Thursday, February 5, 2009

Wells Fargo: penny-wise and pound-foolish?

It's been reported that Wells Fargo has canceled a lavish trip for employees to Las Vegas due to public outcry and congressional scorn.  Rep Shelley Moore Capito, a West Virginia Republican who sits on the House Financial Services Committee, says
"Let's get this straight:  These guys are going to Vegas to roll the dice on the taxpayer dime?  They're tone-deaf.  It's outrageous."

Now, my opinion of the banks' behavior over the last few years is lower than just about anybody else's in the blogosphere.  I've written several articles expressing my disappointment.

However, today I'm going to argue Wells Fargo's side of the story...  (full disclosure - I worked for Wells Fargo Services Company at one time in my life before real estate, and still have many friends who work there.)

First I need to make some assumptions about the cost of the trip.

  • 12 nights in a top-flight Vegas resort-casino..  They're probably getting a price break for having such a large group, and they'll get weekday rates most of the trip.  Let's assume $250 per night.

  • Assuming 25% of the attendees are spouses of Wells Fargo employees, we can reduce 25% of the hotel expense.

  • I'll assume $100 per day per person for food.

  • $1000 per person for travel to & from the event.

  • $100,000 for the group's entertainment.  Spread this into the 1,000 attendees and it's $1,000 per person.

  • ($250 per night * 12 nights * 75% = $2,250 accommodations)  PLUS ($100 per day * 12 days = $1,200 food) PLUS ($1,000 travel) PLUS ($1,000 entertainment) EQUALS $5,450.

  • I want to be conservative, so I'm going to round up to $7,500 per person for the trip.

Next, let's talk about who is attending this "junket."

Wells Fargo employs over 100,000 people.  I assumed above that 25% of the 1,000 attendees are spouses of Wells Fargo employees, which means that 750 employees are invited to attend.  That's less than 1% of the employees - a very select few.

These select employees range across all pay levels and job titles - tellers, customer service representatives, computer programmers, financial analysts, managers, executives..  They're the  best of the best, the people who drive the company to meet its objectives.  They're the first ones in the office in the morning, the last ones to leave at night, and the ones who bring their work home on the weekends.  They're the ones everyone else goes to with questions, who take initiative, make great decisions, and never miss work.  In short, they're the most important employees the company has - the ones whose departure from the company would cause a significant loss!

Given that context, it would be reasonable to give these top-flight, most-important, key employees a $7,500 raise to their salary, right?  But the trip to Las Vegas is even better than a raise!

* It's a one-time expense, which must be re-earned each year.

* It can be transferred to a different employee who excels the next year.

* It's a public display of a job well-done, which makes people feel appreciated.

** The employees who attend the trip will have a special connection with the company and the company's top officers, which will make them less likely to leave in the future - and that's the very goal of the trip in the first place!

So although I agree with Wells Fargo's "junket in Vegas", I find myself once again disagreeing with a bank.  I think Wells Fargo would have made a better decision if it had stood up and made its case - this isn't a lavish party with tax payer dollars; it's a thank you to the employees who work for about half their stated hourly wage and who make the company what it is.  Replacing these employees (or having them work "regular hours") would take at least 2 new employees, which makes $7,500 seem like an awfully small number!

Your disappointed with Wells Fargo's decision Realtor,

Chris Butterworth