Another giant has fallen. Last week, Wells Fargo CEO John Stumpf stepped down amidst public scrutiny and rapidly eroding consumer and regulatory trust. As if the senate hearings and headlines aren’t enough, clear evidence is the company’s declining stock price—off by more than 10 percent since early September.
Ironic isn’t it? How could Wells Fargo, one of the country’s largest financial institutions (by market cap) backed by Warren Buffet, survive the financial crisis relatively unscathed only to poorly handle an issue that it had ample time to prepare for?
After all, The Los Angeles Times questioned the sales practices of Wells Fargo back in 2013. Most would consider that a huge alarm, if not a warning. Then, according to the Wall Street Journal, there’s the $50 million investment spent on monitoring those same banking and cross-selling activities which concluded this was ultimately a “performance issue” of a few rogue 5,000 plus employees.
Where did Wells Fargo go wrong in managing reputation risk? Okay, aside from dismissing warning signals, the disturbing Senate Banking Committee Hearings, blaming the more than 5,000 employees who had been terminated, and failure to be transparent.
So what can we learn from Wells Fargo’s mistakes?
- Disrupt the silos. All large organizations have them. Unfortunately, silos contribute to myopic views of the organization, limited lines of site into the interconnectedness of business operations and a failure to adequately assess reputation risk. Consider building cross-functional, reputational oversight at the senior most level of your organization with clear metrics and accountability for each stakeholder group.
- Build a “conscience culture.” At Wells Fargo, this behavior was culturally embedded. Employees desperate to meet their quotas knowingly acted unethically and committed fraud. What is permissible in your company’s culture? As part of a reputation risk assessment, consider surveying a cross section of your employees to see how well they believe your company performs against key reputation indicators like integrity, favorable work environment and trust in leadership. Compare that data against the same survey of senior leadership. The discrepancies will help you identify where you may be vulnerable.
- Assign accountability. Shared accountability equals no accountability. And, if there’s no accountability, how do you demonstrate the behaviors necessary to engender trust? Take Stumpf, for example. No apology. Evasive. Lack of transparency. He and his leadership never “owned” this issue. Had Wells Fargo identified this reputation risk three years ago, assessed the extent, put mitigation strategies in place and monitored it, they would be enjoying a very different narrative. Instead, grim headlines are plaguing the financial institution.
Handled properly they could have mitigated this crisis. Wells Fargo had the time and opportunity to probe into this issue and bring together cross functional areas to assess and develop enterprise-wide solutions. They could have elected to self-report, been transparent in outlining their findings and shared new policies/protocols to prevent future incidents. Instead, Wells Fargo is the latest example of how turning a blind eye to risky business practices with implications for reputation damage can have catastrophic impact on an organization.
And, unfortunately, there’s little evidence to suggest Wells Fargo leadership is prepared to take ownership of its missteps nor to begin the hard work necessary to repair the reputational damage and regain the confidences of its many stakeholders. This includes employees, customers, regulators, shareholders, etc. Hopefully, the new CEO has rebuilding trust on the top of his priority list.
Want to learn more about identifying reputation risks before a crisis hits? Download my white paper, Viewing Risk through the Reputation Lens, here.
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