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Wells Fargo’s Crisis Response: Could the Debacle Have Been Prevented?

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The missteps in Wells Fargo’s fraud scandal response are well documented. As crisis consultants, our clients are asking us: Could this now chronic crisis have been prevented?

Yes and no. At least a more in-tune management could have kept this from getting worse:

  1. When employee letters citing fraud – one dating back to 2007 — and a  petition from 2014 signed by thousands of employees complaining about draconian sales quotas are sent to management, don’t dismiss them. Not every internal complaint is valid and not everywhistleblower can back up a rumor. But more than one complaint should be a clue.
  2. When the Los Angeles Times or any other major news outlet writes a sensational article on alleged unethical behavior as it did in 2015, an additional organizational alarm should go off. Someone should conduct internal due diligence. Yes, some articles (and law enforcement probes) have little merit and are not a scandal or crisis. But double checking should be standard operating procedure.
  3. When negotiating with the CFPB or any other regulator, game out scenarios from the most benign to the worst possible. Not all issues go away after an apology and a fine.
  4. When a CEO has to testify before Congress, know ahead of time what you can give up without hurting your litigation position or long term business plans. Apologies without action don’t play well on Capitol Hill.
  5. When the heat is at its worst, don’t summarily fire 5,300 employees who were under intense management pressure to meet draconian sales quotas. They’ll pay you back with tell-all articles and web postings that continue to tarnish your brand.
  6. Think short and long term – whether that’s 6 months or a year. What actions do you need to take to prevent customer erosion, and further loss of reputation and employee morale?
Like BP in the Gulf of Mexico, Wells Fargo’s crisis is now a chronic one that will linger for a long time.  BP could not shift to normal business operations until the cap was put on the burning well. Wells Fargo’s “well cap” may not occur for quite some time – perhaps a year or two, if and when it is recertified for business with state and local governments. We counsel clients that no two crises are the same, but it’s worth a discussion on what can be learned from the other guys.
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