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Wells Fargo's high-pressure sales culture starts at the top

After reports of fraud, identity theft and forgery, Wells Fargo has promised to clean up its act. But based on recent statements by the CEO, the bank’s troubles are just beginning.

Over the span of five years, Wells Fargo fired 5,300 employees for opening as many as 2 million fake accounts. Roughly 85,000 of those accounts incurred $2 million in fees.

In many cases, customers were unaware of the accounts and the accompanying fees. Those accounts became delinquent, and customers were forced to fight with debt collectors over the fraudulent charges. Their credit reports were damaged, which affects everything from job applications to mortgages.

Wells Fargo’s bad apples

Wells Fargo describes the problem as the actions of just a few low level employees– not a systemic issue, and not something that represents company culture. The CFO, John Shrewsberry, explained,

These bad practices were not a revenue-generating activity. It was really more at the lower end of the performance scale, where people apparently were making bad choices to hang on to their job.

The CEO, John Stumpf, agreed, telling The Wall Street Journal, “The 1% that did it wrong, who we fired, terminated, in no way reflects our culture,” and that “[t]here was no incentive to do bad things.”

So why did 5,000 people do bad things with “no incentive”?

Eight rhymes with great

According to a complaint filed last year, employees were often required to work unpaid overtime to meet unreachable goals:

Wells Fargo has strict quotas regulating the number of daily “solutions” that its bankers must reach; these “solutions” include the opening of all new banking and credit card accounts. Managers constantly hound, berate, demean and threaten employees to meet these unreachable quotas.

Bankers weren’t expected to just open one account for a customer. They had to open multiple accounts, known as cross-selling. If a customer has a checking account, a banker would be expected to sell them a mortgage, sell them wealth-management products, or credit card accounts. Management set a goal of eight products per customer. Every single person who walked into a Wells Fargo branch needed to have eight accounts.

Why eight? Stumpf addressed this question in the company’s 2010 annual report:

I’m often asked why we set a cross-sell goal of eight. The answer is, it rhymed with “great.” Perhaps our new cheer should be: “Let’s go again, for ten!”

That’s a goal not based on branch traffic or an analysis of customer demand, but based on wordplay.

A rock and a hard place

Over the past five years, there were numerous signs that Wells Fargo’s strict sales quotas created problems, from customer complaints to labor lawsuits. These suits alleged the company forced employees to work beyond their typical schedule without pay– in some cases to meet sales goals. Top reviews on Glassdoor.com warned of the perverse incentives, while dozens of Youtube videos spoofed the bank’s aggressive sales environment.

One employee, Bill Bado, decided to alert the company’s ethics department of the problems in 2013. Shortly after, he was fired, according to a report by CNN Money.

CEO John Stumpf recently admitted to being aware of the problems in 2013, when the LA Times published a scathing piece, which described a micro-managed, high-pressure sales culture:

One former branch manager… discover[ed] that employees had talked a homeless woman into opening six checking and savings accounts with fees totaling $39 a month.

“I’m not aware of any overbearing sales culture,” Chief Financial Officer Timothy Sloan said in an interview.

Despite the denials, Wells Fargo held multi-day ethics seminars in 2014 to try to stop employees from making fake accounts. But, according to The Wall Street Journal, the message didn’t quite get through to one manager, who after the meeting “urged her employees to ignore the bosses and get sales up at any cost.”

The practices continued because the impossible quotas weren’t changed.

Denial at the top

Wells Fargo did announce that it plans to eliminate the aggressive sales goals by next year. But as far as recognizing the pressures placed on employees, that fell short.

When Oregon Senator Jeff Merkley asked if Wells Fargo created a pressure-cooker sales culture that put bankers in an difficult situation, CEO John Stumpf responded, “I do not believe that.”

While Stumpf has repeatedly said that he holds himself accountable, he continues to deny that he instilled a high-pressure environment that fostered the problems.

Change needs to be driven by recognition and true accountability at the top. Until that happens, it’s going to be business as usual.