Wells Fargo has become a vivid example of how companies can veer off in the wrong direction of their company culture due to the influence of their Human Resources systems. There were “widespread illegal” sales practices that included opening as many as two million accounts without customer permission which led to a $185 million fine with many lost clients.* Trust was lost in a company, in an industry, that is based on trust.
Employees shared the impact of the HR systems. “I had to meet sales goals every day or I could get written up.” according to one employee. Another employee stated that “The quotas were simply a way to keep my job, not to earn any substantial bonus or commission.” Some employees indicated they were fired or forced to quit when they did not meet the sales goals and refused to create fake accounts.
Like many companies, Wells Fargo has organizational values. One of those stated five values on their website include “Doing what’s right for customers.” When discussing company culture and the sales practices, Chief Executive John Stumpf said it was the employees’ own fault and that some employees did not honor the bank’s culture by putting customers first. He further said that “This type of activity has no place in our culture.”
Leadership cannot expect a set of behaviors to occur by simply stating them as an organizational value. HR systems will win!
How did Wells Fargo, a company with a stated mission of “We want to satisfy our customers’ needs and help them succeed financially get so far off the mark? Was it the employee’s fault? And what is HR’s role in all of this?
Company culture does not happen by simply writing vision and mission statements and posting values on the website. Mr. Stumpf was incorrect when he stated that it was the employees fault and that the employees did not honor the bank’s culture.
Wells Fargo is not alone. Every organization has a culture with some creating a conscious culture™ while others have an unclear culture. Company culture is not what’s on the website nor on the back of an employee’s ID card. It is the everyday behaviors that occur at work.
Let’s review HR systems that play significant roles in directing the company culture.
In Wells Fargo’s case, it was their compensation system and criteria for performance that had more impact on the culture than their vision, mission or value statements. In creating a conscious culture™, HR leaders need to ensure that bonuses and other incentive practices are tightly linked to desired behaviors.
With Wells Fargo, their bonus reward system put organizational needs first, not customer needs. If sales goals are the only activity rewarded, then sales performance is what will happen, regardless of the unintended consequences. Use the company values as part of the assessment of determining financial rewards. If accountability is valued, then make certain those who demonstrate accountability are recognized and not ignored. Be thoughtful and intentional in all aspects of compensation. Know the power of compensation and learn from Wells Fargo.
2. Performance appraisals
Similar to compensation, when goals are set in performance appraisals and employees are measured to those standards, expect the stated behavior in those standards. If performance appraisals or formal feedback in any context is used, whether annually or quarterly, verify that the company values are part of the evaluation. When values are given weight of 30% or more, a strong message is sent to both employees and their managers. To have the most impact on reinforcing the culture, tie specific behaviors to all formal feedback including performance appraisals.
As a company culture consultant, I find that many organizations do not comprehensively think about what behavior they are rewarding when recognizing employees. Recognition can include verbal thanks, gift cards, a day off or one of the many other ways of sharing appreciation with a job well done. If one of the organizational values is teamwork and the recognition goes towards individuals excelling, you will have individuals excelling and not teamwork. If creativity is important and employees feel like new ideas are quickly shut down, employees get that message.
The best way to tie recognition and culture together is to ensure that when sharing employee appreciation, it is directly tied to one of the company values. Be consistent in your intentional message.
As both an internal SVP HR director in my past and as an external consultant today, I have listened to employees share their shock when certain individuals were promoted. The hallway talk tells the truth of how well the newly promoted manager is received. Employees, rightfully so, become upset when they hear certain values describe by the organization and then the company moves forward on promoting someone who has no regard for those behaviors.
One of the most visible ways to create and build an intentional culture is to promote people who are aligned with the conscious culture™. HR leaders must stand up and influence any decision that could lead to a promotion that sends the wrong message to the staff. Using the culture aspects of feedback tools like performance appraisals provides information to end or support promotion decisions. HR has this information and needs to bring it to the table.
Hiring cultural fit is perhaps the most important long term HR system that builds and reinforces culture. Companies that make the “best place to work” lists often have a rigorous and lengthy process for hiring, and often give culture 80% or more of the evaluation weight.
For this to happen, the organization and the interviewers need to understand the criteria for culture fit. The rubber meets the road when there is a highly talented professional who will not fit the organizational environment. HR must determine what fit looks like and train interviewers on how to select culture fit. And, when it becomes apparent there is not a fit, HR leaders must stop any momentum in these circumstances even if it is not popular. Refining the hiring process shifts all organizations.
6. Manager training
One final HR system that builds intentional culture is training managers to the competencies and behaviors needed to be successful in the organization. If actionable feedback is a key component on how things are done, then ensure you provide managers with the skills needed to effectively provide actionable feedback. For many new managers, this is not a skill that is picked up through osmosis. It can and should be taught so that managers and the staff have more opportunities to be successful in the company.
It was not the employee’s fault that Wells Fargo get off course from their mission and values. Leadership cannot expect certain behavior and outcomes by simply stating those behaviors in company communication. HR must create intentional HR systems that promote the culture and, when appropriate, stand up when dissonance arises. Whether it is through compensation, performance appraisals, recognition, promotion, selection or training, HR must regularly review and update its systems with culture in mind.
* Sources for this article are The Wall Street Journal and Associated Press.