Perhaps lost amid the Hurricane Florence coverage last week was the news that Wells Fargo plans to cut 5% to 10% of its employees, or as many as 26,500 positions, over the next three years. That is bad for North Carolina, where the San Francisco-based bank employs more than 30,000 people, mostly in Charlotte, its largest employment center.
Nowadays, many large companies routinely slice 5% or 10% of their weakest-performing employees, a management theory popularized by former General Electric CEO Jack Welch. Wall Street investors typically praise such cost cutting because it can lead to short-term profit gain and motivate the remaining staff to work harder.
Unfortunately, cutting 10% of staff seems likely to further demoralize a workforce still reeling from the series of scandals disclosed over the last few years. That’s disappointing because a key advantage for Wells and its predecessors, Charlotte-based Wachovia and Minneapolis-based Norwest, was the pride displayed by its employees: To be a Wachovia banker implied professionalism and a devotion to a well-respected corporate culture.
Wells still pays well and provides outstanding benefits, my friends who work for the company say. But the historic swagger is evaporating and there’s less optimism and less pride, they say. Knowing that more staffing cuts are imminent can’t help.
So CEO Tim Sloan faces a big challenge. The New York Post, citing four anonymous sources, reported that Wells’ board had reached out to former Trump Administration economic adviser Gary Cohn about replacing Sloan, who has had the job for two years after the ouster of John Stumpf. Wells quickly rebutted the report as false. (No offense intended, but the Post’s business section has a reputation for hyping stories, in tune with the tabloid newspaper’s style.)
Still, it’s conceivable that Wells Fargo’s board, increasingly made up of newcomers who weren’t around during the bank’s glory days, would seek a dramatic shakeup, even if it involved a former Goldman Sachs Group executive such as Cohn. For decades, Wells promoted its disdain for investment banking, bond trading and brokerage services, businesses in which Goldman excelled. Community banking, commercial lending and mortgage lending were Wells’ focus. After acquiring Wachovia in 2008, however, Wells learned those transaction-oriented businesses provide much lucrative opportunity, something that former Wachovia CEO Ken Thompson had preached for years.
Wells’ predecessor companies have been major banking forces in North Carolina for generations. While that will continue indefinitely, the company’s rivals are licking their chops at the opportunity to siphon business away from the $1.9 trillion bank.