7 Lessons Learned from the Mistakes of John Stumpf

Last month we witnessed something unusual on Capitol Hill – bipartisan consensus.  At a time that is arguably the most politically contentious in at least 50 years, the senate banking committee targeted a common enemy – Chairman & CEO of Wells Fargo, John Stumpf.  As we watched this corporate titan have his ass handed to him by Senator Elizabeth Warren and several of her peers, many of us shared her disapproval of a leader who was either too oblivious or too arrogant to recognize his own failures.

While some may argue that Warren and the committee used Stumpf as a whipping boy to further an agenda about tougher banking regulation, most would agree that his response to their questions were weak, at best.  He blamed his employees, disassociated himself from his board (the same one that he chairs), downplayed the problem, and came across as though he knew very little about systematic fraud taking place under his nose.

Politics aside, I believe the apparent fumbling of John Stumpf provides a few lessons of what you should do when faced with a mistake that causes a breakdown in your business.

  1.  Admit you have a problem. 
    • When 5,000 people in the same role commit fraud . . .
    • When that same fraud is repeated over the course of several years . . .
    • When firing those people fails to solve the issue . . .
    • . . . you have a systemic problem.  Own it.
  2. Hold yourself accountable. 
    • Evaluate your decisions, policies and processes and how they contributed to the failure.
    • Never, ever, ever blame someone else. Especially people who are merely in a position to execute on your decisions.
    • Diagnose the problem quickly.
    • Avoid the temptation to downplay the mistake or make excuses for the error.
      • Sure, $2.6M is a rounding error for Wells Fargo, but sometimes it isn’t about materiality.
      • Rationalizing repeated acts of fraud at the expense of your customers by saying that only 1% of your sales people committed fraud, is like Exxon suggesting that the Valdez oil spill only accounted for 1% of their oil.
  3. Show humility and contrition. Mistakes happen. The quickest way to diffuse any backlash from an error is to admit wrongdoing. In Stumpf’s case, the mistake was creating an unattainable goal for his salespeople, where the result of missing the unattainable goal was job termination.  The easy way out:
    • Admit that YOU messed up.
    • Apologize for the error, first to your customers, and then to your shareholders and employees.
  4. Move aggressively to fix it, end-to-end.
    • Put forth a plan to fix it as quickly as possible.  Firing low level employees should not be considered an adequate fix.
    • Communicate efforts to ensure it never happens again.
  5. Make amends. 
    • Before you take actions with your employees, punish yourself first
      • Forfeit your bonus.
      • Pay back money earned because the mistake happened.
      • And if it is really egregious, offer to resign.
    • Take action with employees quickly, starting at the TOP, not the bottom
      • Identify the accountable party or parties
      • Terminate them quickly and without a bonus, reward or severance
  6. Rebuild trust with your customers, shareholders and employees
    • Call your customers and talk with them about what happened.
    • Overcompensate for the mistake by refunding your customer AND giving them something extra.
    • Set up a small task force whose job it is to investigate the problem and act quickly, without barriers or bureaucracy.
    • Schedule town hall meetings with your employees.
    • Consider rebranding.
  7. Prioritize ethics over everything else.
    • Yes, EVERYTHING else, including financial growth and increased shareholder value.
    • If you find your employees repeatedly committing fraud to hit their targets, then you should take that as a clear sign that your targets are not realistic.
    • If you are sacrificing your integrity to increase shareholder value, it is simply a matter of time before you lose that value along with your dignity.

Bottom line, admitting your mistakes can help you galvanize your employees to work as a team, creates empathy with your customers, and mobilizes your strongest leaders to fix the problem. As a leader, it is your job to take ownership, show humility, make amends and work aggressively to fix your mistakes with your customers, employees and shareholders.

By | 2017-02-16T08:10:56-07:00 October 11th, 2016|Business|0 Comments

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