The news is out regarding Wells Fargo’s recent fraud allegations, and the bank now faces $185 million in fines for opening unauthorized accounts – the largest penalty ever imposed by the Consumer Financial Protection Bureau (CFPB).
According to the CFPB, Wells Fargo employees opened more than 2 million deposit and credit card accounts and transferred funds without consent from customers. Wells Fargo plans to refund $5 million to customers who incurred fees from these unauthorized accounts. At an average of $25 per refund, this incident has affected at least 200,000 Wells Fargo customers.
In addition to the refunds and penalties, Wells Fargo will also suffer a serious blow to its brand reputation, which is “built on trust,” according to CEO John G. Stumpf’s corporate value statement. Following what CFPB Director Richard Cordray calls “outrageous conduct” and “a violation of trust,” Wells Fargo’s hard-won reputation as a “Main Street lender” is under severe scrutiny.
So far, 5,300 employees have been fired in connection with this incident, and Wells Fargo is now in full damage-control mode, working to “make it right,” as Stumpf said in a letter to customers earlier in September.
But the question remains: How did Wells Fargo end up with 5,300 employees who were willing to commit fraud?
The CFPB blames Wells Fargo’s incentive-compensation program for making these illegal practices possible. But that can’t be the root of the problem, because simply having the option to commit fraud does not make people commit fraud. (And plenty of people have committed fraud outside the context of a sales incentive program.)
No company should have to ask, “If I put an incentive program in place, will my people abuse it?” If that’s a real concern, then you have a culture and leadership problem, not an incentive problem.
Fifty-three hundred people is not a few rogue employees; it’s the population of a small town. It’s the undergraduate class at a mid-sized university. That number signals something larger than an isolated event. CEO Stumpf claims that the misconduct of the minority does not reflect the overall culture of Wells Fargo, but as Forbes points out, “Leaders at Wells Fargo seemed to actively create a set of norms … that not only accepted the unethical behavior, but may have even found ways to coach and reinforce it.”
Every person has boundaries around what they consider ethical behavior – in fact, you can assess someone’s moral compass and predict patterns of theft, drug use, absenteeism, etc., before even hiring them. But for most people, there’s a big difference between “working a system” and committing fraud.
Company leaders and hiring managers need to know where people draw that line so they can manage (or avoid) the type of behavior that leads to unethical or illegal activity. They also need to set clear and positive examples for the rest of workforce. If 5,300 people feel comfortable stepping outside the bounds of ethical behavior, then something is wrong.
Not only does Wells Fargo have to make things right with customers, but it also has to begin the work of resetting its company culture. To replace the 5,300 employees who were fired over this incident, the company will likely be making some new hires. While Wells Fargo is a massive company, 5,300 represents 2 percent of their workforce – and that’s a great place to start.
The 2 percent who participated in the scam had the power to disrupt the entire company and its customers. In the same way, a new 2 percent – if they’re the right employees – can help restore the company’s culture and brand.
Through a hiring process that assesses candidates for job fit, culture fit, and integrity, Wells Fargo can be sure that all new hires are truly aligned with the company’s vision and values. Then, leadership can work to foster a culture of change with a renewed focus on trust and transparency. Only then can positive changes begin to heal the blight of scandal.
Greg Moran is the president and CEO of OutMatch.