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Wells Fargo and Volkswagen: The Cost of Quarterly Capitalism
Guest articles > Wells Fargo and Volkswagen: The Cost of Quarterly Capitalism
by: Lisa Earle McLeod
Here we go again. Wells Fargo was recently fined $185 million because thousands of their employees set up millions of fake accounts customers didn’t ask for.
Here’s what happened: The employees were incented to open additional accounts for existing customers. The sales goals were aggressive. Employees were evaluated, ranked and paid based on the number of accounts.
Not surprisingly, what emerged was a culture where financial goals came first and customers came second. "Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses," Richard Cordray, director of the Consumer Financial Protection Bureau, said in a statement.
Why do we continue to be surprised by these situations?
The Well Fargo scandal is no different from Volkswagen faking emissions testing, or GM’s employees not reporting ignition switch safety issues. In each these situations the employees took a management directive – make more money – and applied it to an extreme.
It’s been widely reported that Wells Fargo CEO John Stump often said, “The core of our vision and strategy is cross-selling.”
The problem is cross-selling is not a vision or a strategy; it’s a tactic to generate more fees. To be fair, in the Wells Fargo vision and values communication Mr. Stump also said, “Cross-selling is the result of serving our customers extraordinarily well, understanding their financial needs and goals over their lifetimes, and ensuring we innovate.”
I’m sure Mr. Stump meant those words. The challenge for Stump, and all leaders, is, you can say you want to add value for customers, but if all you measure and reward is internal profit, your people will respond accordingly.
When I first reported on the GM problem in August 2014, and the Volkswagen Scandal in 2015, I wrote, “A culture focused entirely on quarterly earnings will never be anything other than an every man for himself rat race.”
This is not about a few (thousand) unethical employees – the root problem of the banking industry, or the auto industry. The root cause is leaders who focus on short-term financial incentives instead of long-term customer impact.
Cross-selling is not a vision to rally a team around customers. A true vision, or noble purpose as I refer to it, is clear description about the impact you want to have on your clients. As Peter Drucker said, “Profit is not the purpose of an organization, it is the test of its validity.”
Was there a moment when Wells Fargo senior leadership said, set up phony accounts and create a widespread scheme to defraud our customers? I doubt it.
But I feel confident the 5,300 employees who were fired as the result of the scandal remember plenty of moments where their bosses pushed them to hit financial targets, and didn’t ask a single question about what was good for customers.
People often create a false dichotomy between purpose and profit. In reality, the data tells us that organizations whose purpose is to improve customers’ lives outperform the market by over 350%.
You can’t just talk about adding value for customers at the annual meeting. You have to talk about it everyday. You can’t merely write it into your values, you have to write it into performance reviews.
The internal conversation becomes the external conversation. If the internal conversation is only about targets and quotas, your people will regard customers as nothing more than objects to help them reach their financial goals.
Wells Fargo told their people what mattered. They acted accordingly.
Lisa Earle McLeod is a sales leadership consultant. Companies like Apple, Kimberly-Clark and Pfizer hire her to help them create passionate, purpose-driven sales forces. She the author of several books including Selling with Noble Purpose: How to Drive Revenue and Do Work That Makes You Proud, a Wiley publication, released Nov. 15, 2012. She has appeared on The Today Show, and has been featured in Forbes, Fortune and The Wall Street Journal. She provides executive coaching sessions, strategy workshops, and keynote speeches.
More info: www.mcleodandmore.com
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Copyright 2016 Lisa Earle McLeod. All rights
Contributor: Lisa Earle McLeod
Published here on: 16-Oct-16
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