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Corporate Lessons To Learn From Wells Fargo

When a hunger for success didn't lead to it

30Sep

When discussing corporate culture, leadership teams and strategists always try to emphasize the importance of the right environment, and that it's people who drive the company forward. However, there are also cases where competitive advantage as a goal can turn into a disaster, where poor management can further escalate dreadful results.

In the banking industry, September started with a shock, with one of the world's leading banks Wells Fargo revealed to be involved in dodgy affairs. The bank has now become a case study of how corporate culture shouldn't look. Reports have been confirmed that bank's employees had been opening and applying more than 2 million bank accounts and credit cards without customers' permission or knowledge between 2011-2015. After the revelation, the case instantly caught the attention of the various governmental bodies, including the CFPB, Los Angeles City Attorney, the Office of the Comptroller of the Currency, FBI - to name a few.

With such rapid escalation of the scandal, Wells Fargo's reputation and customers' trust nosedived at the same speed as its stock prices - down 8.16%, since September 9. What has this got to do with corporate culture? The whole situation could have been prevented, if only the right management was in place, and different methods would have been chosen to drive a competitive advantage of the bank.

What lessons can be learned from Wells Fargo?

Firstly, corporate culture is a very sensitive and reactive ecosystem. With too much pressure it will collapse, and the same outcome should be expected if it's poorly managed. The latter is what happened to Wells Fargo. When John G. Stumpf, the bank's Chief Executive Officer appears at the various hearings as a process of the fraud investigation, he tends to stick to the same reason the disaster occurred. He blames 5,300 employees, claiming that they unlawfully acted behind the managers' backs: 'If they’re not going to do the thing that we ask them to do — put customers first, honor our vision and values — I don’t want them here,' stressing that the situation is by no means a result of the leadership failure but solely a misconduct of 'low-level bankers' and 'tellers'. When Stumpf was called to resigned, he accepted responsibility but denied it was his failure.

Misconducts in the workplace happen frequently. Each case is individual, and, most of the time, malicious actions against the company are performed by individuals. However, when the situation is out of control for years and leadership teams fail to identify the problem, the blame goes further than just employees. Setting competitive sales programs was the first indication that Wells Fargo put itself in a vulnerable position. Misconducts happen if the opportunity is created - in Wells Fargo there were plenty.

The management success in the organization is strongly linked to the size of it - the bigger it is, the more supervision and connection is needed. With Wells Fargo, considering its sizes and spread in activities, employees were simply scattered, lacking critical support but still faced with extreme pressure driven by sales targets - former employees have been actively revealing the details of their work life in the bank on social media.

One mistake leads to another, and all the ingredients for a huge failure are there. The real lesson is, when someone talks about the importance of healthy corporate culture, listen.

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