Question

In Jim Collins book, “Good to Great”, it talked about Wells Fargo being one of the companies he and his research team identified as “Great.” They outpaced their rivals in the financial industry and were held up in 2001 as a “great company.” By 2017, the mighty had fallen, mired in a nationwide scandal that brought them before Congress and, now, in 2018, they have done it again. Wells Fargo is on the brink of becoming a casualty of their own making. In less than 20 years they have gone from great to near federal shutdown. What signs did they miss? What changed in their culture? How might they recover? Is it even possible? What would they need to do? Or, what is the cautionary tale their destruction leaves for others to avoid the same fate.

Answer 1

Hi,

What signs did Wells fargo missed? and what changed in their culture?

1. Lack of accountability:

   According to Wells Fargo’s vision and values, one of its five primary values is ethics. Apparently, though, it’s not a value that is respected. A recent report documents that there are a handful of employees who did flag improper sales tactics, but they ultimately ended up being fired

   The bank, however, punished the employees who did the right thing and reported wrongdoing in the company.

2. Lack of Vision : Wells Fargo’s leadership could have nurtured an environment where innovation and new ideas are appreciated, and where they created the foundation for new products and services. Instead, Wells Fargo’s leadership focused on cross-selling and drove thousands of employees to engage in “inappropriate sales conduct” with their customers
3. Lack of awareness: Wells Fargo focussed only on short terms gains, cross selling just to report to its customers that it was running profitable due to its cross selling strategies.
4. Of course the Account fraud scandal - creation of millions of fraudulent savings and checking accounts on behalf of Wells Fargo clients without their consent.It did not learn until early 2014 of the bad sales practices.Those practices then became a regular “risk” item on the board agenda. But even then the board failed to push for a stronger centralized Risk Management function; failed to insist on detailed plans
5. Poor Management:  Wells Fargo had a decentralized theory of management which meant that core corporate mission and values were the responsibility of business unit leaders and not driven by the CEO and the top of the company.

In short - Wells Fargo failed to have a strong uniform, company-wide culture that put as much emphasis in reality on high integrity and sound risk management as it did on high performance

What needs to be done in future to avoid these?

Consumers must be able to trust their banks, and a healthy economy must be built upon a strong foundation of banking. In order to maintain this, there should be a system in place to monitor and penalize misconduct against customers being violated and taken advantage of by their banks.

• Wells Fargo should consider setting up an ethics hotline.
• Implement various training on ethics.
• Provide more transparency to its customers.
• Brief customers frequently about their long term goals (and to stop looking only for short term profits)
• Introduce new systems\mechanism to capture the risks and report it to all stakeholders.
• Review internal policies set and change them accordingly for the benefit of employess.

Hope this helps.

Bala