Wells Fargo
Misread its Own Culture
Corporate leaders are
responsible for both the company culture the firm proclaims and that which
really exists.
There
cannot be anyone remotely interested in business and management who has not
heard of the troubles at Wells Fargo. This is the world’s largest retail bank –
a bank for “main” street and a darling of the banking sector – which, having
emerged more or less unscathed from the 2008 financial disaster, watched on as
“Wall street” banks crumbled.
Last
year (2015), the bank’s leader (John Stumpf) was named “CEO of the year” by
Morningstar. This year(2016) he has been forced to resign amid widespread
headline stories and revelations that false bank and credit card accounts were
being created by employees in the name of retail clients without their
knowledge.
This
would not make the news if it were just a matter of a few individuals, but in
this case it was done some two million times, by over 5000 employees over a
period of several years. Wells Fargo leaders argued that this represented a
very small proportion (around two percent) of their workforce and had a minor
impact on revenues. It was, they said, a bad-apple problem, not a cultural
issue, impacting employees “at the lower end of the performance scale”. The
discovery does however, have an impact on the fundamental thing that banks
offer, trust. And it is being taken seriously by regulators and the media.
While
Wells Fargo insists its
employees’ actions did not reflect the “Wells Fargo culture” - a claim the
Senate committee clearly wasn’t buying - the practice was spread widely enough,
and continued for long enough, to be considered a “cultural” problem.
The
scandal presents a good opportunity to think about corporate culture and the
role of leadership. I believe Wells Fargo’s reaction to date points to
some misplaced ideas about what organisational culture is and who is
responsible for it.
Espousing
a value doesn’t make it a culture
First
up, it is important to remember that business leaders don’t oversee just the
culture they wish they had; they are responsible for the culture that actually
exists within their organisation, whether good, bad, or ugly.
We
are familiar with open displays of corporate values - on websites, investor
relations documents, coffee cups etc. There is no harm and even some
potential good in leaders espousing
their values, making it clear what sort of behaviour they
are trying to encourage and, hopefully, demonstrating how this is relevant for
the organisation’s strategy. But these “wish lists” are harmful if they allow
complacency and the mistaken belief that they are accurate labels for how
things really work within the organisation.
By
effectively saying “but this behaviour is not the Wells Fargo culture,” what
the besieged executives are really saying is, “this is not the culture we want
to have”, which is not the same thing as the culture that actually exists, and
for which the firm’s leaders are, in fact, responsible. It’s a little like the
clichéd family joke, where a parent claims ownership of little Taylor only when
s/he is a well-behaved kid (and pushes it to the other parent when s/he is
not). This is light family humour, as no one really believes responsibility can
be transferred. It’s the same in companies, whether good or bad, it’s all
yours.
Employees
are all part of the corporate “family”
It
is also “all yours” up and down the performance curve. We don’t lead and manage
only the top performers. Wells Fargo seemed to suggest that it was only the
people who struggled with performance that were doing these things. But I assume
these individuals all had Wells Fargo contracts and were bona fide members of
the company at the time these problems occurred. Again, this is a little like
the “black sheep”, or struggling adolescent, in a family being renounced
because they don’t “do” the family’s values. Corporations, unlike families can,
of course, sanction and release those who struggle with performance, but while
employees are under the corporate roof they are part of the organisation and
its culture.
Cultures
can change
One
misunderstanding about organisational culture is that “it’s impossible to
change!” A firm’s culture is not monolithic, in the sense of being the same
everywhere, as noted above, or in the sense of being stable. Cultures do
change, even if it’s slow and imperceptible change, as people experiment with
new actions and meanings. Moreover, cultures can certainly drift away from
intended meanings and values. Coping with and maintaining organisational
culture is not something that happens in cycles (like products). It’s something
you should do all the time.
The
links between structures and culture
Reports
are suggesting that Wells Fargo’s dodgy “sales” practices stemmed largely from
the steep sales targets and job security implications for underperformance.
Employees
live in a context where “concrete” tools such as sales targets carry meaning.
They can be interpreted in different, sometimes undesirable, ways, which
becomes a motivating factor if they see enough colleagues adopting similar,
sometimes inadmissible, practices, (in the case of Wells Fargo this was in the
thousands). The lesson here is that leaders need to be part ethnographers, in
that they need to know something about how management structures unfold into
meanings and associations.
The
challenge to inward thinking
Too
many senior business leaders understand well the cultures that they want and
should have, but are less clued in about the cultures that really exist within
their firm. Time needs to be spent analysing how things really work
around their organisation. The challenge here may stem from the enormous
external pressure and scrutiny that business leaders face (from investors,
analysts, regulators, customers and media) drawing their attention outside the
organisation and away from the workings of the firm.
There
is a strange irony in that, while corporations today probably need employees to
spend more time looking outward, we need our business leaders to gain a better
view of what is happening on the inside.
Charles Galunic is
a professor of Organizational Behaviour and The Aviva Chaired Professor
of Leadership and Responsibility at INSEAD.
Read more at http://knowledge.insead.edu/blog/insead-blog/wells-fargo-misread-its-own-culture-5012?utm_source=INSEAD+Knowledge&utm_campaign=a7be941e10-EMAIL_CAMPAIGN_2016_11_03&utm_medium=email&utm_term=0_e079141ebb-a7be941e10-249840429#5ukbG4vdfeZGt7Ur.99
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