Success (alone) does not beget culture

You’ve heard the basics at this point. Or maybe this breaking story is old news if you are one of the unfortunate Wells Fargo customers who received an unauthorized credit card in the mail or suddenly accrued fees for accounts you were unaware existed. It is being reported now that Wells opened more than a half million unauthorized credit cards for its customers and three times as many likely-unauthorized bank accounts. The falling out so far totals 5,300 Wells employees fired and $185M in fines to the bank. But where customers and stockholders keep their money in the future is the far bigger thing at risk here.

Beyond the basics, I expect that we’ll continue to learn more about why and how this happened. And as the picture becomes clearer, I have no doubt that the Wells culture will figure prominently. For a scandal of this magnitude to play out over a period of years inside one of the world’s biggest banks, one might reasonably expect to find an elaborate system in place for spreading these practices and looking the other way; for legitimating the illegitimate. We’ll see...

So far though we’re hearing a lot about the ‘un-checked incentives’ that rewarded the bad behavior, and that the formula of disaster might have been as simple as this: Open a new account. Move a small amount of money in. Close the account and put it back. Repeat. Get a bonus.

Not so fast. There is a reason that strict behaviorism faded decades ago as a way to predict complex behaviors. The basic paradigm overlooked one very important factor, the cognitive machinery that separates us from the other species. In many (perhaps most) organizations there are also incentive systems which could lead to some form of misuse-overuse-or-abuse. And in many (perhaps most) organizations, they also do not possess the degree of policing that we will surely ask of Wells in the future. BUT... what is missing, thankfully, in most organizations is the social environment that is conducive to our brains deciding that the otherwise-bad behavior is actually OK in this context, or worse, that it is preferred.

That is the culture. And leaders play a big role in creating that.

You don’t have to dig deep or go back in time very far to find plenty of praise for Wells’s aggressive sales culture. Cross-selling in particular–more products per customer–appears central to the Wells strategy and success over the years. One might reasonably assume this was also central to the mindset of the people implementing that strategy, and likely a palpable aspect of the culture.

Being aggressively cross-sold does not sound all that appealing to me and makes me wonder what it is was like to be a customer of Wells, even before these practices started to cross a line. It also reminds me of some research that I collaborated on and which was recently awarded the Journal of Organizational Behavior’s 2015 Best Paper.

The study was a longitudinal test of the chick-or-egg question–which comes first? Culture or performance–played out over six years and across 95 car dealerships. The findings told us several important things which car dealerships, banks, or any service environment can take away. When customers walk into a store front, they’re now immersed in the culture. They observe it all around them and they experience it in the interactions they have with the people. And this is a part of what they choose to buy (or not buy) when they do business.

Our study showed that the impact of the culture on customer satisfaction was evident relatively quickly, within a year’s time of the culture survey. Over the two to three years following, something else emerged. The dealerships that created the most positive customer experience also saw the most growth in vehicle sales. Customers experiencing the culture in a favorable way translated to more sales and more money in the long term.

The opposite was not true in the research, in that financial success alone did not breed a healthier and more positive culture in the dealerships. There are hints of this in the Wells story too. It does not appear that the strong 5-year stock performance and profitability of Wells during the scandal years was a lead indicator of a culture getting brighter. It seems now that the years to come will be defined by how Wells can respond to a crisis and repair a brand. I’m swayed to think those actions will be more meaningful if re-examining the culture is part of the equation.

* This article is based on information that has been reported in the public domain. The views expressed are my own.