Reading through the full-page ad Wells Fargo has run in the Wall Street Journal, New York Times, and USA Today. for two days in a row. They have done some good things:
1. Fired some executives who were linked to inappropriate sales practices.
2. The Board “cancelled [Wells prefers the British spelling] all 2016 cash bonuses for 8 senior leaders (including the new CEO) who were serving on the Operating Committee.
3. Separated out the roles of CEO and Chairman of the Board.
4. Refunded $3.2 million to 130,000 customers.
5. Eliminated product sales goals.
6. Changed pay mechanisms for retail bankers.
7. Increased pay for entry-level employees.
8. Created a new Office of Ethics, Oversight, and Integrity.
9. Added protection for those who come forward with issues.
10. Increased training for managers on how to respond to employee concerns and issues.
Good start, but here are some gaps.
1. The changes are all dashboard — you can list them and they make for a nice list. However, the question is whether the culture has changed. The Barometer took a look at the latest report
Wells released on how it was doing:
“Today’s update on Retail Banking trends is part of our ongoing commitment to transparency. In February, we were pleased to see that in general our existing customers continued to actively use their accounts and valued their relationships with Wells Fargo. We remain focused on meeting our customers’ financial needs by providing great service and quality products, and we’re pleased that our customer experience survey scores increased for the fourth consecutive month. We will provide our next update on customer activity trends in April.”
And it is all numbers:
Linked month (LM) and year-over-year (YoY) trends were impacted by February 2017 having fewer days than both January 2017 and February 2016
Total branch interactions down 1% LM, and down 11% YoY
Deposit Balances and Accounts
Average consumer and small business deposit balances down modestly LM, but up 6% YoY
Consumer checking account opens down 3% LM, and down 0.3 million, or 43%, YoY
Customer-initiated consumer checking account closures down 10% LM and 11% YoY
Primary consumer checking customers of 23.5 million, up modestly LM, and up 1.9% YoY
Debit and Credit Cards
Point-of-sale debit card transactions down 2% LM, but up modestly YoY
Consumer credit card purchase volume down 7% LM, but up 3% YoY
Consumer credit card balances outstanding down 2% LM, but up 8% YoY
New consumer credit card applications down 4% LM, and down 0.2 million, or 55%, YoY
Point-of-sale active consumer credit card accounts of 7.5 million, down 2% LM, but up 4% YoY
Not one word about employees, meetings, changes, progress. Put the lists in place, check the box, and move along with the same measurements. Not a word about ethics. But, they are excited about customer loyalty.
This is not the stuff of cultural change. If you talk about numbers, measure numbers, and release numbers, you will get really good numbers. The problem is, and here’s the lesson Wells has missed despite all that has happened: The numbers may not be real.
2. Notice the hedging language — the cash bonuses were “cancelled.” That does not read “all bonuses.” The Barometer knows that cash bonuses are generally a small part of executive bonus programs. In fact, Wells’ 2016 proxy shows that stock compensation is 3-4 times what cash incentives are. The cash incentives are the smallest part of the compensation of the top five executives. You can’t change hearts and minds with token sacrifice at the top.
3. There is no indication of what metrics will be used to measure performance of retail bankers — if not product sales goals — what?
In short, despite the ads, Wells has the hard part ahead: new goals, new measurements, alignment of incentive plans with the plans for a changed culture. That they missed these issues tells me they are not there yet. AS a Wells customer, the Barometer hopes they get there, but they are not there yet. Today, the WSJ reports that an internal investigation found that employees were falsifying small-business customers’ sales. They upped them to get their commissions. Looks like retail bankers aren’t the only ones with issues. Numbers goals, numbers achieved.
Ironic aside — had a call some years ago from a Wells executive who was interested in perhaps having me come to do some training for managers. Gave Wells a proposal. Got a smart-alecky reply that the manager was not going to pay that much for an ethics presentation. The amount was about one-half of what most folks charge and about .0005 the amount of what Wells has paid out to customers. Penny-wise, pound-foolish. Prevention is always cheaper than the clean-up.