By
Edward E. Lawler III
John Stumpf has stepped down as CEO and chairman of Wells Fargo amid public pressure.
Rarely is someone at the top of an organization held accountable for the sins perpetrated by those below – even if they directly or implicitly encouraged them. Will a change at the top be enough to salvage the bank’s reputation and customer relations? More importantly, will the change in leadership to another insider – Timothy J. Sloan, its previous president and chief operating officer steps into the role vacated by Stumpf ‑‑ put an end to the corporate culture that ran amok at Wells Fargo? Congress, for one, doesn’t have much faith that it will. Within hours of the bank’s anointment of Sloan, who held a senior post at Wells Fargo throughout the scandal, Rep. Maxine Waters, a California Democrat, issued an official statement declaring her concern that Sloan was also culpable in the recent scandal. To think about this question, let’s take a look at how and why the unethical culture Mr. Sloan will inherit actually happened.
It has been said that the Wells Fargo culture Mr. Sloan is inheriting is the wrong kind of culture. However, if you look at all the verbiage produced by the company on who they are and what they stand for, it comes off sounding like a wonderful culture, dominated by courtesy and customer care. “Everything we do is built on trust. It doesn’t happen with one transaction, in one day on the job or in one quarter. It’s earned relationship by relationship,” John Stumpf – who spent 34 years of his career at the bank – wrote in Wells Fargo’s Vison and Values Statement.
But carefully-crafted mission statements don’t tell what the real culture is. What we know about culture is that it is determined by top management and supervisory behavior, not words. And clearly one of the key corporate behaviors that determines culture is what people see being rewarded and what they see being punished. What management says is much less important than what management rewards – and when what is said conflicts with what is rewarded, what is rewarded tells everyone what management genuinely believes, values, and wants.
We have spent our careers studying financial rewards in organizations and how they and other management practices affect employees and their organizations. Here is some of what we have learned about using financial rewards as an incentive: When excessively high or difficult goals are set, individuals either do not try to reach them or try to achieve them by beating the system.
