The bank’s admission that it had fired more than 5,000 employees for having engaged in this practice over a five-year period likely has top executives equally puzzled. But in the midst of this scandal, there are some lessons CEOs and their management can learn from Wells Fargo’s mistakes.
Mistake #1: Turning a blind eye to possible problems. An article in the Huffington Post “exposed the culture Stumpf denied knowing about—even as the practices raised in the report prompted employee dismissals.”
“From that day forward, Wells [Fargo] had to know it had a problem,” Helaine Olen, a financial columnist at Slate, and author of financial industry exposé Pound Foolish told HuffPo.
Sen. Elizabeth Warren (D-Mass), who is poised to interrogate Stumpf when the Senate Banking Committee holds a hearing on the fake accounts, said the same in an interview with CNN. “Come on, this went on for years and they didn’t know?” she asked.
Lesson #1: Remember that if something appears “off,” it warrants investigation. “It’s usually better to err on the side of investigation,” than not to, wrote attorney Lisa Guerin, J.D., in her book, The Essential Guide to Workplace Investigations.
Mistake #2: Deflecting blame. During an interview with The Wall Street Journal, Stumpf declined to identify who was responsible for having created the corporate culture regulators blame for Wells Fargo employees’ fraudulent actions. He also insisted there was “nothing in Wells Fargo’s atmosphere that encouraged these practices,” nor “any incentive to do bad things,” HuffPo reported. Instead, HuffPo said, he appeared to blame the trouble on what he characterized as a “minority” of “bad” employees who failed to honor the company’s culture.
Yet, not everyone accepts these assertions, and it is starting to impact overall impressions of the bank. “Stumpf has clearly forgotten Harry Truman’s maxim that ‘the buck stops here,’” Olen said. “It takes a particular level of what my grandmother called ‘chutzpah’ to, when you are earning millions of dollars annually, turn and dump the blame on what are fairly low-paid employees.” Olen called these actions “an astonishing indictment of how people in power think.”
Lesson #2: Avoid playing the “blame game.” Instead, look for the root of the problem. “You don’t get over 5,000 employees all doing the same thing, all ripping off customers,” without someone having coordinated the initiative or offered incentive led to such actions, Sen. Robert Menendez (D-NJ), told CNNMoney.
Mistake #3: Forgetting about customers. In a Forbes cover story about Wells Fargo published four years ago, Stumpf said companies can get ahead in one of only three ways: by earning additional business from current customers, cultivating more customers, or acquiring another company. “If you can’t do the first, what makes you think you can earn more business from your competitors or from customers you buy through acquisition?” he asked.
Admittedly, Wells Fargo is altering its employee compensation system so that customer satisfaction carries more weight than the number of products sold to each household with a Wells Fargo account, CNBC said. But despite the recent turmoil, the bank has no plans to “reel in” its strategy of aggressively cross-selling products to customers, Forbes reported.
Lesson #3: Make gaining and maintaining customers’ trust a priority, because it’s their trust that matters to the bottom line. It may be too late for Wells Fargo to regain its customers’ trust, Forbes said, adding that the question for the bank today is different than the one above: “If your existing customers can’t trust you, who will?”
The gravity of Wells Fargo’s wrongdoing is extreme and the price it will pay, financial and otherwise, appears unusually high. But while the stakes and the consequences of such mistakes may be lower for smaller, non-financial entities, striving not to repeat them is the most prudent approach.