Wells: Two Days of Full-Page Ads on Their Changes: What They Got Right and What They Missed

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:
Key Takeaways
Linked month (LM) and year-over-year (YoY) trends were impacted by February 2017 having fewer days than both January 2017 and February 2016
Customer Interactions

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.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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