Blunt Advice from Wells’ CEO: It’s Time to Be Honest About AI and Headcount
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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Executive Summary
- Stop pretending AI won’t shrink the banking workforce, says Charlie Scharf, Wells Fargo’s chairman and CEO. Bankers should focus instead on how bank processes will change and the role of humans in the new processes.
- Forethought is essential. Figure out how the bank will adapt to life under AI, and don’t hire people you’ll need to lay off a year or so down the road.
- Rethink how the bank will run in key areas and how existing and future employees will need to be trained to produce best results.
In six years at the helm of Wells Fargo, Charlie Scharf took the company’s headcount down from over 275,000 to a bit more than 210,000 today — a cut of nearly 24%. And he expects that headcount will continue to fall.
Even now, “we’re way too inefficient, we’re way too bureaucratic. We have too many processes in the company that don’t add value,” according to Scharf, chairman and CEO. And a key part of finding efficiencies will be the adoption of artificial intelligence, and the and reimagining of workflows in many parts of the company.
Scharf is not mincing words: “Anyone who sits here today and says that they don’t think they’ll have less headcount because of AI either doesn’t know what they’re talking about, or is just not being totally honest, because ‘it’s not the right thing to say’.”
More productive, in Scharf’s view, is an honest, forward-looking assessment by the bank’s operating committee on where AI can improve the way things get done.
To do this right, leaders have to “put the cart ahead of the horse a little bit.” First, Scharf said the worst way to treat people is to hire them and then fire them not long afterward because the bank has figured out a way to do things with fewer people. Looking ahead can avoid that.
Second, banking leaders need to get a stiff dose of realism about artificial intelligence.
“Even though everyone’s incredibly excited about AI, and there are certainly significant opportunities to do things differently, it’s not going to happen tomorrow — at least not for us. It’s going to happen over a period of time,” said Scharf during a question-and-answer session at the annual conference of The Clearing House.
Some rethinkings will take months. Others may take years.
For him, that means that with sufficient forethought, Wells can address the human resources challenge intelligently.
“We can figure out where we can retrain people so that they can be effective in the way the new world works,” said Scharf.
Read more: Is AI Learning the Job Faster Than Banks Can Redefine It?
AI’s Impact on Wells Will Vary by Function
During an interview with Lananh Nguyen, U.S. Finance Editor at Reuters, Scharf gave some concrete examples of how multiple operations will change as the bank presses forward with AI implementation.
A key area is coding.
“Our developers are 30% to 40% more efficient in generating code than they were before they had AI tools,” said Scharf. In this instance, the bank hasn’t reduced headcount thus far. He said the bank was “just doing more, because we have a very big agenda,” with the coder workforce it had. In this case, AI is more of a force multiplier.
In call centers, there are tasks that are very repetitive that involve humans because customers still want to talk to someone. In time, Scharf said this will be turned over to AI agents that are capable of talking to customers.
Commercial lending is an example of where adoption of AI techniques will enable the existing workforce to focus on thinking instead of mind-numbing number crunching.
“We write credit memos before underwriting and approving any credit. It’s a long process to create those credit memos,” said Scharf. “Most of that should be automated. We want commercial bankers’ eyes to be focused on thinking about the credit as opposed to preparing the memo.”
Similarly, in the investment banking area, change will come in handing rote work to AI to free humans up for more valuable tasks.
Scharf said that Wells will still need investment analysts going forward, because the future executives of investment banking will be drawn from their ranks.
But the details of the career path could be very different. The days of young investment analysts burning themselves out in round-the-clock preparation, grinding out documentation for pitches and deals, will give way to more thinking.
“We are going to be very focused on how they learn and in a very different way,” said Scharf. “I think they’re going to learn more quickly because they’re going to be able to focus on the underlying information and facts.”
Read more:
Change How Your People Think and Learn. Scharf Did It Himself
Scharf’s talk about investment analysts, and the way they learn, generated a follow-up question: How do newcomers learn a business well enough to make decisions if they don’t start with the basic building blocks?
Scharf made an example of himself to answer the question.
“Some people say that the only way you learn is by writing something down, right? Maybe some people are like that and they’ll have to continue to do that,” said Scharf. But not Scharf.
“I don’t write anything anymore,” Scharf continued. “You come into my office and I have no paper.” He said that’s how he handles everything in his life now — paperless.
Getting to that point didn’t happen overnight, he said. At one point he printed out everything he needed to read.
“I couldn’t do anything on my screen,” he admitted.
Scharf decided that had to change, and did it.
“You learn to work differently,” he said, “and you learn to learn differently.”
Scharf said that among bank employees this will be a continuing, evolving process. But to drive that, banks will have to stimulate the evolution.
“It’s not necessarily going to happen on its own. We can’t teach people the same way that we were teaching them yesterday,” said Scharf. “We need to teach them differently — and we need to teach them different things. Otherwise people will be short on skills.”
Read this next: Why AI Won’t Replace Bankers but Will Expose the Bad Ones
