By Emily Glazer
Mary Mack arguably has the hardest job in banking today.
The head of retail banking at Wells Fargo & Co., Ms. Mack
must change the sales culture at the scandal-scarred firm. To do
so, she will have to figure out how to incentivize employees
without spurring the kind of improper behavior that led to the
bank's $185 million fine, regulatory enforcement action and abrupt
retirement of Chief Executive John Stumpf.
In the wake of the bank's settlement with regulators and its
public drubbing, Wells Fargo scrapped sales goals for retail-bank
employees. At the same time, Mr. Stumpf and his successor Timothy
Sloan have said Wells Fargo won't abandon cross-selling, or efforts
to sell multiple products to individual households, which was seen
as contributing to the misconduct.
That has left bankers wondering how they will be evaluated and
paid. The urgency to craft a new approach was apparent during an
internal conference call at the bank late last week with Ms. Mack,
54, and about 800 retail-banking managers and executives.
"This is real time, we've got teams that are responding; we know
you need more," Ms. Mack said, according to a recording of the call
reviewed by The Wall Street Journal. "The very first thing," she
added, is to remove incentives that might lead to bad behavior.
From there, though, it is less clear what the future holds for
the roughly 100,000 employees in Wells Fargo's 6,000 some branches
across the U.S. Figuring out the retail-bank incentive structure is
vital given the role overambitious sales goals played in the bank's
problems, according to former employees and others.
"Wells Fargo pushed aggressive sales goals for low-wage
employees that were so unrealistic and so unattainable that some
felt pressured to commit crimes just to keep their jobs," Rep.
Maxine Waters (D., Calif.) said during a congressional hearing
about Wells Fargo's sales-tactics situation.
Over the past five years, branch employees had opened as many as
2 million accounts without customers' knowledge. Former Wells Fargo
employees have said this occurred as bankers tried to meet lofty
sales goals. The bank also fired 5,300 retail-bank employees over a
five-year period related to the misconduct.
Wells Fargo has said it regrets the behavior and is working to
refund any improper fees charged to customers.
"There are clearly things as a company that we've got to work
on," Ms. Mack said in an interview Wednesday. "I really want to
make sure we get this right by our team members, investors,
customers and other audiences, I want to make sure they understand
the changes going forward."
Ms. Mack was named head of community banking in July when the
bank said Carrie Tolstedt would step down from that position and
retire at year-end. Ms. Tolstedt was roundly criticized by members
of Congress for the sales practices. The bank's board subsequently
clawed back $19 million of her compensation and said she was no
longer with the firm.
Ms. Tolstedt hasn't responded to requests for comment. Ms. Mack
said she hasn't talked to Ms. Tolstedt since the regulatory
settlement in early September.
A 32-year Wells Fargo veteran who previously ran the bank's
brokerage operation, Ms. Mack told employees on last week's call
that the bank is working on a new performance plan based on updated
metrics around customer service, growth and risk management.
There is some talk within the retail bank of creating new kinds
of sales goals based on combinations of product lines, one
retail-banking executive said. But the executive added this could
be "kind of tone deaf" given the bank's current reputational
troubles.
Ms. Mack said in the interview nothing has been finalized, but
the bank is examining loans, deposits and investments in terms of
how they are aligned with customers' growth and providing value to
them.
Already, the scandal appears to be taking a toll. During the
bank's third-quarter earnings report, it said customer visits with
branch bankers fell 10% in the August-to-September period compared
with a year earlier. Consumer checking-account openings fell 25%
and credit-card applications dropped 20%.
As she tries to reverse this, Ms. Mack has been traversing the
U.S. on a dozen "listening tours," planning to hit 20 cities by
month-end. The point: figure out what went wrong and how to fix it,
according to employees, executives and internal calls reviewed by
the Journal.
"I do want team members to know that I want to know if there are
situations not congruent" to what the bank thinks is acceptable,
she said.
On the call, midlevel managers asked repeatedly about how to
measure employees' performance, and, in turn, how they would be
paid. Managers have recently received average weekly numbers by
team but not individuals.
In the past, such performance figures have dictated parts of
employees' salaries. With sales goals now scrapped, Ms. Mack said
the bank would calculate fourth-quarter performance by evaluating
customer-service metrics and compare that result to the average of
the first three quarters of incentive compensation. The employee
would get the higher of those two numbers.
"We wanted to make sure people felt comfortable that they would
be paid at a like amount," Ms. Mack said on the call.
In her old job, she was based in the brokerage unit's St. Louis
headquarters. Now she is back working in Charlotte, N.C., where
Wells Fargo has extensive operations. It was also the area she was
previously based since she was originally with predecessor banks
Wachovia and First Union.
Ms. Mack jogs regularly and has earned a reputation for her
drive among current and former executives. She has also known tough
times. She took a leave of a few months after one of her daughters
died unexpectedly from meningitis two years ago.
Among her many roles at the bank, Ms. Mack has led wealth
brokerage, been a retail-banking regional president and a managing
director of health care and corporate banking, garnering favor with
predecessor bank Wachovia's chief Ken Thompson, executives
said.
Write to Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
October 20, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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