Not Management’s Fault; The People Did It.

This is the behavior of people that we found, that we did not want.

CEO John Stumpf, Wells Fargo


I’ve followed the news accounts of the phony sales tactics at Wells Fargo. The Minneapolis Star Tribune reported:

U.S. and California regulators have fined San Francisco-based Wells Fargo $185 million, saying bank employees trying to meet sales targets opened up to 2 million fake deposit and credit card accounts without customers’ knowledge. Regulators said they issued and activated debit cards, and signed people up for online banking without permission. The abuses are said to have gone on for years, unchecked by senior management.

Millions of dollars were paid out in bogus bonus money and 5,300 employees were fired.

And the CEO blamed it all on the people—all 5,300 of them.

Sorry, Mr. Stumpf: I don’t buy it (UPDATE: Stumpf retired on Oct. 12, 2016).

I went to work long ago in the Circulation department at the Star Tribune newspaper. I was shocked at what I found. District Managers (the people who hired paper boys and girls) had circulation sales goals. There was lots of pressure to grow circulation numbers because the circulation of the newspaper determined advertising rates—the majority of the newspaper’s revenue.

Many district managers wrote phony orders, which created bogus circulation. They then collected bonus money and the “best” sales people “earned” trips for themselves and their significant others to luxurious resort locations around the world. The “stars” got promoted so they could supervise up and coming district managers. Everyone knew what was going on and supervisors and managers looked the other way. The culture had been this way for a long time and the cheaters did so willingly and happily—cheating beat working for a living (other sales tactics did similar things).

Not everyone cheated. Many did things the right way. They didn’t earn the trips or promotions. In my two years as a district manager, I always made my goals and I won two trips. I didn’t cheat; I worked hard.

The day came when I was given responsibility for the sales activities of the district managers. I wrote in my e-book, Value Driven Leadership ( how we changed the culture and behavior of the district manager group. I think it is a good example of how to be successful and value-driven at the same time:

This was my opportunity to do something about the rampant dishonesty in carrier sales. As a district manager, I had observed first-hand the perverse dishonesty in the sales program. District managers were allowed to write bogus orders, which many did. And they were well-rewarded for doing so: cash awards, and trips to exotic vacation spots. I couldn’t wait to clean this mess up.

I selected May Worker, a district manager, to be our carrier sales specialist and she left her district to work for me. May was a hard worker, down-to-earth, and could handle the male-dominated Metro Circulation managers.

May was the perfect fit. Over the next few years, she worked hard and was the primary catalyst in our building a sales program that we could feel proud of. May conducted training sessions for carriers and district managers. One summer, district managers trained more than 1,000 youth carriers in sales. I asked the district managers to put a sports coat on when they did their training session. I wanted them to look professional to the young people. One young manager refused. I told him that he could not be part of the sales campaign if he didn’t want to be a professional and he could spend sales nights making service calls for the other managers. Oh, and he would not be eligible for a bonus. He changed his mind and wore the sports coat.

May also selected district managers to work with her to plan sales campaign kickoff events. They were spectacular and funny. I remember one manager was a fleet truck. He had a green cardboard cutout of a truck over his body and walked around the stage saying, “truck, truck, truck.” The audience roared with laughter. From then on, we all looked forward to the kickoff meetings.

We wrote incentive plans with achievable goals for sales of subscriptions. Each manager had three levels of goals for morning and Sunday/weekend subscriptions. Achieving each goal level resulted in larger bonuses. Once the top-level was reached, the managers were paid “overage” for each additional order. Each campaign we exceeded the highest goals. The next campaign we raised the goals 10%. There was tremendous pressure to raise the goals higher as they had achieved higher results in the previous campaign, but I wanted them to feel successful and feel they could go all out and not be penalized for their success. We achieved more by requiring less.

After the first serious sales campaign in many years, about 20% of the district managers missed one or more of their goals. I didn’t like that. I scheduled a meeting with each manager. I invited the business agent for the Newspaper Guild. We met in a conference room near my office.

I began the meetings by thanking them for coming and did what I could to put them at ease. Then I calmly reviewed their goals with them and their accomplishments and how they had failed to meet their objectives. I talked about how important it was to the Star Tribune for district managers to grow circulation, and about how valuable a contribution it was to the company for them to participate and succeed. I told them that I asked only that they achieve the minimal level goal. If they did that, I would not bother them. If they chose to work harder and achieve the higher-level goals and make more money, they could. That must have sounded fair and reasonable to them. And the fact that I talked to them like adults mattered. In future sales campaigns, no district manager missed more than one goal and only a handful missed any at all. Everyone had to contribute and be a part of the team. The days of the district managers deciding what goals they would or would not achieve were over, as were the days of using threats and intimidation to motivate them.

After a week or two of one of the first campaigns, I met with the zone managers. They complained about how hard the goals were. They said they couldn’t make the objectives. I let them whine and feel sorry for themselves for a while and then said, “The given is that we will achieve our goals by the end of the campaign. The only question is, ‘Do we do it the hard way or the easy way?’ By that, I mean you and your district managers can make a plan and execute it every day for 12 weeks, or you can sit around and have a pity party and then have to work late every night for the last weeks of the campaign.”

From then on, each district and zone manager had to prepare a sales campaign plan before each campaign began. They always made and exceeded their goals.

At the end of 2½ years, we increased net sales by 250% per year. “No good” orders decreased by 95%. Customer incentives (free offers to customers) were cut by 50%. Incentives to carriers decreased by hundreds of thousands of dollars a year. Several district managers were disciplined when they were caught cheating. We grew circulation, we had fun, and people felt proud of themselves.

Isn’t it amazing what responsibility, accountability, tough love and employee engagement can accomplish?

Leaders create cultures and people follow the unwritten-rules of the culture. At Wells-Fargo, greedy leaders set goals that were unreachable in honest ways, supervisors and managers threatened people with the loss of their jobs if they didn’t make the goals so many did what they had to do to survive. Don’t try to tell me that the employees—all 5,300 of them—did this all on their own. That said, employees are responsible for their choices too. They could have said no and found other jobs. But asking people to behave in value-driven ways in a context that pushes them to act contrary to their values puts employees in difficult situations and not all have the inner strength to resist.

The behavior of district managers in the Star Tribune Circulation department followed an industry pattern that had been in place for decades.

Congress might do some digging into what is going on at banks and financial institutions throughout the country.