Tag Archives: Transformation

Why intensity and metrics matter when reshaping an organization’s culture: Lessons from Wells Fargo

tim_sloan_in_front_of_congress

Wells Fargo’s challenges over the past few years have been well documented. It took a turn for the worse when it created an aggressive sales culture based on unrealistic targets.

To meet sales targets, employees opened accounts customers did not need, ordered credit cards without their permission and even forged customer signatures on paperwork.

The result was the creation of 3.5 million fake customer accounts many of which were then billed fees. Further investigations produced evidence that 570,000 customers had been sold car insurance they didn’t need.

These were failures of culture, leadership and ultimately risk management practices, something the bank had prided itself on during the mortgage crisis of 2008.

In 2017, the Institutional Shareholder Services (ISS), an influential shareholder advisory group released the following statement:

“The board failed to implement an effective risk-management oversight process in a timely way and that could have mitigated the harm to its customers, its employees and the bank’s reputation.”

It also suggested shareholders vote against the re-election of 12 of the 15 directors.

Most of the board was replaced over the next 12 months and Tim Sloan, the new CEO was tasked with cleaning up the mess.

To his credit, he did a lot of work with his top team to reshape the vision, values, and goals around the core idea of “helping customers succeed financially”. He also began to signal a shift in leadership focus away from shareholders:

“When you put your shareholders first—I hope Warren Buffett isn’t listening by the way—but when you put them first, then you’re going to make mistakes because you’re going to make short-term decisions that aren’t focused on creating a long-term, successful company.”

Sloan began dismantling the sales incentives that created the bad behavior and stopped paying employees on how many products they sell. Instead, they shifted the metrics to how often customers used their accounts and a range of customer experience metrics.

However, as with all changes, the devil is in the detail and employees had begun raising concerns again about customer-unfriendly practices emerging. A report by the Committee for Better Banks highlighted a continued culture of fear in which front line employees were not engaged in the change process but instead had it imposed on them.

“Honestly, it’s perceived as a joke — ‘Oh yeah, they’ve changed things,’ ” said Meggan Halvorson, 35, who works in Wells Fargo’s private mortgage banking division in Minneapolis. “I haven’t met anybody, personally, who believes what they’re saying or that it’s the case.”

Unfortunately, this has all been too little too late at least for Tim Sloan who was pressured into early retirement in early 2019.

In his final statement as CEO to the House Financial Services Committee he stated:

“We have more work to do, and that is an ongoing commitment by all of Wells Fargo’s 260,000 team members — starting with me — to put our customers’ needs first, to act with honesty, integrity, and accountability; and to strive to be the best bank in America.”

Within a month he would be gone.

What are the lessons?

Intensity and Velocity Matters

Changes need to be led with intensity and purpose from the top team throughout the organization. One of the reasons Tim Sloan was pressured into early retirement was that changes were not happening fast enough. There is a level of intensity and engagement required by the CEO to shift culture, and this is particularly important when the culture has gone bad.

Personally, “seeing the front.”

This term comes from the military and is based on the idea that leaders must see what is happening at the front lines themselves before making crucial decisions. The front line must be engaged in the process, the people doing the work matter and the daily interactions customers have with those people determine how the brand is perceived over time.

If change is imposed from the top, it is naturally resisted. The result is that employee initiative gets squashed, ownership is destroyed, and people keep their heads down out of fear of losing their job. In short, you get compliance, the bare minimum out of people.

If more direct attention had been paid to the front lines at Wells Fargo it would have been clearer what needed to happen to improve the customer and employee experience. If done correctly this will result in better business performance.

Metrics can help or hurt.

How people are measured can result in behavior that improves the customer experience or works against it. Clearly, the unrealistic sales targets at Wells Fargo resulted in the wrong behavior, that does not mean sales targets are bad; they are a necessary part of driving business performance. However, the way in which they are implemented matters.

Likewise, measures of customer experiences can be used in the right way or the wrong way. If they are used to performance manage, as a “stick,” they result in fear and resentment. Ironically, this works against the very thing they were designed to do which is to improve the customer’s experience. These metrics must be designed as learning tools that help employees develop and grow. This creates an environment that unleashes most people’s natural desire to deliver great experiences for their customers.

Transforming a company’s culture begins with a genuine desire by the top leadership to make things better. However, it then must be followed with concrete action by leaders at all levels.

If you want to catalyze customer-centric change across your organization, start by measuring how customer-centric you are today with the world’s only customer-centric culture benchmark, the Market Responsiveness Index.

Is your business model under threat and your survival at stake?

Business Model Threat

In any large successful business today parts of the business are performing well while other parts are ailing. Multinationals like Ford Motor Company and Starbucks are performing well in some countries, but not in others. Samsung and Ikea have high market acceptance of some products, but not others. But, what’s important is to determine if your core business model is under threat. If it is, your very survival is at stake.

Consider what is happening to the traditional postal service corporations like the US Postal Service (USPS), Royal Mail (UK) and Australia Post. Virtually all national postal services originated from government owned and legislated monopolies when letters were the primary source of written communication. These organizations created thousands of bricks and mortar post offices and shops, a large transport infrastructure to deliver letters using thousands of postal staff. The digital revolution has changed all that – letter volumes are declining rapidly, with consequent ongoing and growing losses for incumbent mail services. The business models of traditional postal corporations are under attack from all sides.

Take Australia Post. Like many postal corporations it has developed a growing profitable parcel delivery service fuelled by online consumer purchasing. It is providing new services like its digital mailbox for business and consumers. But profits from these new lines of business are being eroded by losses in the traditional letter delivery business and from competition. Both Singapore Post and Japan Post have purchased courier companies to compete in the Australian parcels delivery market. Also Uber Rush is allowing people to order pickup and delivery of packages using the Uber app. Last year Volvo trialed a service called Roam Delivery that allows retailers to drop off merchandise inside your parked car. All of this adds up to intense competition for Australia Post. Much the same is happening to US Post and Royal Mail as well as other incumbent mail and postal services around the world.

How can organizations like Australia Post survive? They must develop and strengthen a customer-centric culture as the foundation of their organization and as a basis for long-term competitive advantage. This means that they must have strategic alignment with their markets and customers where an understanding of current and future customer needs and current and potential future competitors is factored into their strategies and supported by everyone in the business. This knowledge and mindset must become embedded in all of their businesses and throughout all functions in their organization to enable them to become more agile, competitive and innovative to create superior value for their customers. That in turn will help to drive ongoing growth and profitability.

The postal organizations around the world seem to be at different stages on the journey to customer centricity. New Zealand Post is probably one of the most competitive being one of the earliest to have its mail service deregulated in 1998. It is now two years into a 5-year transformation plan and is showing improvements in overall profitability. USPS lost US$5.5 billion in 2014 despite its growth in package services and has a lot of ground to make up. Australia post is profitable, but profits are declining from the impact of mail service losses and there is now a strong focus on developing a customer culture.

Is your business model under threat? You can measure where you are in terms of customer centricity and what stage of the journey you have reached by exploring the roadmap provided in the award winning book: The Customer Culture Imperative: A Leader’s Guide to Driving Superior performance.