Just wanted to let you know that the Members and I enjoyed your presentation and found it to be insightful and impactful. We continue to discuss different aspects of your presentation and, in particular, use your “locked-in” concept… especially during these times.
Your recent presentation to The Association for Corporate Growth CEO group was remarkable. The feedback we got from the leaders who attended was outstanding. Your researched based concepts and real world work experience challenged our members to create new success formulas for their business. I’m confident that the practical ideas you shared will be the foundation of new innovation and profitable growth for years to come. I look forward to having you come back and share more thoughts on how leaders can create significant breakthroughs in performance.
Adam, THANK YOU! The compliments just keep on rolling in about your presentation to our Members and guests. YOU WERE TERRIFIC and we really appreciate your time and insights!
Adam presented practical, actionable viewpoints to our management team. Using a combination of examples and specific to-dos, he explained how we can avoid a lock-in mindset that has resulted in the downfall of many a company! His engaging style made it easy for our team to internalize the concepts.
Adam Hartung, author of Create Marketplace Disruption, was my guest speaker at a recent FEI Career Management Group Breakfast. Adam did an excellent job of enlightening the group on the concepts in his book, tying in current business events (eg. the GM Chapter 11 filing) and bringing topic relevance to the Finance executives in attendance. Adam conveyed his material with the authority one would expect from someone who had conducted extensive research but also with a sense of humor and engaging style that sparked many questions from the audience. Adam is the type of speaker who will make business leaders think differently about what they need to focus on and how to lead so they will have successful businesses not only today but in the future.
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Everyone knows what happened at Wells Fargo. For many years, possibly as far back as 2005, Wells Fargo leaders pushed employees to “cross-sell” products, like high profit credit cards, to customers. Eventually the company bragged it had an industry leading 6.7 products sold to every customer household. However, we now know that some two million of these accounts were fakes – created by employees to meet aggressive sales goals. And, unfortunately, costing unsuspecting customers quite a lot of fees.
We also know that Wells Fargo leadership knew about this practice for at least five years – and agreed to a $190 million fine. And the company apparently fired 5,300
Which begs the obvious question – if management knew this was happening, why did it continue for at least five years?
Let’s face it, if you owned a restaurant and you knew waiters were adding extras onto the bill, or tip, you would not only fire those waiters, but put in place procedures to stop the practice. But in this case we know that management at Wells Fargo was receiving big bonuses based upon this employee behavior. So they allowed it to continue, perhaps with a gloss of disdain, in order for the execs to make more money.
This is the modern, high-tech financial services industry version of putting employees in known dangerous jobs, like picking coal, in order to make more profit. A lot less bloody, for sure, but no less condemnable. Management was pushing employees to skirt the law, while wearing a fig-leaf of protection.
CEO Stumpf’s testified to Congress that he didn’t know the details of what was happening at the lower levels of his bank. He didn’t know bankers were expected to make 100 sales calls per day. When asked about how sales goals were implemented, he responded to Representative Keith Ellison “Congressman, I don’t know that level of detail.”
Really? Sounds amazingly like Bernie Ebbers at Worldcom. Or Jeff Skilling and Ken Lay at Enron. Men making millions of dollars from illegal activities, but claiming they were ignorant of what their own companies were doing. And if they didn’t know, there was no way the board of directors could know, so don’t blame them either.
Does anyone remember how Congress reacted to those please of ignorance? “No more.” Quickly the Sarbanes-Oxley act was passed, making not only top executives but Boards, and in particular audit chairs, responsible for knowing what happened in their companies. And later Dodd-Frank was passed strengthening these laws – particularly for financial services companies. Ignorance would no longer be an excuse.
Where was Wells Fargo’s compliance department?
Based on these laws every Board of Directors is required to establish a compliance officer to make sure procedures are in place to insure proper behavior by management. This compliance officer is required to report to the board that procedures exist, and that there are metrics in place to make sure laws, and ethics policies, are followed.
Additionally, every company is required to implement a whistle-blower hotline so that employees can report violations of laws, regulations, or company policies. These reports are to go either to the audit chair, or the company external legal counsel. If it is a small company, possibly the company general counsel who is bound by law to keep reports confidential, and report to the board. This was implemented, as law, to make sure employees who observed illegal and unethical management behavior, as happened at Worldcom, Enron and Tyco, could report on management and inform the board so Directors could take corrective action.
Which begs the first question “where the heck was Wells Fargo’s compliance office the last five years?” These were not one-off events. They were standard practice at Wells Fargo. Any competent Chief Compliance Officer had to know, after five-plus years of firings, that the practices violated multiple banking practice laws. He must have informed the CEO. He was, by law, supposed to inform the board. Who was the Chief Compliance Officer? What did he report? To whom? When? Why wasn’t action taken, by the board and CEO, to stop these banking practices?
Should regulators allow executives to fire whistle-blowers?
And about that whistle-blower hotline – apparently employees took advantage of it. In 2010, 2011, 2013 and more recently employees called the hotline, even wrote the Human Resources Department and the office of CEO John Stumpf to report unethical practices. Were their warnings held in anonymity? Were they rewarded for coming forward?
Quite to the contrary, one employee, eight days after logging a hotline call, was fired for tardiness. Another was fired days after sending an email to CEO Stumpf alerting him of aberrant, unethical practices. A Wells Fargo HR employee confirmed that it was common practice to find fault with employees who complained, and fire them. Employees who learned from Enron, and tried to do the right thing, were harassed and fired. Exactly 180 degrees contrary to what Congress ordered when passing recent laws.
None of this was a mystery to Wells Fargo leadership, or CEO Stumpf. CNNMoney reported the names of employees, actions they took and the decisively negative reactions taken by Wells Fargo on September 21. There is no way the Wells Fargo folks who prepared CEO Stumpf for his September 29 testimony were unaware. Yet, he replied to questions from Congress that he didn’t know, or didn’t remember, these events – or these people. In eight days these staffers could have unearthed any information – if it had been exculpatory. That Stumpf’s answer was another plea of ignorance only points to leadership’s plan of hiding behind fig leafs.
CEO Stumpf obviously knew the practices at Wells Fargo. So did all his direct reports. And likely two or three levels downs, at a minimum. Clearly, all the way to branch managers. Additionally, the compliance function was surely fully aware, as was HR, of these practices and chose not to solve the issues – but rather hide them and fire employees in an effort to eliminate credible witnesses from reporting wrongdoing by top leadership.
Where was the board of directors? Why didn’t the audit chair intervene?
It is the explicit job of the audit chair to know that the company is in compliance with all applicable laws. It is the audit chairs’ job to implement the Sarbanes-Oxley and Dodd-Frank regulations, and report any variations from regulations to the company auditors, general counsel, lead outside director and chairperson. Where was proper governance of Wells Fargo? Were the Directors doing their jobs, as required by law, in the post Enron, WorldCom, Tyco, Lehman, AIG world?
Should CEO Stumpf be gone? Without a doubt. He should have been gone years ago, for failing to properly implement and enforce compliance. But he is not alone. The officers who condoned these behaviors should also be gone, as should all HR and other managers who failed to implement the regulations as Congress intended.
Additionally, the board of Wells Fargo has plenty of responsibility to shoulder. The board was not effective, and did not do its job. The directors, who were well paid, did not do enough to recognize improper behavior, implement and monitor compliance or take action.
There is a lot more blame here, and if Wells Fargo is to regain the public trust there need to be many more changes in leadership, and Board composition. It is time for the SEC to dig much deeper into the situation at Wells Fargo, and the leaders complicit in failing to follow the intent of Congress.
As I write this in 2016, Hurricane Matthew is crashing into Daytona Beach. It is a monster storm, and far from over. But there already is a great lesson we can learn.
Shockingly, after passing nearly half of Florida, including densely populated areas like Miami, Fort Lauderdale and Palm Beach, only one person has died. Even as northeastern Florida awaits Matthew’s fury, damage assessments are underway in south Florida. Even though 600,000 homes are without power, utility companies are already restoring power to over 50,000 homes, and that number is growing. The Florida highway system is open, with all roads passable and people are able to reach safety, while realistically expecting they may soon be able to return to their homes. By all accounts, damage is considerable. Yet, few lives were lost and repair is already underway – long before the storm is ending.
Photo by Drew Angerer/Getty Images
The lesson here is that scenario planning is incredibly valuable. Florida’s leaders have been preparing for this storm for years. The many agencies, federal, state, county and municipal, built their scenarios, and prepared action plans. They talked about “what if” various things happened, and thought through the impacts – and actions they would take.
Then, there’s Brexit. The British currency has fallen to 30-plus year lows. This morning a “flash crash” happened with the currency falling 10% in minutes. Even though the pound recovered much of that loss, the crash left traders and those who do international business shaken. This was just the latest reaction to the British vote to exit the EU.
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This week people in all parts of the international business community were trying to figure out how to react to Prime Minister May’s speech saying Britain would seek a “hard exit.” This seems to imply a faster, more drastic break from Europe. But as David Buik, market commentator at Panmure Gordon & Co. said, “The media decided very quickly what interpretation to put on the term ‘hard Brexit,’ when most of us are none the wiser as to what Brexit means yet.”
The key word here is “reacting.” It is clear that almost nobody had any plans for undertaking Britain’s departure from the EU, even as the effort to create a vote, and implement a vote, occurred. While there was a lot of talk, nobody in government or business had a plan for what to do if the vote to leave actually passed. Now everyone is reacting, and the consequences are significant fear, uncertainty and doubt (FUD), and wild swings in everything from currency values to equity values and even real estate.
Proper scenario planning separates leaders from wanna-bes, and winners from losers. Those who consider what might happen, and prepare for events, inevitably do far, far better than those who react. Lacking a preparedness plan, based on careful consideration of “what-ifs,” it is impossible to implement good decision-making, because you have no idea what markers, or metrics, to watch – and no idea of what actions to take as those metrics vary.
I observed a scenario-planning meeting where the head of planning was asking questions – “what-if…regulations go in this direction…technology accomplishes this level of performance…customer adoption of a substitute increase.” After a series of these propositions were discussed, the CEO said “This seems to be a waste of time. We don’t know what will happen. What if pigs could fly?” Given a lack of facts about the future, he proposed building a future plan based upon the market as it existed at the time, and reacting to changes only after they occurred.
The planning lead responded, “Whether or not pigs will fly has very little to do with the future performance of our company. And that is why we aren’t discussing flying pigs. These variables in the scenarios could have a major impact on future performance, and if we prepare for them we most likely will improve competitiveness, sales and profits.”
Scenario planning is not a wild exercise of imaginary happenings. Scenario planning uses known trends to identify key variables which can be measured. By looking forward on the trend, it is possible to predict possible outcomes – and prepare.
For example, famously, the leadership of Apple in 2000 looked at the trend toward high-speed internet implementation, including WiFi. They started tracking high-speed implementation, and realized that as bandwidth expanded and improved the desire to work on-line would grow as well. They began preparing products for much greater on-line use (iMac) and products based on widely available, low cost internet access. The result was a shift from near bankruptcy to the most valuable traded equity in America in just one decade.
Planning systems are biased toward using historical data, and do not consider big changes. Leadership must constantly fight the urge to assume the future will look like the past, and invest time building scenario plans. Building the skill to predict the future, using trends to build scenarios and plans, is a hallmark of the most successful companies.
Florida’s leaders could have assumed another big hurricane would not hit their state, and simply waited to react when it happened. By thinking through possible outcomes, they have shown an amazing level of preparedness. In contrast, Britain’s leaders did not think through the impact of a British exit, pushed for a vote prematurely, and now are lurching from point to point, reacting to events, unprepared for any outcome – and trying to create and implement a plan “on the fly.”
How prepared is your company? How often do you discuss future scenarios, and actually plan for them? Or do you plan based on history, hoping the future will look like the past? Are you going to use scenarios to be effective in future markets?
Or are you going to wait for events to unfold, react and hope you don’t drown?
First, let me recommend you strongly consider Adam Hartung’s presentation. It was very well received and valued by my two audiences – all 5s out of 5. I believe that Adam’s presentation couldn’t come at a more opportune time. The challenging of some of our strongly held paradigms and “sacred cows” may end up being just the breakthrough some need. You want to get this man, Adam Hartung in front of your groups and engage with them in some fierce conversations.
Thank you, thank you, thank you!! Excellent job at the FSA Spring Meeting in Savannah, Georgia. Many members came up to me and indicated you were one of the best speakers we have had at any of our meetings. Your topic was very timely and helps all of us clarify the direction we are headed as a trade association. I am so pleased we were able to get you in to talk at this event.
After seeing Adam speak at a very well-attended ACG meeting, I asked him if he would like to speak at one of our events on the spot. As the incoming President for the 2 year old Chicago Chapter of the Association for Strategic Planning, I wanted to bring in a high-impact speaker to give our members and prospective members a clear sense of the quality of value that we provide as an organization and to draw others to attend. Adam was thoroughly knowledgeable, entertaining, but best of all, very insightful and provocative – I had many people thank us for having him present and I believe it helps our image and growth plans.