Wells Fargo: A wake up call amid the scandal

Originally published on LinkedIn September 21, 2016

This week finds Wells Fargo CEO John Stumpf facing heavy criticism and calls for his resignation in congressional hearings following last week’s $185 million fine levied by federal regulators. The crux of the issue is a poorly designed sales quota and incentive pay program that resulted in employees opening millions of accounts that customers didn’t know about. It is truly awful.

Profitable businesses became a rare thing during the financial crisis. Wells Fargo was not alone in launching aggressive sales quota systems that were designed to incentivize employees to offer more products and services to consumers and then pay them for successfully selling. Selling was measured by the opening of new accounts or services: many businesses chose not to measure retention, customer satisfaction, or appropriateness to the consumer. These sales quota incentive plans were sometimes launched at the same time that unprofitable businesses were freezing wages, cutting benefits, and/or laying off employees. Employees could be disciplined “up to and including termination of employment” for failing to meet sales quotas. Meanwhile, consumers were focused on paying down debt and due to high unemployment many people didn’t want, or weren’t qualified for, new loans and didn’t have much extra money to save in the bank. Basically productivity expectations went up even though demand was down.

Fear is an incredibly strong motivator and employees were scared for their jobs, scared for their financial future, scared about providing for themselves and their families. While I am not ignoring the individual’s personal ethical responsibility or dilemma, the bottom line is that Wells Fargo employees sold products and even falsified product sales because they needed their jobs. Everyone should have seen this coming.

For a surreal “is this the same company” experience, visit the company website to read about Wells Fargo’s long standing commitment to its vision and values, https://www.wellsfargo.com/about/corporate/vision-and-values/index.  From page 4: “Our vision is: We want to satisfy our customers’ financial needs and help them succeed financially.” Stumpf also writes quite eloquently about the importance of trust and building relationships.

Let’s assume that the bank’s target of 8 products per customer was developed by ethical and bright people who truly believed in the vision and wanted a way to deepen relationships by paying employees to sell more products (a very common banking practice). They didn’t intend to have any of this happen. This is a great wake up call to re-evaluate policies and practices and identify unintended consequences in your own organization. From compensation practices and bonus structures, to time off and attendance policies, all the way to management behavior modeling and organizational culture, be sure that your employees are giving you not just what you ask for. Make sure they are incentivized to give you what you actually want.