Handling Bad Publicity
Four Communications Lessons from the Wells Fargo Scandal
When confronted by crisis, it may be a natural response for companies to batten down the hatches and wait for the media storm to pass. However, in our current age of social media and two-way customer engagement, crisis communications takes on a new urgency. Hoping that a crisis will blow over is simply not an option.
The 2016 Wells Fargo debacle offers a worst-case scenario for public relations and communications professionals. Under intense sales quotas, bank employees opened 2 million false accounts without customer knowledge; this resulted in millions of dollars in fines, and more than 5,000 employees—nearly 1 percent of the Wells Fargo workforce—fired. This painful episode offers valuable lessons in how to handle bad publicity.
Lesson 1: Apologize to the right people.
Many PR journalists and bloggers have commented on the initial “dry and sterile” statement offered by Wells Fargo in the aftermath of the crisis. The fraudulent accounts resulted in bounced checks, lowered credit scores and other real problems for Wells Fargo consumers. In their September 8 statement, the company said:
“Wells Fargo reached these agreements consistent with our commitment to customers and in the interest of putting this matter behind us. Wells Fargo is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request.”
This statement did assume responsibility, and detailed the settlement amount. Yet the impact on consumers was downplayed: “Accounts refunded represented a fraction of one percent of the accounts reviewed, and refunds averaged $25.” Other words that stand out are “putting this matter behind us.” Is this matter behind the affected customers, or for that matter, the fired employees? The language used reveals it was mostly written to minimize the damage and appease regulators, lawyers, and investors—not the consumers harmed.
Lesson 2: Don’t mince words in your apology.
Wells Fargo ran a full-page newspaper ad with a letter shortly after the settlement announcement. While it did express “regret,” it never used the more powerful words “apologize” or “sorry.” It also danced around the issue by never mentioning “false” or “fraudulent” accounts. Clearer, stronger, more direct language was called for here. Instead, the letter seems to be a half-hearted apology, one that minimizes the impact of the damage.
Lesson 3: Assume personal responsibility at the top.
The initial statement and the subsequent newspaper ad did admit regret. However, the language used in these initial reactions shifted the blame to lower-level employees without fully taking on responsibility for the large-scale fraudulent activity on a company level. For example, John Stumpf’s signature as company CEO failed to appear on the letter in the newspaper ad. This gesture, although small, would have been a meaningful symbol of top-level accountability; all crisis-focused statements ought to be attributed to the CEO from the start.
When John Stumpf testified before Congress, he not only admitted regret, but even said the golden word “sorry” and noted that he was “fully accountable.” This admission is critical: Those at the top must take ownership and accept responsibility in crisis situations. But Stumpf’s testimony before Congress may have been too little, too late for a company facing a scandal of this size.
Lesson 4: Move quickly with specific fixes.
Company ads, web pages and television ads rolled out weeks later offered a few more details. However, a television ad by Wells Fargo concentrated mostly on nostalgic imagery and a vague promise to “make things right.” It made mention of refunds, but did this refer just to fees or to other damage (such as fees sent to collection agencies) that impacted customers with these bogus accounts? Wells Fargo did not mention one inconvenient fact: Consumers with complaints about their accounts would be referred into binding arbitration, a system that puts consumers at a disadvantage.
In our social media-driven age, customers expect an immediate reply to problems and mistakes. They complain on Twitter and Facebook, and increasingly major companies, such as airlines and hotel chains, move immediately to respond to issues through social media. Similarly, small businesses on sites such as Yelp and Angie’s List do well when they own their pages and respond to negative reviews quickly. Consumers can tell when companies drag their feet.
Does all this really make a difference? It did in the case of Wells Fargo. According to the LA Times, only 3 percent of bank customers in a survey reported being directly affected by the fraud—but 32 percent said they were actively looking for another bank. In addition, the percentage of prospective customers considering business with Wells Fargo shrank to 19 percent, down from 52 percent before news of the scandal broke.
Excellent customer service and accountability define a brand. The Wells Fargo response has been slow-moving, reluctant and vague, providing an object lesson in how not to react during a crisis. This lesson applies to communications and public relations professionals at companies big and small. Apologizing with the right language to the right people, taking responsibility at the very top and quickly resolving problems can all go a long way in fixing damage—and protecting a brand’s reputation from the start.
What Will Happen Next?
The short-term damages of a scandal can mean litigation, settlements, layoffs and new hires. It means some customers will get scared and close their accounts and others will think about it but ultimately take no action. The stock will likely fall, but if the company gets itself on track, it will rise again. The long-term damages to the brand are another matter. Brand reputation is intangible and sometimes difficult to measure. It’s one more reminder that your brand and your company operations are not mutually exclusive. Your brand is the external perception, and you need to help make that perception as positive as can be.