By Kevin Groves, PhD
Last year, banking giant Wells Fargo was fined $185 million for allegedly creating more than two million fake customer accounts. Now, new filings by plaintiffs’ attorneys suggest that as many as 3.5 accounts may have been fraudulently created in the period between 2002 and 2016 (the bank disputes the number).
This significant failing is directly attributable to the bank’s upper management, which neglected to acknowledge and address mistakes early in the process. The failure to act created a culture that discouraged staff across levels to report problems and fraudulent actions — including pressure from front-line managers on performance outcomes. Ultimately, CEO John Stumpf lost his job, and the crisis severely damaged public confidence in one of the few large banks that avoided major damage during the financial crisis in 2008-2010.
The simple fact is, companies are run by people, and people make mistakes. The best thing a company can do to mitigate issues is to build a corporate culture that both tolerates mistakes and learns from them, regardless of whether the missteps are from front-line employees or the C-suite. But when personal mistakes impact your business, hiding from the consequences can potentially be the beginning of the end.
While small business owners probably don’t have the high profile of John Stumpf of Wells Fargo, those who find themselves in this predicament should follow five steps to right themselves and safeguard their operations:
- Look in the mirror and assess what you’ve done wrong. First, failing to assess what you’ve done, and the impact, means the same thing could happen again. Second, this step will allow you to clearly understand the problem to be solved. After all, this is more than a PR problem; issues can pervade your personal and professional existence. Case in point: Lance Armstrong steadfastly denied that he had been using performance-enhancing drugs despite a flood of evidence to the contrary. His mea culpa, when it finally happened, appeared to be about more damage control than genuine contrition. He still blames the U.S. Anti-Doping Agency and in 2015, told the BBC, “If you take me back to 1995, when doping was completely pervasive, I would probably do it again.” Armstrong now faces a $100 million lawsuit from former teammate Floyd Landis and the U.S. government.
- Take responsibility and apologize. The CEO of Airbnb advised leaders in a tough situation to “have some humility.” That’s good advice. Consumers are a forgiving bunch, willing to give a brand a second chance. Owning the mistake suggests that you’re trying to change and improve, not sidestep and obfuscate.
- Reestablish trust with your stakeholders. Specifically, trust needs to be regained with the wronged party — generally, employees, investors and/or customers. It won’t happen overnight. Every good crisis communications professional knows that reestablishing trust takes effort and time.
- Embed your new thinking into your operations going forward. Let your actions speak for themselves, without being self-promotional or artificial. In fact, Kalanick would be well served to heed this advice from a CNN opinion commentator that Kalanick’s mistakes were, “…only the most recent in a long line of incidents from a company that has celebrated disruption above community, and prized money, power and control above morality.”
- Follow your values, no matter what. Sometimes that requires a mea culpa, but sometimes that means making unpopular decisions and sticking to your morals. Values resonate with leaders, shaping their reactions and decisions in the face of crisis and more broadly, defining how their behaviors impact their companies. You should consider pursuing best practices for executive leadership, including a reflection of your personal values and leadership principles, followed by a 360-degree assessment to ensure employees and others view your behavior as being consistent with your stated values.
Proverbs 13:3 tells us that, “Those who guard their lips preserve their lives, but those who speak rashly will come to ruin.” As an entrepreneur, you’re used to challenges. Don’t let a highly public mistake define and ruin your business. Investing in a few strategies will be rewarded in consumer forgiveness, investor confidence, employee morale, and the intrinsic reward of practicing values-centered leadership.
Kevin Groves, PhD, is an associate professor of organizational theory and management at Pepperdine Graziadio School of Business and Management and president and founder of Groves Consulting Group, which helps organizations develop leadership talent through executive assessment, development, and succession planning capabilities.
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