Selling vs Business: What the Wells Fargo scandal teaches us

CEO’s are not Sales Managers and vice versa. Company profits are not sales commissions. A business is not a sales team and fraud has no place in either. Welcome to the Wells Fargo (Bank) scandal.

When you run a business the way you would a sales team, the results cannot be good. Throw ethics out the window and wholeheartedly embrace corruption, and the results can only be catastrophic. This is what the Wells Fargo (Bank) scandal demonstrated.

How? For those coming in late. The American 164 year old Wells Fargo fraudulently opened a whopping two million accounts through ‘cross-selling’ to its existing customers. And why? Two reasons. One. To meet impossible sales targets. And, two, to deliberately inflate the bank’s stock value. Why again, you ask? Wait for it, to inflate executive bonuses! It gets even more intriguing. All this happened with the blessings of the executive and board.

Further, those who didn’t ‘shape up’ were ‘shipped out’. This is what the Senate hearings (akin to our Public Accounts Committee) reveal. They can be viewed on YouTube.

From the stars to the stable

Until it was busted, Wells Fargo was the most valued bank by market capitalisation in the US. It is also celebrated in the highly acclaimed management book, Good to Great. Seemingly, it lost its way over the past decade. Core to its growth strategy was cross-selling. Cross-selling is to sell a different product or service to an existing customer. For instance, your barber interests you with a pedicure, and you agree. Or, in addition to the loan you have, your bank entices you to open a current account and/or get a credit card, and you agree. In banking parlance it is referred to as increasing the bank’s share of (your) wallet.

Now then. There’s nothing wrong with cross-selling. In fact, cross-selling is the foundation of deepening relationships with clients and is the cornerstone of CRM (Customer Relationship Management) systems. After all, it is simpler, cheaper and more sustainable to sell another product to an existing customer than it is to do so a new one.

Wells Fargo Scandal

Wells Fargo (Bank) scandal: cross-selling abused

However, blinded by greed, the Executive Chair and (now resigned) CEO John Stumpf instructed that the cross-sell target should be eight accounts. Why? Senator Elizabeth Warren while grilling him explains: “Other big banks average three accounts per customer, but you set the target at eight … Every customer at Wells should have eight accounts. And that’s not because you ran the numbers and found that the average customer needed eight banking accounts. It is because, ‘Eight rhymes with great’. This was your rationale right there in your 2010 annual report.

To be fair, globally, setting sales targets is not scientific but anecdotal. Still, if targets remain consistently unattainable, sales people become demotivated, or, in the case of Wells Fargo, because of the suffocating pressure, rode its compromised organizational culture.

So. Because all the bank wanted was accounts, irrespective of where they came from, the salespeople went into survival mode. Forging customer signatures, they proceeded to open two million accounts and put them down as ‘cross-sells’. And the executive and board clapped.  But guess who took the fall immediately they were busted? All 5,300 customer facing staff!

Lessons from the Wells Fargo scandal

CEOs are not Sales Managers and vice versa. A business is not a sales team and fraud has no place in either. Company profits are not sales commissions. Joshua Oigara (KCB Group CEO) while being interviewed by the Daily Nation in his early days explains: “To run a business you don’t have to be a specialist. It is more of a job for a generalist. A bank can hire the best accountant or marketer (or salesman) it needs. The CEO is a captain. The key task for the captain is to inspire the team. It is not enough simply to get a degree in marketing or finance. One should be able to broaden their knowledge base considerably.

Leading a business calls for long term thinking intended for the business to transcend time; unlike selling, it is not a perpetual chase of targets. Leading a business calls for a “generalist”. Successful selling calls for short term thinking and a salesperson/manager is a specialist.  To succeed, a business needs both. When the business sees itself solely through the sales lens, it exposes itself to being a Wells Fargo.

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