Dive Brief:
- Pointing to customer preferences that have changed market conditions, Wells Fargo announced it will reduce its workforce by up to 10% over the next three years, cutting as many as 26,000 jobs across the country. The company will use layoffs and attrition to reach their labor reduction goals by 2021.
- The bank plans to close about 1,000 branch locations nationwide over the coming two years, the Houston Chronicle reported. Last month the company announced layoffs of over 600 mortgage employees, according to Reuters. The company cited market conditions for the staff reduction.
- The company has been scrambling to regain consumer confidence following 2016 scandals that included aggressive sales goals that revealed its own employees were opening unauthorized accounts on behalf of customers. Over 2 million customer accounts were opened without consumer consent in an effort by employees to meet sales expectations. The layoffs, closures and workforce reductions may be the devastating aftershock of the scandal that prompted the company to change its wage structure and sales initiatives.
Dive Insight:
A truly high-profile scandal still has the power to knock giants, even in a more diffused media environment. While the company continues to recover from the unauthorized accounts scandal, fines, refunds and settlements have neared $200 million as the company struggles to regain consumer confidence.
Wells Fargo has not had an easy time in its recovery. The EEOC opened an investigation into claims of sexual harassment against the company in 2017, and claimed Wells Fargo had been uncooperative in its investigation. And only months before that, the company was required to pay over $5 million and reinstate an employee who was fired because, he claimed, he was a whistleblower.
For businesses, protecting their brand in the market is key, especially during high-tension times such as layoffs. Customers and talent will quickly abandon a business with a negative connotation. The scandal prompted the company to look at the way it recruited and rewarded its employees in a new light. Following the revelations that staff members were creating unauthorized accounts to meet expected sales goals as well as increase their base earnings, the company shifted its practices and increased hourly rates up to $17.00, stating that it was putting employees before shareholders.
