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Kovacevich, 167,500 others guide Wells Fargo through the crisis

Written by: Dan Day

Article Overview: Why is it the only major bank that's thriving through the chaos? Employees and their relationships with customers.

Kovacevich, 167,500 others guide Wells Fargo through the crisis

Some Wall Street analysts suggested that Dick Kovacevich should step down as chairman of Wells Fargo & Co. after he reached the mandatory retirement age of 65 last October. They’re wise not to complain that he’s sticking around a little longer.

He is, after all, responsible for shaping the vision that strengthened consumers’ faith in Wells Fargo, carrying it through a crisis that has left most other major banks tattered. A vision he began shaping while CEO of Minneapolis-based Norwest Corp.

Wells Fargo climbed to the top by creating a brand through strong customer relationships. This strategy sustained it through the mortgage crisis, and will through the looming credit crisis. Revenue for 2008 was $42.23 billion, up 7 percent from the previous year and best among its large-bank peers. Behind these numbers is testament to the brand and its impact on new and existing customers: The bank realized a 31 percent growth in deposits.

How has it survived, even thrived, through this historic economic downtown?

It took diligence in lending practices and management commitment to core values forged 15 years ago. While other big banks ignored the basic tenants of running sound financial institutions, dizzy from the mortgage-loan money swirling all around them, Wells Fargo remained undistracted.

But it also took something as important but often lost in financial pundits’ evaluation of the bank’s success: 167,500 employees of the bank who build the brand and create committed customers.

They’re able to engage customers because “a brand is a relationship,” says Minneapolis brand expert Karl Speak. It’s not a cool logo, snappy slogan or colorful packaging, and Wells Fargo understands and builds on that distinction.

Those employee-to-customer relationships have built a customer base that is satisfied and engaged, often buying multiple products from the bank, rather than just a mortgage or just a checking account. This bought the bank protection when one product—mortgages—faltered.

Kovacevich made it a priority that employees encourage customers to buy all their financial products through Wells Fargo. His goal: sell at least eight products to every customer.

"We want to earn 100 percent of our customers' business,” he said. “The more products customers have with Wells Fargo the better deal they get, the more loyal they are, and the longer they stay with the company, improving retention. Eighty percent of our revenue growth comes from selling more products to existing customers."

The concept of introducing customers to more of a company’s products is called “cross-selling” and has been tried in the financial services industry with limited success. Individual products are typically sold through their own distribution channels in larger institutions, causing the practice to stall in most firms. When Norwest acquired Wells Fargo in 2000 (giving up its name to the strong west-coast brand), Kovacevich had already made it a marketing pioneer, selling all of its products through all of its channels. These efforts were quickly adopted by Wells Fargo.

It’s paying off. The average American consumer owns 16 different financial products from eight different institutions, putting the average "cross-sell ratio" for a financial institution at two. In 2008, Wells Fargo purported to have a cross-sell ratio of 5.73 products per Community Banking household. Such product penetration is achieved through front-line associates and managers creating relationships during routine employee-customer encounters.

Wells Fargo’s CEO John Stumpf, now carrying the flag for Kovacevich’s customer-centric ideals, calls financial services “the ultimate team sport.”

“It doesn’t matter what our responsibilities are, our levels or titles, what businesses we’re part of, or where we live and work,” he said. “We all should be passionate about our values and share them with others. We believe everyone on our team is important and deserves respect.”

That respect is then shared like currency with customers during interactions, and has given the company accolades in return, from customers in the form of deposits, and from industry observers.

Businessweek called Wells Fargo one of the top 50 places to work; Diversity Inc. places it in the top 50 companies in all industries for diversity (top 10 for Latinos, executive women and employee recruitment and retention); Latina Style ranked it in the top 50 companies for Latinas to work; and Essence said Wells Fargo is among “the top 25 great places to work for African Americans.”
If you’re searching on-line for a career in banking, Wells Fargo’s advertising urges you to “join a company where people are the competitive advantage.”

Tellers and other employees on the front lines are empowered to try to make personal connections with customers. You might notice they’ll say your name when you’re inside a branch or at the drive-thru. However, when servicing some 28 million customers and representing 150 products and 80 different business units, customer-facing employees simply can’t know everything about all products, let alone customers.

Stumpf admits that day-to-day execution of the strategy to become a seamless operation across all product categories is not without its challenges.

“Too often, [customers] get behind the curtain and see the plumbing and wiring, and they experience that we're not always connected,” he said.

Still, Wells Fargo is arguably more connected to its customers than any major American financial institution, and its board of directors was wise to grant Kovacevich exemption from the mandatory retirement age, keeping him on through the acquisition of Wachovia.

Customers will thank board members for that.

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Article Tags: brand expert, cool logo, core values, credit crisis, customer base, customer relationships, dick kovacevich, existing customers, financial institutions, management commitment, mandatory retirement age, mortgage loan money, multiple products, norwest corp, previous year, pundits, snappy slogan, wall street analysts, wells fargo, wells fargo co



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