The Wells Fargo Scandal was Inevitable (If not there, elsewhere.)
As Wells Fargo begins to pick up the pieces after the news broke that about 5,300 employees and managers at 6,000 retail branches were involved in opening up about 2 million fraudulent accounts under the names of current investors, Wall Street is reeling from the blow. Many are asking how a scandal of such proportions could happen at one of the big four banks, especially given the federal oversight that was put in place following the financial crisis of 2008.
Everyone is rushing to pin the blame on someone else. Lawmakers and politicians on Capital Hill are rushing to blame Wells Fargo executives; executives are rushing to blame employees; and employees are rushing to blame managers who pushed aggressive sales targets.
Is corporate culture to blame? Yes, but not in the way that you might think.
Many editorials have focused on corporate culture as the real culprit here. Executives ‘drunk’ on power and huge salaries created a “toxic culture” of greed, which led to widespread unethical behavior. We are right to take a hard look at corporate culture. But the problem is more than a particularly toxic culture. It’s a widespread culture of management that continues to use outmoded models of human motivation which inevitably leads to greed.
Despite lip service to the contrary, management at many workplaces is still based on the concept of extrinsic motivation as the primary motivator. Employees are rewarded, usually monetarily, for good work and punished for bad behavior or poor performance. This model made sense a century ago when much of work was rote, repetitive, and did not require thinking or creativity on the part of the employees. But in today’s society with rapidly changing technology and increased complexity, the kind of work expected from employees is not simply following a routine set of instructions. It requires more complex thinking, nuanced reasoning and creativity. Today’s work necessitates calling on a different set of motivations.
When Chief Executive, John Stumpf, defended the culture at Wells Fargo and blamed the scandal on problem employees representing about 1% of the company, and then went on to order them fired, he not only didn’t take responsibility for helping to create the corporate culture that led to these problems, but was taking action that supports a corporate culture would perpetuate the very same problems.
A different perspective.
For those at Wells Fargo anxious to move past this dark chapter and other senior executives wondering about their own organizations, continuing to focus exclusively on the bad behavior misses a more profound issue. A more useful question might be: How can we motivate our employees to perform at high levels, to want to continuously improve and to be committed to our organization’s success?
The limitations of the reward – punishment model is made evident in the New York Times article describing how internal controls at Wells Fargo detected the behavior and the response of the bank’s managers was to strengthen “training, monitoring, oversight and compensation structure.” But the behavior persisted for five years. This is because adding rules and increasing pressure on employees (who are already struggling) not only punishes the victim, it doesn’t work.
And neither does reward. It is well known that monetary rewards are very limiting. The effects of a raise in pay, even a substantial one are shown to wear off after very few weeks. To rely on money as a motivator will necessitate feeding an ever increasing hunger. It’s not surprising that both management and employees succumbed to temptation when being driven in that way.
I am not suggesting that all of the parties involved be given a pass for their individual contribution to this corporate scandal. In fact, I think that the senior leaders have an obligation to take full responsibility for the actions they directly or indirectly encouraged. What I am suggesting is that after the mea culpa, executives take a hard look at the assumptions they make about what motivates and to what motivations they are appealing.
So, what kind of corporate culture do you really need?
The good news is that we humans are hard wired to be motivated by much more than the extrinsic reward of money. From the moment we are born, we are motivated by such things as curiosity, mastery, and connection with our fellow humans. Just remember the last time you spent any time with a 2-year-old if you have any doubt about that. They work tirelessly to master putting one block on top of another, are insatiably curious about what’s behind those cabinet doors, and revel in connection with the people around them.
Instead of buying into the culture of reward and punishment, executives should consider that people are intrinsically motivated by such things as:
· A good challenge.
· An opportunity to learn and grow.
· Feeling like they are making a contribution.
Employees need to make decent salaries commensurate with their contributions and those of their colleagues, but once those requirements have been met, it is essential to look beyond a mentality of “more of the same.” When we motivate employees using internal incentives, studies show that they are more committed to the organization, perform better, and are less likely to be seduced into the kinds of unethical behavior we saw at Wells Fargo.
It’s crucial that CEO’s and other influencers, recognize that culture doesn’t come from paying an employee relations team to create a message in an employee manual. Training employees in the mission and values of a large corporation doesn’t do any good if the tone and attitude coming from leaders doesn’t match up. To have the kind of engaged and committed employees who will ensure the organization’s long term success, leaders must evolve their thinking about what motivates not only their employees, but themselves.
Top executives and others, are understandably asking how a scandal of such proportions could happen at one of the big four banks, especially given the federal regulations put in place after the financial crisis.
Psychologists have at least a big part of the answer. Simply put, organizations like Wells Fargo are made up of people and people are influenced by their experiences and the incentives all around them. It’s crucial for successful executives to understand how company culture is developed, the crucial part they play and the mistaken assumptions they may have about the most effective way to have a strong successful corporate culture.
If you are a c-suite executive or leader who is ready to see how to transform the experiences of individuals in your organization and improve overall performance, contact me, firstname.lastname@example.org. Let’s discuss how I can put my experience and expertise to work to strengthen your company’s culture.