Wells Fargo’s new CEO must fix the problem, fix perceptions and point the way forward to a brighter future in that order as part of his executive onboarding. Unfortunately this will be extremely hard as Timothy Sloan is a 29-year Wells Fargo insider with a board focused on fixing perceptions. Success will require Sloan to fix the board as part of fixing the problem.
The basics of executive onboarding always apply. Sloan, like every executive moving into a new role, needs to 1) get a head start, 2) manage the message and 3) build the team. In this case, Sloan has already had his head start – over the 29 years he’s worked at Wells Fargo and through his seat on the stage of the developing scandal. Managing the message will require real actions to fix the problem first, likely starting with tearing down and then rebuilding the team.
Fix The Problem
The problem is cultural. A strong corporate culture is the only truly sustainable competitive advantage. In this case, Wells Fargo’s culture is the anchor keeping it from moving forward. And, as Dan Freed wrote for Reuters, Wells Fargo’s cultural issues go from top to bottom to create “pressure-cooker sales culture inside the bank where managers had browbeat staff into hitting aggressive daily sales quotas, which in turn led some workers to create unauthorized accounts.”
Of course the people that actually took advantage of customers should have been fired, as should their managers and their managers in turn all the way up to responsible board members. The culture inspired and enabled the wrongdoing. The culture and the board supported the incremental response.
These bad practices have been going on for over a decade. And for at least five years well-meaning Wells Fargo employees have been raising their hands to get people to look into the issues. But “the bank retaliated against employees who called the ethics line.”
As things have gone from bad to worse over the past month, senior leadership and the board has taken an incremental response. A couple of highlights from the timeline:
September 8, 2016: Consumer Finance Protection Bureau and others fine the bank $185 million for opening fraudulent accounts. The bank terminates 5,300 employees.
September 20, 2016: Senator Elizabeth Warren says CEO Stumpf should resign and face criminal charges. The bank’s independent directors claw back $41 million of Stumpf’s compensation and launch an investigation. Wells Fargo community banking division head Carrie Tolstedt’s “early retirement” announced.
September 30, 2016 Saturday Night Live lampoon’s the Wells Fargo Wagon on its show. Stumpf is out within days.
Sloan needs to stop this slow motion wagon wreck and make top to bottom changes in every aspect of the organization’s culture from its environment to values, attitudes, relationships and values. And this needs to include changes at the board level. Board members need either to back Sloan and let him lead or to accept that they are part of the problem and go away.
Sloan’s challenges are exacerbated by the need for a long-term solution and crisis management at the same time. He must start fixing the culture as the basis for longer-term success. But if he doesn’t fix perceptions quickly, there may not be a long-term to worry about.
Sloan needs take control of Wells Fargo’s crisis management response, laying out specific situational objectives and intentions, developing and managing a prioritized action plan with frequent updates (at least daily) and clarifying their crisis management communication plan with a single, primary spokesperson, message and core communication points.
Point The Way Forward
The Stockdale Paradox applies. Sloan needs to face the hard facts head on, deal with them as noted while, at the same time, communicating an optimistic future to his team. He must own the future culture starting now and communicate a new, inspiring vision and values in everything he says and does everyday.