In September 2016, Wells Fargo announced it would pay $185 million to settle a lawsuit filed by federal regulators and the City and County of Los Angeles, admitting that employees opened up to 1.5 million accounts without customer permission over five years. . These unethical practices led to an immediate drop in the company's stock prices, and the company continued to undercut significantly.
Wells Fargo's CEO attributed the banking scandal to bad apples at the company, which laid off (about 5,000). But former employees have spoken out, saying they were fired despite being "good apples" who contacted the company's ethics hotline with concerns about fraud and an unhealthy sales culture. Several employees said they were fired after blowing the whistle.
This massive breach of ethics, one of the largest in recent years, contrasts with the company's then-publicly stated mission to "meet the financial needs of our customers and help them succeed financially." Sadly, even authentic, highly purposeful CEOs and their companies can succumb to short-term profit pressures.
In my consulting work, I have found that honest conversations are a critical tool in helping leaders and their organizations successfully meet their ethical ambitions. If you're a CEO trying to lead ethically and with high purpose, consider the following strategies.
Start inside.
Start by writing down the key decisions you've made in your life (such as your choice of job, spouse, and friends) and then ask yourself what motivated you to make those decisions and what they say about you. For example, a newly appointed division manager, trained in accounting, reflected on why he chose to work for his company despite better offers and realized that it was a friendly, collaborative and ethical culture. He then used this information to help define who he wanted to be as a leader.
Match your senior team.
Start a conversation with senior team members. What are their ambitions for the kind of company they want to create? This type of discussion allows you, the leader, to test your own advocacy and then lead your team to a consensus statement. Here's how one CEO created his company's purpose statement:
Be prepared to derail.
Unfortunately, at some point the pressure to meet shareholder expectations derails your desire to lead with a higher purpose and values. Research shows that there is an inevitable gap between what we humans stand for and what we actually do. The same goes for CEOs and their companies.
Don't let your organization get caught off guard when things don't go according to plan. Schedule routine conversations to validate your organization's ethical ambitions. I will explain more about how to do this in the next section.
Don't wait for the whistle to blow.
In too many companies, lower-level employees are afraid to speak truth to power about misalignment with purpose and values. To help combat this, my colleagues and I have developed the Strategic Fitness Process – a structured process that allows senior managers to have conversations that reveal the whole truth about how their organization really works. It also helps senior management relax knowing they aren't just waiting and hoping they don't hear back.
To understand what the process of strategic fitness looks like in practice, let's look at a company that found that their practice of quarterly channel fulfillment (supplying large quantities of unsolicited products to distributors) was contrary to their values and purpose, and was, on the contrary, damaging to trust, loyalty and distributor and employee commitment and, unsurprisingly, performance.
To begin the fitness strategic process, the CEO and his leadership team first developed a two-page statement of direction that communicated their strategy and values. Then, an eight-member task force was tasked with interviewing 100 people in the organization—key leaders and individual contributors two to three levels down—about the organization's alignment with their stated strategy and values. In this part of the process, the strengths of the organization and the obstacles to the realization of their direction, including the filling of channels, were identified.
They then held a structured meeting where they set ground rules—no blaming, defensiveness, or emotional outbursts—that allowed the task force to be honest about the obstacles they found. The structured interview helped the CEO and the leadership team to really listen and understand the issues. As the CEO later said, "The truth was compelling and it was clear that we had to act and how to act." Channel filling was immediately suspended, even though quarterly earnings for the year fell short of Wall Street expectations and the stock price would suffer a decline. In addition, it stopped a practice that later became illegal and for which the company was fined $800 million in the same industry.
Consider what Wells Fargo's CEO and executives could learn if they wanted to. They would have the opportunity to change unethical practices, instill company pride and commitment to employees and other stakeholders, and avoid financial and reputational damage before it is known. If you are striving to lead ethically and with high intent, you must consistently have these honest conversations with yourself, your team, and your organization.
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