Composure | Lessons from the Greatest Banking Scandal in History – Why Some Cultures Are Doomed to Crumble
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Lessons from the Greatest Banking Scandal in History – Why Some Cultures Are Doomed to Crumble

The Wells Fargo Fiasco

I am a big fan of podcasts. I find them to be a wonderful way to get the mind working, explore the world, and learn new things. One of my favourites, is a brilliant NPR podcast called Planet Money, which explores fascinating economic topics from around the world in engaging 20 minute weekly episodes.

Recently, Planet Money did a two part series on Wells Fargo, the third largest bank in the US. The investigative podcast revealed some extraordinary insights into a toxic culture that prioritised profits over integrity, customers, and their own people. Specifically, Wells Fargo opened as many as two million fraudulent accounts without customers’ permission and was slapped with a $185million fine; the biggest fine in banking history.

Perception vs Reality

In 2007, it was the beginning of the financial crisis, and other banks were starting to panic. Wells Fargo on the other hand, was still growing and profitable.

Wells Fargo positioned itself as the “folksy bank”; the everyday friendly bank with a grand history dating to the 1800s, even placing giant antique stagecoaches in the lobby of its banks. The idea was to leverage this longstanding reputation as a friendly and safe place, to sign up as many customers as possible, and get those customers to buy as many different products as possible, while banks around them felt the crunch.

Wells Fargo went hard. They recruited a large sales force of young and impressionable employees. Many had no experience in the banking world and had never completed any degrees. They then developed and promoted a culture of up-selling in the extreme.

The CEO, John Stumpf, had a slogan: “eight is great”. Every customer should have eight Wells Fargo accounts – checking, savings, credit cards and other products.

The Success

The hyper-commercial upsell culture Wells Fargo had developed was working. The bank was a huge financial success. In 2009, many banks were still struggling from the financial crisis, and Wells Fargo announced record earnings. A profile in Fortune magazine called Wells Fargo a “rare upbeat tale amid the banking wreckage”.

The Byproduct

To meet the very real targets of eight new accounts, eight new products, every single day, managers pushed employees to make over a hundred calls a day. “Dial, dial, dial” was the mantra. In January, they raised the goal to 20 and called it “jump into January”. Employees were expected to call everyone they knew and beg them to open an account.

Predictably, Wells Fargo burned through young workers at a hyperbolic rate:

“They would get hired, sell Wells Fargo products to just about everybody that they knew and they could call on the phone, and then they’d get pushed out when they didn’t have anybody else to sell to.”

When employees were pushed out, their “failure to perform” was marked on their permanent record, and with it, all opportunities to work in the banking industry disappeared forever.

The Crash

Employees’ goals were impossible to sustain. The pressure was overwhelming. Predictably, people did what they always do when a system demands the impossible; they found ways around it.

Employees figured out ways to make new accounts appear out of thin air. Employees would slip extra accounts into the paperwork without customers ever noticing. A customer with an investment account of $10,000 would come in, and a bank employee would split it up into 10 different accounts of $1,000. One account becomes 10 accounts and the employee would magically meet their daily goal.

Complaints started coming in, and even a few lawsuits were filed, as customers started noticing the extra accounts. Nonetheless, for over 5 years customers were told it was a simple mistake, and the accounts were closed.

The scam started to unravel in 2013 when the LA Times published a story about some of the intense sales pressure that employees were feeling at Wells Fargo. Regulators started to investigate and eventually, as mentioned above, Wells Fargo was hit with the biggest penalty ever issued against a financial institution in the United States.

It is estimated there may have been more than 2 million unwanted accounts opened and over 5,000 Wells Fargo employees were fired due to not meeting performance demands. The scandal was so widely publicised, and the bank’s reputation so severely damaged, that when you Google “Wells Fargo”, most of the results on the first page are articles focussed on its toxic culture. This type of irreparable damage caused share prices to plummet to a 31 month low (though they have since recovered).

Designing Balance

The Wells Fargo fiasco is a fascinating study in imbalance. When an organisation builds a narrow culture, driven to excel in one area at the expense of all others, success will inevitably be short lived.

A narrow culture – like a house of cards – can reach spectacular heights and deliver impressive results, yet remain highly vulnerable right up until it inevitably crumbles. In Wells Fargo’s instance, commercial success at the expense of integrity and its own people, meant it outperformed its competitors for a period, only to suffer irreparable damage in the long term.

Balance comes from effective and purposeful culture design. This process must be strategic and well-thought-out enough to consider the intended and unintended consequences of the culture being created.

The Value of Objectivity

When the CEO of Wells Fargo, John Stumpf, was called to Capitol Hill to testify, he told the senators that the bank’s upper management wasn’t responsible for the giant scam. He said it was just a bunch of bad apples, mostly low-level employees. Senator Elizabeth Warren called out his claptrap for what it was: “gutless leadership”.

It is a CEO’s job to know precisely what messages people in their organisation are receiving, and what behaviours these messages are driving. In other words, they need to know the culture they are “leading”. Especially when its toxicity is present on a mass scale as it was at Wells Fargo. When we work with organisations and leadership teams to design purposeful and balanced cultures that serve strategic goals, we often stress-test both the existing and the aspirational culture: In order to truly understand the existing culture, an objective measure (by way of both quantitative and qualitative assessment) is necessary. If the thought of undertaking this objective measure scares the leadership, and/or the results of the assessment surprise the leadership, this can only mean that theirs is a house of cards waiting to crumble.

When determining what their organisation’s aspirational culture ought to be, leaders must consider what competing messages and priorities are likely to be levelled at employees both consciously and subconsciously. When pushed to choose, which values take priority and what behaviours do these elicit? Do these behaviours drive short-term gains at the expense of long-term viability? An informed and insightful examination of the existing culture, coupled with a strategic and balanced approach to developing the aspirational culture, are a leadership team’s recipe for avoiding the crumble of imbalance.


Alon Cassuto is a Senior Consultant at Composure, a leading firm specialising in strategy, culture and leadership.

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