework is rooted in a corporate ecosystem; it doesn't function in a vacuum. The performance management framework is accompanied by solid corporate governance, as well as independent monitoring sectors as we mentioned. Our human resources practices are also robust, and they are applied consistently in the organization. The framework is accompanied by a corporate culture which in the long term supports the sustainability of the organization. You have to consider that ecosystem as a whole, as well as the place occupied within it by financial objectives.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Speaking of ecosystems, Mr. Auerbach, some public reports revealed that some of your employees were sometimes subjected to shaming and bullying.

Can you confirm the existence in your institution of a practice according to which the names of employees who do not reach their objectives are posted on a list that designates them as employees whose performance is poor, or that their name is posted on a white board in the branch so that the other employees know which employees have the poorest performance in the group?

Do you think this system makes the client the priority? Are we talking again about putting objectives and profits first?

[The Chair, Liberal, Wayne Easter]

Next is Mr. Auerbach, and that will end your round, Mr. Dusseault.

Mr. Auerbach.

[Andrew Auerbach]

Mr. Dusseault, I'd reinforce the vision and the approach we take in our company, and I know that is validated by a very strong engagement of our teams, who do believe that we are strongly focused on doing what's right for our customers. The behaviours you're describing would not be consistent with our values or our approach, which is about making sure that, first of all, we are showing empathy with our teams. It's one of our core values. I mentioned earlier that we have a very clear articulation about responsibility, integrity, diversity, and empathy. Empathy is a really core component of it.

The leadership behaviours you're describing are not reinforcing what we believe so passionately, which is that we have to get it right for our teams first, because if we have engaged teams, they in turn will deliver a great experience to our customers. These things are inextricably linked. In terms of this idea that we must have teams who are engaged and are happy to work there, what you're describing would not be consistent with that.

[The Chair, Liberal, Wayne Easter]

Thanks to all of you.

Ms. O'Connell.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Thank you, Mr. Chair.

Thank you all for being here.

I want to ask a question that's similar to Mr. Dusseault's line of questioning.

You're all senior VPs or executive VPs. How do you ensure, from the top down, that the behaviour at the branch level is appropriate and fitting with these values? Mr. Dusseault used the example of shaming on a whiteboard. We also heard testimony—and you three have been consistent with the three earlier representatives from the bank—saying that sales are not the only factor in performance reviews.

However, it's a factor, and what happens? We've heard testimony from employees who say that branch managers don't explicitly say your sales are bad. If they don't meet their sales targets, the branch manager or supervisor would call them into the office to talk about getting their sales up. Then, if they still didn't get their sales up, they'd have a note in their file saying they were a troublemaker or they don't work well with others. That would then go to one of those other categories of performance.

How do you ensure that the branch managers or supervisors are recording the disciplinary action appropriately, especially considering that a branch manager's or supervisor's bonuses and trips, as I said in the previous panel, are contingent on the overall branch meeting some of their targets?

How do you make sure, if these are truly the policies from the top, that they are actually trickling down, at every level, so that there's not some manipulation of people who aren't hitting their sales targets?

[Kirk Dudtschak]

There are a couple of examples that I could give you.

One of those is that all employee corrective action cases are reviewed and managed by our employee relations centre. The manager will call in and review the case, and those individuals at employee relations will coach that manager on handling it, or they will help objectively assess that case to ensure we're being fair and balanced with that employee. We also, as I said earlier, do an annual employee survey. We consistently do round tables where regional vice-presidents, regional presidents, even myself, will be in market to listen, to try to understand where there are issues and opportunities.

Specific to the employee survey, we review not only the scores on that survey right down to the manager level, but we also review the verbatim comments, looking for the nature of concerns that employees might have. Again, we can use that information to either coach a manager or ensure that improvement plans are put in place at that branch level to identify issues, or to allow us to learn and enhance our programs overall.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

Sorry, I'm going to stop you there.

Are those surveys confidential?

[Kirk Dudtschak]

Yes.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

It's confidential.

[Kirk Dudtschak]

Fully confidential.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

I'm going to move on, but if anyone else wants to jump in on this next question, you can. It's also relatively broad.

My colleague, Mr. Deltell, somewhat compared the sales target of a shoe store. This is not the first time that there's been testimony and conversations around the appropriateness of commissions or sales targets. I have a real problem with that, when there are endless numbers of shoe stores. I know there's not a lot of regulation, so there is a big difference when you have a private company or private enterprise that wants to solely focus on sales and profits. When we're talking about banking, there is a lot. For example, it's not just anybody who can open up a financial institution. Not just anybody gets the backing of the federal government and Canadian tax dollars essentially, to ensure that it's stable and regulated in a way that protects everybody.

Do you share the same view that it should be profits first and that sales targets are a good way to ensure your employees are meeting the objectives of the bank, or do you see that there is a service you owe to Canadians, given that you have protections provided by Canadians as well?