Choose Culture Norms Wisely

Gustavo Grodnitzky Organizational Culture, Uncategorized

As a CEO and/or leader of an organization, culture is your number one priority. One of the most important decisions leaders make is the type of norms one will bring into one’s organizational culture: “business norms” or “social norms.” Business norms are all those things we associate with business: quid pro quo, this for that, things are paid for in an agreed upon currency, and payment is typically made at time of exchange. Social norms are different. Social norms have a softer side. Social norms are what drive us to open a door for someone else or give up our seat on public transportation for an elderly person. Payment isn’t necessarily expected, and if it is, it may not come at time of service. Because these are two different behavioral norms, they drive different sets of behaviors. Business norms drive much more self-interested, self-serving, internally competitive, “profit comes first” behaviors. Social norms drive much more collaborative, team-oriented, “profit follows culture” behaviors. In short, business norms drive more of the behaviors we don’t want; social norms drive more of the behaviors we do want.

Case in point: The never-ending saga of Wells Fargo. Whenever you see or read about a company that has a seemingly endless stream of illegal and/or unethical behaviors across the entire company, you should always look first to the culture and the application of business norms, as they often internally justify the behaviors in pursuit of profit.

Wells Fargo is currently the third largest bank in America, and it had a long and reputable history … until 2016.

September 8, 2016: A story was published that Wells Fargo employees had created more than 2 million bank and credit card accounts – without the knowledge of their customers. The company was fined $185 million. Wells Fargo fired 5300 employees for reasons related to the scandal. The CEO at the time, John Stumpf, stated, “We don’t have a culture issue. This happened because of 5300 bad hires.”

September 28, 2016: Wells Fargo was accused of illegally repossessing service members’ cars. The bank paid $24 million to settle these charges.

January 23, 2017: Wells Fargo acknowledged that it retaliated against employees who tried to raise concerns about the fake accounts being created.

March 27, 2017: Wells Fargo was accused of discriminatory and illegal lending practices. The company settled a class action lawsuit and promised $110 million to the customers it wronged.

April 21, 2017: The Wells Fargo class action lawsuit settlement was increased to $142 million.

June 14, 2017: A new lawsuit claimed Wells Fargo modified mortgages without authorization from its customers. The bank “strongly denied” the charges.

July 27, 2017: Wells Fargo admitted it charged at least 570,000 customers for unnecessary auto insurance. An internal review revealed that approximately 20,000 people may have defaulted on their auto loans because of the increased charges.

August 4, 2017: Wells Fargo was sued for overcharging small businesses for credit card transactions.

August 31, 2017: An additional 1.4 million fake accounts were identified, bringing the total number of fake accounts created to 3.5 million.

October 3, 2017: Wells Fargo admitted to wrongly fining 110,000 mortgage holders for missing a deadline that was the bank’s fault.

November 13, 2017: Wells Fargo admitted to illegally repossessing cars from another 450 service members. The bank agreed to pay an additional $5.4 million.

April 20, 2018: The Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency announced that Wells Fargo will be fined $1 billion for their car insurance and mortgage practices.

Wells Fargo is a classic example of a company that established a culture using business norms. If you look at any company that has had a financial scandal over the last 50 years (Enron, Tyco, WorldCom, the VA scandal), they were all using business norms. Business norms lend themselves to financial scandal because profit comes first – often at the expense of all else, including culture. Social norms insulate a company from financial scandal because profit is a result of a collaborative culture.

What type of norms are you using in your company culture? Are you employees collaborating with each other to serve your customers and business partners or are they competing for an individual win and/or thinking about the bottom line first? Do your customers and business partners feel like actual partners in a shared endeavor or do they feel “nickel and dimed” at every turn? If you’re not sure, you may want to take a closer look at the norms in your culture – understanding that it is social norms that drive more of the behaviors we do want.

Let’s cultivate a strong culture – together!