In case you missed it, last week Wells Fargo paid $185M in fines for illegal banking practices. Bank employees were opening new accounts for existing customers without the customer's knowledge, then closing the accounts. Usually the customer had no idea that the account had ever been opened, but the employee still earned credit towards their quota of new accounts opened. It is estimated that 1.5 million fraudulent bank accounts were opened and closed dating back to 2011. Wells Fargo was not trying to steal money from customers (although it has agreed to pay 2.6 million in fraudulent fees), rather these practices are attributed (mostly) front line workers struggling to meet quotas for selling new products and ultimately finding a “work around”. In the end, 5,300 employees of Wells Fargo were fired for opening fraudulent accounts. I believe the Wells Fargo debacle has two important lessons for leaders in education: (1) how we apply measurement in our systems is important and (2) it is about the system, not the people.
As the New York Times article points out, Wells Fargo has been financially successful since the financial crisis and had gained a reputation as a tightly run organization as other banks have struggled to regain their footing. It is clear that Wells Fargo adopted a strategy that focused on developing new business from its existing customers by cross-selling new products. For example, if a customer has a checking account Wells Fargo believed it made more sense to focus on that customer for credit card and mortgage offerings rather than focus on acquiring new customers. Apparently, Wells Fargo pushed this strategy by setting sales quotas for employees. Employees felt pressure to achieve these quotas and worried they would lose their job if they didn’t. Wells Fargo appears to have a clearly articulated strategy (cross sell existing customers instead of increasing total number of customers) and an appropriate leading indicator for whether strategy is being implemented (new accounts opened by existing customers). Fraud emerged as a problem when Wells Fargo created quotas for employees. No longer was new accounts just a leading indicator, but now it was also a tool of accountability for individual employees. Wells Fargo, the tightly run ship that Wall Street had imagined, violated one of Edwards Deming’s key points: “eliminate numerical quotas”. Numerical quotas are counter-productive to quality and improvement and create fear for employees and reduce opportunities for learning. One might argue that Wells Fargo falling victim to Campbell’s Law is obvious in hindsight, but that isn’t true, it is just obvious that this would happen.
Schools and districts should be using measurement to understand and improve the performance of their system. It makes sense to clarify strategy, map the system, and monitor leading and lagging indicators. What doesn’t make sense is to use those indicators as tools for accountability. If schools or districts choose to use a measure for accountability (or evaluation) they can rest assured that it is no longer useful for learning. In short, schools can expect that the system will be gamed as soon as quotas are introduced. Measurement that is used to improve learning is essential for success, but measurement is can be corrupted if used for the wrong purpose.
The second lesson we in education should learn from this Wells Fargo story is that it is about the system, not the people. Wells Fargo reported firing 5,300 employees (about 1% of total work force) since 2011 for these fraudulent banking practices. Yet, the Wells Fargo response was that the company culture had been infected by bad apples and they resisted acknowledging that the practice of setting quotas had caused the behavior. The CEO asserted that there was no incentive to “do bad things”. Except, it seems like there was an incentive to do bad things. Instead of acknowledging that the system was broken and had created this behavior, Wells Fargo assigned blame to individual employees and moved on. As the Proctor and Gamble guru Arthur Jones noted, “All organizations are perfectly designed to get the results they get.” When and organizations are not getting the results they expect they should take time to analyze the system, not identify the people responsible. It is remarkable that the problem of fraudulent accounts at Wells Fargo dates all the way back to 2011. The response, fire the employee, never changed the behavior (employees committing fraud). Maybe somebody asked “why”, but if they did it did not result in systemic change.
The second lesson that schools and districts should take from this Wells Fargo story is that the system is more powerful than the individual. Our systems are perfectly designed to get the results we are getting. If we want to improve take the time to understand the system. Develop a strategy for monitoring both leading and lagging indicators. Focus on learning how the system is performing. Spend time asking the employees tasked with implementing the strategy about their experiences.