CHARLOTTE, N.C. — Day-by-day, new memos arrive “announcing changes.” The changes sometimes reorganize a team. Some announce that certain employees will be “seeking new opportunities.”
Across the behemoth workforce of Wells Fargo, CEO Charlie Scharf’s drive to cut $10 billion in expenses at the bank often criticized for its bloat and inefficiency has set off anxiety and panic among its workforce. Many at the bank feel they are in the dark about what’s going on.
How many people will be laid off? They don’t know, and the bank won’t say. There is no firm timetable for the layoffs, but the bank says $3.7 billion in cuts will come this year.
Are you in jeopardy if you work in San Francisco? New York? Charlotte? Hard to tell.
These are natural questions most employees ask when confronted with coming layoffs. Yet, the way that Wells Fargo is going about its cost-cutting drive, without firm targets, is making things worse, some workers say.
“We completely understand and empathize with the uncertainty that it creates and understand that it impacts morale,” Scharf said in an October internal webcast obtained by the Observer. “The last thing that I want to do is create uncertainty for someone who has given so much to this company.”
Wells Fargo has not said how many layoffs it expects. Employees in divisions across the bank don’t seem to know either. The layoffs don’t come at all once, but rather ebb and flow. Some of the cuts are achieved through attrition.
“We are at the beginning of a multiyear effort to build a stronger and more nimble, customer-focused company,” Wells Fargo spokesman Peter Gilchrist said. “We expect to reduce the size of our workforce over time through a combination of attrition, the elimination of open roles, and job displacements.”
Wells Fargo is the largest private employer in Charlotte, with roughly 27,000 workers in the area.
So far, the most detail the bank has publicly disclosed about the cuts is where they occurred companywide within the bank’s five divisions. In the fourth quarter, headcount fell by 6,482 in consumer banking, which was the most of any division. That includes the bank’s sprawling network of over 5,000 branches, which it has been paring back.
In commercial banking, headcount fell by 1,681, and in wealth management, it fell by 714. Investment banking was generally unaffected by cuts. On a call with reporters, Wells Fargo’s new chief financial officer, Mike Santomassimo, declined to say what an ideal headcount would be at the end of the current cost-cutting drive.
The shroud of secrecy into how big the layoffs will be is unusual. It’s more common to announce a big number of cuts, then deliver on that number.
“In a classic restructuring, you basically do it in one fell swoop and move on. Because the worst thing for a business is people asking ‘Will I be laid off next?’ ” said Charles Elson, finance professor at the University of Delaware and a Wells Fargo shareholder.
In December 2008, at the depth of the financial crisis, Bank of America said in a single announcement it would cut 30,000 to 35,000 jobs over the next three years. It was one of the biggest layoffs in banking history. It was more workers than had worked at Lehman Brothers at the time of its collapse. In July of that year, Wachovia announced it would cut 10,750 jobs.
Almost all employees who spoke to the Observer agreed on one thing: the bank is bloated. Cuts need to happen. The bank has more than 50,000 more employees than its rival Bank of America, but Bank of America has 40 percent more money in it.
After Scharf took over as CEO in October 2019, he did some simple math. He looked at how much the bank was spending versus how much it took in. From that, he said the bank needed to cut $10 billion in yearly expenses to get in line with its peers.
“Our returns are below where they should be and what this company can deliver,” Scharf said on a January earnings call.
So bit-by-bit, Scharf and his team are working toward $10 billion. In January, the bank revealed it had identified $8 billion of the cuts already.
Most of the money the bank plans to save will come from having fewer workers. According to a Wells Fargo earnings presentation, more than a third of the savings the bank already has identified so far will come from streamlining the bank’s sprawling bureaucracy, mandating that managers have more direct reports. This process of thinning middle management is already underway.
Wells Fargo also plans to close another 250 branches in 2021, after closing 329 in 2020. In December alone, the bank disclosed to federal regulators that it would close ten branches in San Francisco, its headquarters city.
It’s also leaving some small towns where banks are in short supply, like Eunice, N.M. The small town in the oil-rich southeast of the state will have just one bank branch once its Wells Fargo closes.
Money also will be saved through digitization and selling off parts of the bank that the bank sees as extraneous, like its private student loan portfolio and rail business. Outside spending on consultants is getting cut, too. So far, Wells Fargo has set aside about $1.5 billion on restructuring, most of which the bank says is for severance payments.
“There’s this looming thing over everyone’s head: layoffs. And there’s very little information. So no one knows when the shoe’s going to drop,” said Nick Weiner, the lead organizer at the Committee for Better Banks, which is trying to unionize the bank.
On top of that, internal employee reviews were revamped under Scharf so it’s much harder to be considered a top-tier employee. While some welcomed the change, the anxiety of layoffs is compounded by the harsher reviews, workers say.
Sometimes a suspected “day of reckoning” passes without a layoff. A TV station once reported on a suspected “mass layoff” that didn’t materialize. With hundreds of thousands of the bank’s employees working from home with no offices to clear out, the closest thing to a stack of Bankers Boxes in these layoffs are the memos outlining changes on the internal Wells Fargo web portal, Teamworks.
Scharf only fanned the flames when he held an internal webcast in October about the cost-cutting in which, after cuts had already started, he talked about them with hypothetical language.
“If we do have to do something where we do have to eliminate positions, we don’t take the decisions lightly,” Scharf said in the webcast.
The remarks both confused and frustrated employees in the bank, workers said, because when he made them, the cuts had already begun.