Wells Fargo's Diversified Assets
March 1, 2005
| The 300 top leaders of Wells Fargo & Co., the nation’s fifth-largest bank in terms of assets, met for two days in late January to discuss what the 146,000-employee company considers its most important competitive advantage: its people. The annual Connections Conference focuses on the role that senior leaders play in engaging team members in living its values and achieving the company’s vision and strategic initiatives.
Many firms herald their talent as their differentiation, but Wells Fargo has a record to support its rhetoric. When the financial services company posted a profit of $7 billion for fiscal 2004, an increase of 13 percent compared with 2003, CEO Dick Kovacevich rewarded employees with a special contribution in Wells Fargo common stock to their 401(k) plans. And despite a massive merger, the company minimized layoffs by retraining staff.
At the Goldman Sachs Bank CEO Conference in December, Kovacevich said that "everything we do at Wells Fargo starts with our people. Why? Because when people are properly incented, rewarded, encouraged and importantly recognized, they provide better service, generate more sales and produce even better business results. This generates more revenue, which results in greater profits."
Wells Fargo wins the 2005 Optimas Award for General Excellence for its workforce management strategies that successfully integrated two companies, fostered revenue growth while retaining talent and held employees to high ethical standards. Here are highlights of the company’s work in six Optimas categories:
Partnership: While human resources professionals at many companies struggle to be treated as business partners, that partnership has been enshrined at Wells Fargo. They are part of all key meetings and are expected to have as much of a voice about the strategy and direction of the business as they do about human resources practices.
"The question about HR being a business partner is not a question at this company," says Patricia Callahan, executive vice president and director of human resources. "It hasn’t been a question for a long time. The HR function is critical to maintaining the staff and maintaining the culture that drives the company."
Managing change: This is a proven skill at the growing company, which is itself the result of a merger. In 1998, Wells Fargo and Norwest Corp., a Minneapolis-based bank, agreed to a "merger of equals." The combined entity adopted the name Wells Fargo, one of the best-known in banking, and moved its headquarters to San Francisco. Kovacevich, Norwest’s CEO, became CEO of the new Wells Fargo.
Outsiders questioned the cultural compatibility. Norwest had relied on a "community bank" approach based on customer service. Wells Fargo had emphasized efficiency, favoring supermarket branches over full-service facilities.
Upon the merger, a team with members from both predecessors analyzed the two cultures. Wells Fargo then purposefully planned its new culture and proceeded at a deliberate pace to minimize missteps. "We were very clear going forward that this is the blueprint for the future," says Holly Kurtz, vice president of talent management, learning and development. "Then everything we did reinforced it."
Since then, the company has acquired 60 firms, such as Utah’s largest bank, First Security Corp. Employees of acquired banks are paired with "buddy bankers" from Wells Fargo, who help instill the company’s vision and values.
Innovation: Executives vowed that the 1998 merger would not lead to mass layoffs. Instead, Wells Fargo practiced what it calls "retain and retrain," a philosophy it still follows. The company retained and reassigned two-thirds of employees whose positions were eliminated as a result of the merger. Head-count reductions occurred primarily through a hiring freeze and attrition.
"It’s not that we guarantee that we never do layoffs," Callahan says. "We don’t do that. But in every case, we do our best to open up opportunities for the individuals who are affected. We never want to be in the press saying, ‘Wells Fargo saves X million dollars by laying off thousands of people.’ We don’t believe that is good for us, for our team members, for our customers, for our shareholders, for anyone."
Service: Instead of focusing on cutting costs, Wells Fargo concentrates on growing revenue. CEO Kovacevich identified cross-selling among its 80 business lines as an opportunity for growth. Workforce management plays an integral part in cultivating that strategy across product lines and geographies. Employees can earn bonuses for achieving collaboration goals.
"And people’s careers are tied to it," Kurtz says. "If they don’t partner, if they don’t collaborate, they’re not the ones promoted." The result is that consumers had an average of 4.6 products with Wells Fargo in 2004, compared with three in 1998. TowerGroup Primary Market Research puts the industry average at 2.4.
"Kovacevich’s strategy at Norwest, which he brought to Wells Fargo, was: ‘Don’t worry about reducing costs. Focus on increasing revenue,’ " says Charles O’Reilly, professor of human resources management and organizational behavior at the Stanford Graduate School of Business. "That’s a cultural issue. The execution really is in the people."
Vision: With success dependent on talent, employee development and succession planning receive attention at all levels, from the board of directors to the business-line managers. Wells Fargo introduced a talent-management process that brings together the top 25 people in the company, business-line managers and human resources leaders. They meet three times a year to discuss such topics as key openings and cross-group moves. Once a year, the business-line managers meet with the human resources director and CEO for a talent review, a workforce analysis akin to a budget review.
Ethical practice: Wells Fargo takes ethics seriously. Its Code of Ethics and Business Conduct details policies and standards for employees, covering everything from maintaining accurate records to participating in civic activities. Every year, employees also receive ethics training. Anyone in the company can ask questions or report breaches anonymously using an ethics hot line or special e-mail address.
The company is not timid about firing violators, dismissing at least 100 people a year for misconduct ranging from conflicts of interest to cheating on incentive plans.
"I’m the biggest soft touch in the world," Callahan says. "But when someone lies or cheats, you can’t have people like that representing us to our customers, whose trust is all we have."
Workforce Management, March 2005, pp. 42-43 -- Subscribe Now!