In September of 2016 Wells Fargo was convicted of falsifying 1.6 million fake deposit accounts and over 500,000 fake credit cards, entirely in customers’ names and without their consent. Under extreme sales pressure, low-level employees took drastic measures to meet the expected quotas, often creating additional accounts and manipulating the location of customers’ funds without notifying them. These low-level employees claimed that the organizational pressure and over-competitive climate created by their management caused them to operate unethically. These actions resulted in $3.7 million refunded to customers for miscellaneous bank account fees that were charged on unauthorized accounts and lines of credit.
So how did this flourishing bank, with ethical espoused values and a philosophy that gave it every reason to excel, fail itself and their customers so badly?
The reason Wells Fargo failed is because of leadership that refused to acknowledge and take ownership of a deeply rooted problem in their employees’ incentive system. While it may have appeared to be a direct result of poor customer service and account manipulation, these were merely second and third order consequences of a systemic problem that stemmed from upper management.
Wells Fargo did not have a banking issue, an employment issue, or a customer satisfaction issue… Without question, they had a leadership issue. Specifically, poor recognition of errors, a failure to acknowledge the reality of the situation and improper decision making from upper leadership during crucial moments. It wasn’t necessarily that the incentive system corrupted their employees or that the culture was flawed, so much as a failure on leadership to intervene at a moment’s notice when something clearly wasn’t going right. After recognizing that their accountants and bankers were manipulating their clients on the basis of an unrealistic expectation, no punitive or corrective actions were taken.
Any time there is an indication that a certain policy is promoting poor behavior, it needs to be tackled and corrected immediately. Rather than waiting for thousands of customer accounts to be manipulated, the massive mistake could’ve been stopped before it began to snowball. Wells Fargo made the wrong mistake when selecting leadership that did not know how to take total ownership of the situation at hand. To put it in Jim Collins’ terms, they did not “look in the mirror” for responsibility. Rather, they looked to excuses and a “few bad apples” at the tactical level of the company to blame. Should the leadership of Wells Fargo recognized and accepted the reality of the situation, they could have acted sooner and publicly announced the mistakes made to their customers. Instead of acting shocked on National television, they could have been forthright with their error and approached their customers before they realized they had several unexpected accounts opened and miscellaneous fees on their behalf. Additionally, after realizing they had put customers in the wrong, they could have acted relentlessly to reverse the damage as quickly as possible. There was no legitimate effort or course of action outlined by Wells Fargo until well after the damage had gotten out of control and congress demanded an explanation.
There are two key takeaways that any young leader can learn from this scandal:
1. When things aren’t going right on your team, look in the mirror before looking anywhere else. No matter your role in the organization, it is possible to exude true leadership by taking full ownership of not just your own work, but the output, attitude and effort of the entire team. Personal ownership is what distinguishes between average managers with leadership skills, and relentless leaders.
2. When given the responsibility of building the team, choose those who intrinsically uphold the team’s core values and commitments. With the right process for recruiting and selecting team members, you can substantially increase the chances of success. Those who build world-class teams ensure first and foremost that they’ve got the best people possible on board and gotten rid of any dead-weight (people who bring down the team). From there, the team has the foundation to work relentlessly towards the task at hand; this team will adapt to the changing demands and environment much easier.
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