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Taran March @ Quality Digest

Customer Care

Mr. Stumpf Goes to Washington

Wells Fargo wagon arrives on Capitol Hill, but cash boxes prove empty

Published: Monday, October 10, 2016 - 23:00

I hate banks. I’ve hated them since I was a drifty teenager who had a volatile relationship with math and trouble coming up with the required documents proving my adultness. My first checking account had less to do with the paltry sum I owned than it did with running head-on into the vast and solid dimensions of bureaucracy. But I eventually grew up and learned to deal responsibly with money. Can the same be said for banks?

I ask that after recently watching John Stumpf, CEO of Wells Fargo, explain his company’s disregard of federal regulations and decent business practices before a couple of panels on Capitol Hill. Judging from the testimony, there are so many missed opportunities for quality improvement in this spectacle, it’s hard to decide which one to mention first (and the improvement opportunities aren’t limited to the bank). Probably it’s a tossup between customer satisfaction and respect for employees, although a booby prize could go to continuous improvement run amok.

For those just tuning in, the famous bank of the West was first outed three years ago by E. Scott Reckard of the Los Angeles Times for promoting such an aggressive (some might say oppressive) sales culture that quota-desperate employees opened as many as 1.5 million checking and 565,000 credit accounts in the names of customers who may not have approved them. It was either that or lose their jobs, say many of the 5,300 employees who were subsequently fired.

But it wasn’t until last month, when the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo $185 million for these actions, that the circus really came to town.

“Was this fraud?” Rep. Sean Duffy (R-Wis.) asked Stumpf during the House panel. “Was this just a HR problem, was this theft? Did you steal? I want to know if you and I are on the same page. Did Wells Fargo employees steal from a million to two million other customers, yes or no?”

“In some cases they did,” said Stumpf.

Just so we’re on the same page. Watching the proceedings unfold, I had to marvel at Stumpf’s sang-froid. Some of his $41 million in stock awards, to say nothing of his $2.8 million base salary, were surely earned that morning. His banker’s face rarely blinked, and his answers never strayed from the surreal conviction that he, and by extension his company, were part of the solution to the overgrown problem that has flourished on his watch for years.

But if Stumpf didn’t appear to feel the heat, the Wells Fargo board evidently did. In between his trips to the Senate and House, the board announced it would be clawing back a portion of the CEO’s earnings. (So apt, that term “clawing back.” Like a croupier’s rake cutting a swathe through a compulsive gambler’s pile.) But when you’re paid millions regardless of how good a job you do, “win a few, lose a few” surely becomes irrelevant.

Many of the lawmakers, conscious that this might be their last opportunity before the election to look tough in front of cameras, showed an unseemly haste to get their sound bites out, often not waiting for a response before the next verbal spitball hit the unflinching Stumpf. In that respect they made his job easier.

So there was fine, theatrical anger, plenty of rhetorical squeeze plays, and a corporate gladiator crouched and watchful as the lions circled, but to my eye no one appeared to be frustrated up there. I was, though, watching it. I guess it doesn’t pay to scrutinize the glacial pace of justice too closely. It’s very slow in manifesting and, especially with lofty transgressions like these, usually unrecognizable when it does.

Back on the pedestrian level of the common man, litigation is piling up. There’s a class-action lawsuit on behalf of Wells Fargo customers. There’s a class-action lawsuit on behalf of employees who were fired for not committing the fraudulent transactions. There are single-plaintiff lawsuits and shareholder lawsuits. There are forged signatures and unowned credit debt. There’s the Bureau of Labor scenting blood and hastening to the fray.

There is, in short, tremendous misuse of human resources and cynical squandering of a powerful brand that had the entire Wild West mythos galloping before it (that coach and surging horses, those leather coats and gauntlets…). And all because of truly insane sales goals.

“You took 5,300 good Americans and turned them into felons,” Rep. Brad Sherman (D-Cal.) lashed out at one point during the House panel’s questioning. And while Stumpf didn’t hold a gun to the heads of the 5,300, intense pressure and visions of unemployment worked just as well. Snippets from the L.A. Times article summarize the bank’s prevailing sales culture, which torqued employees to remain somehow ethical while also meeting impossible sales goals:

“The bank expects staffers to sell at least four financial products to 80 percent of their customers, employees said. But top Wells Fargo executives exhort employees to shoot for the ‘Great 8’—an average of eight financial products per household.

“The tracking starts each morning. Managers are asked not only to meet but to exceed daily quotas passed down by regional bosses. Branch managers are expected to commit to 120% of the daily quotas, according to the former Pacific Northwest branch manager, who said results were reviewed at day’s end on a conference call with managers from across the region.

“‘If you do not make your goal, you are severely chastised and embarrassed in front of 60-plus managers in your area by the community banking president,’ the former branch manager said.”

And, in a journalistic effort to garner both sides of the story:

“I’m not aware of any overbearing sales culture,” Timothy Sloan, the bank’s CFO, responded to queries from the L.A. Times.

To meet their goals, many employees would open accounts and then close them a day or two later, so the amount of money actually charged to customers for accounts they were unaware they had was relatively small, and the bank has since reimbursed them. No, it wasn’t the amount of “product” sold to customers that increased Wells Fargo’s assets; it was the perceived value of shares in a company that, on paper at least and year after year, seemed incapable of losing money. 

I’m still not that great at math, so I’m unsure who besides the lawyers will end up turning a profit on this one. Certainly not Wells Fargo employees, who average $12 an hour when they’re not being fired. But I do know that regardless of where you stand in a corporate hierarchy, to issue a non-apology before Congress for a toxic company culture you imply has nothing to do with you is a nasty way to earn a living.

“Sales might not always lead to better service,” says Stumpf in a hypnotic promotional video on the company’s website, “but better service will always lead to more sales.”

May I quote you on that, sir?

Discuss

About The Author

Taran March @ Quality Digest’s picture

Taran March @ Quality Digest

Taran March is Quality Digest’s editorial director. A 30-year veteran of publishing, March has written and edited for newspapers, magazines, book publishers, and universities. When not plotting the course of QD with the team, she usually can be found clicking around the internet in search of news and clues to the human condition.