Wells Fargo Scandal - A Reminder for Company Leaders Everywhere

 September 8, 2016 - Wells Fargo ordered to pay $185 million in fines to city and federal regulators.

If you haven’t heard, Wells Fargo is dealing with a major PR crisis. The bank has been under fire since the story broke that over 2 million false bank accounts were created by employees to fulfill sales quotas.

When the story broke, Wells Fargo released this statement:

“At Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action.”

The thing is, company leadership has overtly rejected the notion that they played a role in this scandal. When John Stumpf, (now former) CEO of Wells Fargo, testified about these allegations, he claimed to have no involvement or knowledge of these acts, deflecting the brunt of the responsibility onto “a bunch of bad apples,” AKA lower-level branch employees. The bank has paid a penalty and fired over 5,000 of these lower-level employees.

 Lessons Leadership Can Learn from Wells Fargo's Sales Scandal - Spire Workforce Solutions

But let’s be clear: fraudulent activities emerge from three forces, regardless of the company involved:

  • Opportunity – Enough gaps in the company to ensure fraud would not be caught
  • Pressure – High stakes involved in forcing a certain outcome to happen
  • Rationalization – The moral justification of the individual involved

In short, Wells Fargo’s banking scandal happened because their company culture was compromised. And when company culture is compromised from the inside, the effects will inevitably radiate outward. Obviously, employees should have been fired for fraudulent activity of any kind. But there is another side to this story, best told by NPR’s Planet Money Podcast, titled: “The Wells Fargo Hustle.” This side of the story is told by one of those lower-level employees who insists “it was part of the sales culture.” So… how did it happen?

1. There was opportunity for fraudulent activity.

Between the sheer size of Wells Fargo, the sales culture, the nature of the banking industry, and the trustworthy façade the brand has built, it’s no wonder that there was opportunity for fraudulent activity.

 Wells Fargo former CEO John Stumpf - Testifying about the allegations against Wells Fargo - Spire Workforce Solutions Blog

The lesson: As a company grows, so should the emphasis on culture, values, and vision that the company began with. Connection between employees, management, and leadership is essential in safeguarding against inappropriate or unethical behavior.

2. There was a lot of pressure on employees…and not a lot of support behind them.

Wells Fargo, not unlike other companies, used KPI’s to impose pressure on employees to meet objectives, threatening their job (and even their career in banking) if the problem persisted. They praised the result and forgot to care about the process which achieved that result.

The lesson: While KPI’s are useful in identifying gaps in employee performance, they are designed for coaching. You can coach to strategy, skill, or execution. KPI’s help in determining where that lesson is. They do not help when they are unreasonable, rigid, or tied to a specific outcome indefinitely.

 

3. Employees were able to rationalize their behavior

The combined disconnection between leadership and employees with pressure to meet performance quotas left an opening for employees to rationalize unethical behavior. Employees were overworked and underpaid. Management threatened employees. And eventually, employees found a shortcut. As they say, “necessity is the mother of invention.”  

The lesson: Your brand does not shape your company culture, your people do. If you do not value your people and invest in their personal and professional growth, why should they invest in your company? If management does not support their employees, they may turn to each other – leaving an opportunity for them to rationalize undesirable behavior.

Unfortunately for Wells Fargo, a brand who once represented a beacon of trustworthiness, an identity crisis emerged from within their own ranks. But as a leader, you can take preventative measures to ensure that “The Wells Fargo Hustle” doesn’t happen to your company.

 

 

Kate Jacoutot

Spire Workforce Solutions, 5575 Peachtree Dunwoody Road Northeast, Building C, Suite 240, Sandy Springs, GA, 30342, United States