Wells Fargo Organization Behavior

Wells Fargo Organization Behavior

Synopsis

Wells Fargo, the American multinational financial services corporation, has been on the news media over recent years for the wrong reasons. The bank has been hit hard by several scandals that have significantly affected its reputation and heavy losses due to the fines leveled against by the regulators (Tayan, 2019). In 2016, regulatory agencies revealed that Wells Fargo had built a sustained cross-selling program where customers sold different products to customers. However, during the cross-selling, it was discovered that Wells Fargo employees were engaging in aggressive tactics to meet their daily cross-selling targets (Reckard, 2013). The aggressive tactics included creating millions of fraudulent savings accounts on behalf of Wells Fargo customers without their knowledge.

Wells Fargo customers started to notice the fraud when they were being charged unexpected fees and receiving unexpected credit or debit cards without requesting them. Right from 2002 to 2016, Wells Fargo employees used fraud to attain impossible sales goals. The employees opened millions of fake accounts in the clients’ names without their consent (Bloomberg, 2017). The employees signed account holders up for credit cards and the bill of payments programs. They also created personal identification numbers and forged signatures. The worst part is that the employees could also transfer customers” cash secretly to their created fake accounts.

Moreover, Wells Fargo adjusted mortgage plans for thousands of customers without their consent in that some customers could not repay, and thus, the company repossessed their property. The adjustments on the mortgage plans were quite unfair since many customers paid more than the mortgage costs (Tayasn, 2019). In addition, Wells Fargo charged 600,000 auto loan customers for insurance they had neither requested nor needed. The class-action lawsuit against Wells Fargo revealed that the bank caused about 275,000 customers to default on the loan payment. Thus, nearly 25,000 vehicles were illegally repossessed by the bank.

The regulators, such as the Security and Exchange Commission, put information into the matter after numerous customers’ complaints revealed shocking fraudulent activities in Wells Fargo operations (Bloomberg, 2017). Initially, the blame for opening a fake account was leveled against employees and branch managers, but later investigations revealed that the blame squarely fell on the top management. The employees were forced to fake accounts using customers’ details without knowing how to meet the set target. In the court proceedings, the prosecutor described the work conditions at Wells Fargo as a pressure-cooker environment (Reckard, 2013). The top management pressured the junior employees for unrealistic targets in that employees were given targets for sales. The targets were too high and unrealistic to achieve. Employees who did not attain their ales targets were warned, and some were dismissed.

Initially, the employees convinced customers to open other accounts in their names, but the pressure from the top was too high. Some customers refused to comply with the employees’ requests; they came up with a strategy of just opening fake accounts without twin the names of the existing customers without their knowledge (Flitter, 2020). In other words, employees engaged in such vices for fear of being reprimanded or even dismissed. Those employees who met the targets were rewarded and praised as good examples. Therefore, the only way each employee would meet the target was to open as many fake accounts as possible to retain their jobs.

In February 2020, Wells Fargo was fined $3 billion for its fake accounts malpractices, leading to heavy customer losses (Egan, 2020). Despite the heavy fine leveled against Wells Fargo, the company is still vulnerable to other litigations. Senior employees like the former CEO John Stumpf will likely face many legal battles from individual customers.

Previously, Wells Fargo had been fined $50 million to settle lawsuits that alleged that the bank overcharged thousands of homeowners. The bank overcharged the mortgage holders, and most of them defaulted and repossessed some of the houses illegally. Moreover, in 2019, Wells Fargo was fined a total of $ 386 million over unwanted auto insurance it was charging its customers (Flitter, 2020). The bank went ahead and repossessed some of the customers’ vehicles and failed to repay them. Looking at how Wells Fargo operated right from the start of the century, it is learned that the company committed many economic crimes that later led to high fines.

Problem 1: Winning New Businesses

One of the main challenges facing Wells Fargo is how to win new customers (Reuters, 2021). When a scandal emerged in 2016 and investigations were conducted, the company lost many customers, and its stock price dropped drastically. Most existing customers conned through fraudulent accounts had their relationships with banks cut. The many scandals discouraged investors from investing in the company’s stock since its prices were low.

Cause of Problem #1

The cause of this problem is the many scandals the company faced, including the fake accounts scandal, the mortgage overcharging scandal, and the auto loan repossession scandal. All these scandals discouraged the business partners from partnering with Wells Fargo, making winning new customers and business partners hard.

Recommendation #1

To solve this problem, I will plan a public apology to reassure customers and other business partners that the management has changed and the company will operate according to the business laws and corporate ethics. The public apology would be channeled through various media channels such as television, newspapers, radio, and company magazines. The apology aims to restore customers’ confidence in our company so we can do business together again. Our public apology would run on media for quite some time so that the message could sink in the public.

Problem 2: Top Management Turnover

After the many scandals and fines, one of the main challenges facing Wells Fargo right now is the high rate of senior management turnover. When John Stumpf, former CEO, was fired, Tim Sloan took Wells Fargo as a CEO and President, but his tenure at the company has been short-lived in that he stepped down recently, giving way to Charles Scharf as the CEO (Reuters, 2021). Many other senior managers have resigned following the scandals, leaving the top management in disarray.

Cause of Problem #2

The main cause of the high rate of senior staff turnover is the firing of the former CEO, John Stumpf. Thus, other senior managers felt uncomfortable working while they were blamed for the previous mismanagement.

Recommendation #2

In solving senior management’s high turnover rate, I would work closely with all the senior managers and try to request them not to resign. I will encourage them to stay and perform their duties as required instead of thinking of moving away. I will try to protect the senior employees from external attacks and support them when they face court cases. I will try as much as possible to improve the workplace environment so that everyone would feel comfortable working here to prevent employee turnover. I will also adopt a democratic management style that allows everyone to express and consider their opinions when making decisions.

Problem 3: Asset Cap

Wells Fargo is facing one challenge: satisfying the U.S. Federal Reserve asset cap, which hinders the bank from increasing its balance sheet beyond those of the 2017 levels (Reuters, 2021). The Federal Reserve has put an assets cap on this bank, and thus, it cannot increase the assets. The bank expects the assets cap to be lifted so that it can explore its potential well.

Cause of Problem #3

The cause of the assets cap limit is when the bank was found guilty of engaging in unethical business activities that led to the theft of customers’ cash and overcharging on the mortgages. Setting the asset cap by the U.S. Federal Reserve is one measure used to tame firms that seem to be going against corporate ethics.

Recommendation #3

One of the things I will do to ensure that the assets cap is lifted so that Wells Fargo can raise more assets to operate to its full potential is streamlining the management to prove to the Federal Reserve agency that it has undergone reforms. I will ensure that we comply with all the Security and Exchange Commission regulations and other regulators to put the company into good books. All the effort aims to reassure both the public and the government that the company has reformed and that new management is serious about bringing change.

References

Bloomberg. (2017). The Wells Fargo Fake Accounts Scandal Just Got a Lot Worse. Retrieved from https://fortune.com/2017/08/31/wells-fargo-increases-fake-account-estimate/

Egan, M. (2020). U.S. government fines Wells Fargo $3 billion for its ‘staggering’ fake-accounts scandal. Retrieved from https://edition.cnn.com/2020/02/21/business/wells-fargo-settlement-doj-sec/index.html

Flitter, E. (2020). The Price of Wells Fargo’s Fake Account Scandal Grows by $3 Billion. Retrieved from https://www.nytimes.com/2020/02/21/business/wells-fargo-settlement.html

Reckard, S. (2013). Wells Fargo’s pressure-cooker sales culture comes at a cost. Retrieved from https://www.latimes.com/business/la-fi-wells-fargo-sale-pressure-20131222-story.html

Reuters. (2021). Factbox: Five challenges in store for Wells Fargo’s next CEO. Retrieve from https://www.reuters.com/article/us-wells-fargo-ceo-factbox-idUSKCN1RA2N6

Tayasn, B. (2019). The Wells Fargo Cross-Selling Scandal. Retrieved from https://corpgov.law.harvard.edu/2019/02/06/the-wells-fargo-cross-selling-scandal-2/

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Wells Fargo Organization Behavior

Complete the Problem-Solving Application Case, “Incentives Gone Wrong, Then Wrong Again, and Wrong Again,” in Chapter 6.

The assigned cases focus on specific (real-life) OB issues like motivation, culture, and ethics encountered by managers and leaders that can be applied to your everyday encounters in the workplace and at home

Paper must also be formatted according to MLA guidelines. Papers must be five to seven pages in length with current and updated references.

Case study must contain the following:

Synopsis

A synopsis is a brief overview of the case. Please prepare your synopsis as if I (and your classmates) do not have the whole case study. Your synopsis should be concise, complete, and fully describe the situation “as you see it.” The synopsis should not exceed four to five paragraphs.

At the end of your synopsis, you must identify three Organizational Behavior problems that must be addressed.

Problem Analyses

For each of the three identified problems, you must analyze them, drawing from the content covered in class. These analyses should identify the causes of each problem.

Each of the three Problem Analyses should be no more than three to four sentences in length. Be succinct.

Problem Recommendations

For each problem, you must provide a solution. Recommendations must directly tie to the Organizational Behavior problem you identify. Support your solution with critical thinking that demonstrates an understanding of the course material, internet resources provided for this course, and real-life experiences.

Shy away from general statements and blanket conceptual recommendations that are not fully justified with the facts of the case.

Formatting and References

In addition to references in the textbook, you must include at least three quality outside current and updated references (properly vetted news sources, business publications, scholarly articles, etc.) to support the information you outline in your case study. You may “re-use” outside sources you found for your discussions as long as they truly support your response to the case study.

Clearly label and indicate each Problem Analysis with headings in your paper followed by your Problem Recommendation. Ultimately, the structure of the assignment should follow the 3-Step Problem-solving Approach:

• Synopsis
• Problem #1
• Cause of Problem #1
• Recommendation #1
• Problem #2
• Cause of Problem #2
• Recommendation #2
• Problem #3
• Cause of Problem #3
• Recommendation #3