Leadership Challenges within an Organization – Wells Fargo

Leadership Challenges within an Organization – Wells Fargo

Organizational Culture and Work Environment

Organizational or corporate culture refers to the common social knowledge within an entity. It entails the norms, rules, and values that shape an organization’s behaviors. Organizational behavior is comprised of three components: espoused values, basic underlying assumptions, and observable artifacts. Employees learn about an entity’s culture through other staff members. Simple observation or explicit communication are alternative ways of learning about the culture (Colquitt, LePine, & Weson, 2019).

In the case of Wells Fargo, the organizational culture can be categorized as strong. A strong culture does not always mean that an organization will be successful. Wells Fargo battled a scandal that was unethical in the eyes of the public and involved its employees. The scandal involved the creation of customer accounts that were unauthorized, falsifying contact details, forging signatures, and manipulating these accounts without the clients’ consent. In 2017, the financial institution found itself in a different crisis that involved automotive insurance. It was revealed that the bank charged unnecessary auto insurance to 800,000 loan clients between 2012 and 2016. These wrongful charges led more than 270,000 clients into delinquency and 20,000 mistaken repossession of vehicles (Premachandra & Filabi, 2018).

The two occurrences go against the company’s brand purpose. Wells Fargo’s brand purpose highlights the need for long-term relationships, guidance, and the appropriate expertise that should assist clients in making the right decisions, and going further than expected to do the right thing. The scandals highlighted a major issue with the company’s strong culture that forced employees to deliver without caring for the strategies (Premachandra & Filabi, 2018).

According to John Stumpf, the former CEO at Wells Fargo, the employer required the employees to prioritize clients and honor the vision and values of the entity. However, this is not reflected in the occurrence and handling of the scandals, which involved the elimination of at least 5000 employees. The failure to take responsibility for these actions at the senior level showed the management’s reluctance to resolve cases that involved ethical violations as well as denial of the problem’s magnitude. Most importantly, the company’s management failed to handle warnings that were brought to their attention regarding such issues (Pontefract, 2016). Instead, they silenced the whistleblowers despite the existence of the anti-retaliation policy.

Wells Fargo’s work environment is characterized by an overbearing culture, which requires employees to meet set goals without fail. In the past, the bank divided employees into teams. These teams received daily goals, which had rewards and punishments. The occurrence of lapses attracted punitive actions, including firing. Sales representatives were promised at least 15 to 20 percent of their salary in bonuses and 3 percent for tellers. Based on past behavior, employees were aware of the punitive actions that failure would attract (Tayan, 2019). The management’s failure to review the employees’ strategies to meet the set goals attracted such negative actions that led to a bad reputation, loss of jobs, and financial resources.

Leadership

Organizational leadership is a complicated issue because it entails behaviors, positions, and ideas. Despite its complexity, leadership has the potential to make substantial impacts and differences in an organization. Leaders have various tactics at their disposal that they can use to drive change of attitude and behavior in an entity. Each tactic has varying effectiveness (Colquitt, LePine, & Weson, 2019). Wells Fargo leadership is a perfect embodiment of a group that is in denial and too reverent of the culture. CEOs usually hold the culture of their entities in higher regard than employees do. The former CEO, John Stumpf, demonstrated this behavior repeatedly. In addition, middle-level managers relied on their coercive power to control and intimidate employees into engaging in unethical practices.

When the scandals were publicized, the CEO constantly denied any knowledge of their existence. He also quoted the company’s culture of care and prioritization of clients frequently. This denial continued even after evidence of the unethical practices was revealed. Such denial indicates a great disability in the CEO’s leadership, considering the middle managers’ intimidation practices. As stated earlier, the employees had to meet their daily goals without fail. This pressure birthed unethical practices that grew into costly scandals as employees tried to avoid the punishment. Instead of approaching the issue objectively and handling it during its infant stages, the CEO nurtured the overbearing culture (Ochs, 2016). This process was motivated by the need to retain leadership in the geographical market. The scandals and failed leadership emphasize the role that leaders play in the success or failure of an organization.

Organizational design and structure of the firm

The structure of an organization dictates the division of duties and tasks. It also shows the coordination between employees at different levels. Wells Fargo’s organizational structure is first showcased in a simple organizational chart. The chart shows the topmost leaders and their titles. In the chart, it is clear to identify the chain of command and the span of control. At least 119 individuals report to the company’s CEO and president, Charles W. Scharf (Orgio, Inc., 2021). Based on the organizational chart and recent scandals, Wells Fargo’s span of control is wide. This assumption is supported by the managers’ failure or inability to control employees effectively. In addition, poor communication occurs when the organizational chart is too ‘tall’, which is a characteristic of the poor management of employees at the company. The structure is centralized based on the reports that employees who were involved in the scandals provided. Most employees reported that they received daily goals in their teams. This implies that the employees were not involved in the decision-making process. A centralized structure has the managers making all the decisions. This could also explain the former CEO Stumpf’s lack of knowledge about the scandals right from the infant stages (Ochs, 2016). In terms of design, Wells Fargo uses a mechanistic style. Mechanistic entities are characterized by a high level of work specialization, clear authority lines, a high degree of hierarchical control, vertical communication, and a lack of employee involvement in decision-making (Colquitt, LePine, & Weson, 2019).

Ethical issues, conflict, and managerial challenges management

In the past, Wells Fargo handled ethical issues, conflict, and managerial challenges in a reckless manner. Under the leadership of Stumpf, the former CEO, the company ignored all early warnings of unethical behaviors that employees brought forward. This ignorance cost the company its reputation, clients, and financial resources. The conflict of interests was not adequately addressed as middle managers pushed employees to achieve extreme goals using both coercive and reward power. The failure to address or question the strategies that were used to achieve the goals displayed a deep lack of integrity among the leadership. Furthermore, the company’s former CEO actively denied these occurrences even after evidence was released. He remained adamant, claiming that the accusations were not very serious when first reported (Ochs, 2016). The lack of interest in investigating the issue displays the leadership’s ethical attitude.

However, based on a recent Environmental, Social, & Governance (ESG) report, the company has a different theoretical approach that is expected to manage such issues in the future. This report was edited in 2016 to create a clear path for employees as far as ethical expectations are concerned. The main principles highlighted in the report include anti-bribery and corruption, antitrust, insider trading, gifts, conflict of interest, money laundering, human rights, serving communities, and the environment. The company highlights the need for whistleblowing to avoid escalation of ethical issues. It also has a 24/7 hotline that can be used to make ethics-related reports (Wells Fargo & Company, 2020). While this is a theoretical approach, the only hope is that the company utilizes it practically to avoid such scandals in the future.

Transactional Leadership

The firm uses transactional leadership characteristics. In transactional leadership, the leaders motivate employees to achieve certain results for a specific reward. For instance, the middle-level managers at Wells Fargo motivated the tellers and sales representatives to achieve the goals using bonuses. The tellers would receive 3 percent of their salaries as a bonus, while the sales representatives could receive 15 to 20 percent of their salaries (Tayan, 2019). Those who failed could face dismissal, a result that most employees avoided. Thus, the motivation was to avoid job loss and gain the promised reward. This type of transactional leadership is the contingent reward style (Colquitt, LePine, & Weson, 2019).

Recommendations

Wells Fargo requires changes within the organization to improve its performance in the future. First, it is necessary to train the employees on ethics and other related subjects that led to the scandal. Besides training on the company’s code of ethics, it is necessary to repeatedly remind employees at all levels about the company’s values. This should kick off the process of changing the culture. Secondly, the company should train all staff members on the best practices that they should engage in while performing their roles. Prior to this training, a needs analysis is necessary to identify areas where employees require further teaching. Such training will ensure that employees are well aware of their responsibilities and possess the skills and knowledge necessary for the completion of the same. Such training should be carried out periodically to ensure that employees remain skillful and knowledgeable (Colquitt, LePine, & Weson, 2019). Thirdly, the company should involve employees in the decision-making processes. This requires better communication channels that enable employees to raise their concerns without any fear. The goal-setting process should also involve employees to ensure that realistic, achievable, time-bound, and measurable objectives are set. The process of brainstorming to identify the best strategies that consider the company’s values should also involve staff members. Such involvement enables employees to air their opinions and highlight issues that present challenges. In addition, such engagement also empowers employees and makes them feel valued (Patro, 2013). An employee who feels valued is also motivated to achieve the company’s goals in the right way.

References

Colquitt, J., LePine, J. A., & Weson, M. J. (2019). Organizational Behavior: Improving Performance And Commitment In The Workplace. New York: McGraw-Hill Education.

Ochs, S. M. (2016). The Leadership Blind Spots at Wells Fargo. Harvard Business Review.

Orgio, Inc. (2021). Org Chart. Retrieved from Wells Fargo: https://theorg.com/org/wells-fargo/org-chart

Patro, C. S. (2013). The Impact of Employee Engagement on Organization’s Productivity. Managing Human Resources at the Workplace, (pp. 1-9).

Pontefract, D. (2016). Wells Fargo proves that corporate culture can also be a competitive disadvantage. Forbes.

Premachandra, B., & Filabi, A. (2018). Under Pressure.

Tayan, B. (2019). The Wells Fargo Cross-Selling Scandal. Harvard Law School of Corporate Governance. Retrieved from https://corpgov.law.harvard.edu/2019/02/06/the-wells-fargo-cross-selling-scandal-2/

Wells Fargo & Company. (2020). Environmental, Social, and Governance (ESG) Report.

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You will be responsible for a research term paper that focuses on a company of your choice and examines the challenges of leadership within this organization. It is best to choose a company with which you are familiar, as this paper will require significant knowledge of the company and its leadership.

Leadership Challenges within an Organization – Wells Fargo

This assignment requires you to demonstrate your learning and to highlight the leadership challenges in which you describe how your chosen organization has orchestrated its leadership and followership culture and applied transactional versus transformation leadership theory. Emphasis will be placed on understanding the problems, evaluating them critically, and having the ability to clearly communicate proposed solutions.

Your final project is your major contribution, where you will exhibit your learning. You will write an analysis of the organizational culture, leadership, ethical practices, and the use of power and political behavior in your chosen company. This will require you to research as much as you can through the company’s own website, articles written on your company, our textbook, and scholarly articles about your company. In your analysis, discuss the following areas:

•The organizational culture and the unique characteristics of the firm’s work environment.

•Leadership and how the various concepts and leadership models discussed in the text are utilized in your firm’s CEO and management team

•The organizational design and structure of the firm.

•How the firm manages ethical issues, conflict, and managerial challenges.

•Whether the firm uses either or both the characteristics of transactional and transformational leaders.

•Your recommendations for the future of the company. How can key leaders of this firm improve in the next 2-3 years? Please do not make recommendations on products or services you want the firm to produce. Rather, focus on how the company’s organizational climate, leadership, ethics, leadership development, and overall leadership environments should improve. When discussing these concepts, be specific and use examples that detail how your analysis of the organization fits with the theories (especially transformational and transactional leadership) that were 8MGT 4430–Leadership covered in this class. The focus of this paper should be on the leadership of the company and should incorporate what you’ve learned in this course. The paper should reveal additional information beyond that covered in the textbook. Your own analysis, summary, and conclusions will increase the value of your paper.

Term papers will be a minimum of 1,500 words of content (excluding cover and reference pages). At least four scholarly sources other than the eText and the company website must be used to write the paper. Use proper in-text references to your sources when quoting directly or indirectly, and an end-of-paper reference list. Papers must be word-processed and conform to the high standards established in Berkeley English composition classes.

APA format must be used. Please review your APA formatting here at http://berkeleycollege.libguides.com/APAPlagiarism. It is not allowed and will be the basis for failure. See Course Information for more information on how to avoid plagiarism.