Culture and incentive issues appear to have caused the troubles at Wells Fargo. Details are still unfolding, but what we know is approximately 5,300 employees were fired and Wells Fargo must pay $185 million in fines to the US government for employees opening new accounts illegally, without customer knowledge.
How could this have gone on for years, and affect so many people? The only answer can be in the culture that developed within Wells Fargo caused by employee incentives to open new accounts.
It is common in financial institutions to create incentives for new accounts, encouraging employees to get new deposits, or new loan accounts. What I surmise happened for it to be so pervasive and affect so many people, is a culture of performance-over-all that developed, pressuring employees to open new fictitious accounts in order to meet performance quotas, incentive compensation targets, or avoid punishment. Instead of balancing performance, risk and compliance, the emphasis on performance trumped the other two.
In a short-term attempt to meet performance quotas, Wells Fargo jeopardized its reputation with its customers, regulators, and shareholders. It did not practice Principled Performance – the reliable achievement of objectives, while addressing uncertainty and acting with integrity.
I have studied many frameworks and standards and have found two areas that seem to be missing in most relate to culture and incentives. In fact, the only one I have found that addresses these areas in detail is the OCEG GRC Capability Model.
Organizations often overlook the importance of culture; and how often, incentives are perverse … leading to behaviors not anticipated. By designing and implementing an integrated GRC capability, based on the OCEG GRC Capability Model, organizations can avoid the Wells Fargo mistakes.
Taking an integrated approach to GRC, that includes assessing culture and incentives, can help avoid similar troubles at your organization.
You can learn how to do this at the next OCEG, GRC Professional training on 1-3 November 2016 in Dallas, TX.
Get registered today, so you can help your organization avoid these damaging mistakes.
Image: Jason Mefford