“At Wells Fargo, we are a bank that works hard to help our customers and communities succeed. When they succeed, so do we,” John Stumpf, CEO of Wells Fargo writes in the bank’s 2011 CSR report. Richard Bove begged to differ, at least when it comes to the bank’s customer service. He told the New York Times last month how he “encountered this string of bad experiences at his Wells Fargo branch in suburban Tampa.” As a result, Bove, a well-known bank analyst, moved to another bank, but he also had an epiphany: Bad customer service doesn’t necessarily mean the company is bad. When it comes to the financial sector, he believes, the contrary is true – bad customer service can indicate a good business.
How does it work exactly? Bove explained for example that when his branch was part of Wachovia, the manager used to stand to greet customers when they entered the bank. After Wells Fargo bought Wachovia, the manager’s booth was removed and replaced by a desk where an employee was selling bank products. While Bove didn’t like the change personally, he appreciated it professionally: “Spending time solving problems with people is not selling products,” Bove told the Times. “It’s wasting time.”
This interesting assumption provoked an interesting discussion, and it also kept me thinking – what does it mean from a sustainability point of view? After all if Bove is right it can actually apply that stakeholder engagement or even sustainability as whole might be just “a waste of time.” Is it possible that in some cases less sustainability means better business?
Bove’s conclusion about Wells Fargo is based on the assumption that most people and businesses won’t behave like him, i.e. they won’t leave Wells Fargo because of bad customer service. Otherwise, if everyone behaved as he did, there would be a smaller customer base, which might lead to lesser profits and a growing risk. Bove believes customers have not fled because the bank is doing very well – it had 10 consecutive quarters of earnings growth.
Now, let me take his assumption one step forward – it might not be just customer service, but also the way the bank treats its employees, its environmental policies, its relationships with communities and so on. Basically, customers just don’t care much about these issues, or don’t care enough to leave the bank if they’re unsatisfied, as long as the bank sells them good products.
While it’s easy to dismiss this sort of thinking by describing it as “short-termism,” it might be worthwhile to take another look at it as it reflects a general question on the essence of CSR – do people care about social and environmental issues enough for it to make a difference for companies? The basic notion of CSR is that the answer is yes and there are plenty of examples to demonstrate how corporate social responsibility benefits the bottom line. At the same time we have other examples showing the opposite. For example, how many people don’t buy a new iPhone or iPad because of the working conditions at Foxconn? How many people don’t buy on Amazon.com because the company is refusing to measure and report its carbon emissions? And finally, how many people don’t buy at Whole Foods because the company doesn’t release a sustainability report or doesn’t have a climate change policy?
The answer is probably not too many. Apple, Amazon and Whole Foods show great results, and the fact is that no matter how material you think these issues are, the majority of consumers think they aren’t. I guess that Bove would see these companies as further examples proving his point, but what he might be missing is that even though most consumers still don’t care about these issues to a degree that it will influence their decisions, we have reached a point where even a relatively small number of customers can make a difference. Armed with simple virtual tools, like online petitions on Change.org, customers that do care find ways to effectively translate their concerns into a serious headache for companies.
And no one is immune, not even banks. Bove can check with Bank of America, which abandoned its plan last year to charge customers a $5 monthly fee for using its debit cards for purchases, after a public uproar fueled by a petition a young customer posted on Change.org attracted more than 300,000 supporters. Even though we’re talking about less than one percent of the bank’s customers, it was enough to generate various types of risks for the bank, including reputation and regulative risks, to make the bank’s decision to abandon its plans a no-brainer.
Interestingly, Wells Fargo decided at the same time to abandon a similar $3 debit card fee, stating feedback from customers in a pilot program as the reason for it. “Wells Fargo is trying to find the right balance between doing what’s best for customers and shareholders,” CEO Stumpf said back then to CNBC. I believe is no contradiction between the two. Not only that research shows that companies with substantial sustainability policies outperform their counterparts in the long term, but as BofA’s and other examples show us being inattentive to customers can be very risky in the short-term as well. As Paul Polman of Unilever nicely summarized it: “we are not out there just to make money, but to satisfy consumer needs and doing it well, we will make money.”
Raz Godelnik is the co-founder of Eco-Libris, a green company working to green up the book industry in the digital age. He is an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the New School, teaching courses in green business and new product development.