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Press Release



Something In The Water?

Wells Fargo Scandal Highlights Disconnect Between Main Street And Wall Street


When news broke of a fraudulent account opening scandal at the $1.8 trillion Wells Fargo, community bankers’ jaws dropped open, and many took to Twitter to proclaim #WeAreNotWells.

A clear narrative emerged in the ensuing coverage of the scandal: the bank’s culture – in particular, a high-pressure sales environment – incented employees to open fraudulent accounts in order to meet sales goals and simply keep their jobs. If Wells Fargo had thousands of its own employees engaging in sketchy and illegal behavior, that suggests something bigger than just a few bad apples spoiling the bunch, right? Community bankers certainly think so.

“My first response was, it’s a byproduct of quotas,” said Julienn M. Thurlow, president and CEO of Reading Cooperative Bank. “We see it when we bring people in and interview them. Generally when they come from larger institutions, they’ve been given quotas … rather than thinking about the whole customer and what’s suitable for their needs.”

Sally Eastman, senior vice president of customer engagement and sales at Middlesex Savings Bank, had a similar reaction. “Of course that was criminal activity, but I think we were also sad for our colleagues in banking that they work for a culture where that kind of behavior is not checked, that the pressure is strong that people would actually put themselves in danger as well as their customers in order to be successful. It is a little shocking in that regard,” she said.

Executives at both Reading Cooperative and Middlesex Savings Bank told Banker & Tradesman that new hires joining the bank from big banks are often relieved to find they don’t have to meet strict sales quotas.

“At first they’re waiting for the other shoe to drop when they find out we don’t have the weekly sales calls and the hammering of sales goals,” Eastman said. “As time goes on, we hear from them how much they appreciate that the main focus of their job is to help the customer and whatever recommendations they make to the customer are based on the needs of the customer.” Thurlow said her goal is to build a lifelong relationship with customers beginning with their very first savings account, and she was blunt in her assessment: “You don’t screw the customer if you want to have a continuing relationship.”

It Starts At The Top

The Wells Fargo episode shouldn’t be a reason to write off cross-selling altogether said Frank Cespedes, a professor in Harvard Business School’s entrepreneurial management unit. Cross-selling is a perfectly legitimate business objective, and compensation and incentives are a perfectly legitimate tool to help achieve those objectives.

“Compensation and incentives clearly influence behavior but they’re one influence among many,” he told Banker & Tradesman. “What are the other things that influence behavior for sales? What are the relevant metrics that are not discussed? What is the behavior and norms that I see going on around me? What does my boss pay attention to, and what does my boss not pay attention to?”

Moreover, Cespedes points out that given Wells Fargo’s size, the number of employees estimated by the CFPB to have partaken in those nefarious activities matches up pretty closely with other reports of employee malfeasance at other institutions. He cited a report from Oversight Systems that found just 5 percent of employees were responsible for 82 percent of fraudulent activity at an organization. The 5,300 employees Wells let go over the scandal represent far less than 5 percent of its more than 200,000 employees in total, he noted.

Cespedes said that “the real rot” in the Wells Fargo incident comes down to two areas: a lack of clear values from the top and a lack of control systems that failed to catch or punish this behavior for years.

“You begin with clear values, with controls, with modeling behavior. And the first time this happens, somebody’s fired and now everybody knows what happened,” he said. “Apparently that clearly didn’t happen early enough and often enough.” Incidentally, this is where community banks shine.

“It has to come from the top. It has to be modeled through your behavior, through your dealings with your customers, through your honesty,” Thurlow said. “None of those people at Wells had ever had an opportunity to meet their CEO in person. We do that every quarter. We talk about who we are, where we’re going and everybody understands they’re on a team together.”

Modeling and incentivizing that good behavior can also include paid time for community service and rewarding employees for things like volunteerism and years of service – not just for meeting sales goals. If you’re ladling out soup to the homeless alongside your CFO, community bankers say, that sends a clear message about what kind of behavior is rewarded and what isn’t.

“Our CEO is so clear and direct in his communications and so transparent about things,” Eastman said. “He told us the story about Wells when it first came out and he underscored the fact that this isn’t our culture and this isn’t going to happen here, but customers may have concerns and questions. It was just like a friend talking to you.”

This article was originally posted on Banker & Tradesman.


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