An analysis of How the Leadership of Wells Fargo Contributed to the Recent Fraudulent Business Practice

The management of Wells Fargo should take full responsibility for the fraudulent sales techniques that involved millions of fictitious accounts and credit cards that were opened by its staff without the knowledge of its consumers. This claim is supported by the leadership of the company's involvement in creating the correct culture, which establishes the firm's methods of conducting business. Watkins (2013) stated that an organizational culture is all about the common values and actions of a company. It indicates what an entity stands for and is seen from its actions, beliefs, values, norms, and meanings. The culture is crucial in determining the company's performance, growth and success. The management of Wells Fargo created a high pressure sales culture (Emmanuel, 2016).
As a giant financial institution in the world, Wells Fargo setting such a culture resembles those established by other giant companies, notably the Enron Corporation, which later collapsed. The Enron's executive had set a poor culture of doing all they could to ensure that they made 'profits' even where huge losses had been realized (Sawayda, Baird, Jackson, Urban, & Herdon, 2015). Its management exerted pressure on employees and other lower level managers to ensure that the results were good, which saw a fall of morals. Sorkin (2016) reported that Wells Fargo wanted to depict itself as the bank for Main Street, and its CEO, Mr. Stumpf, worked to ensure that it was ahead of other big New York banks.
One of the approaches to achieve these goals was to use its human capital to reach the customers and expand the market. In 2010, Wells Fargo's leadership imposed sales quotas to its employees and which they were to reach (Emmanuel, 2016). Tippett (2016) described these sales targets as extremely aggressive goals. Wells Fargo asked every of its salespersons to sell at a minimum eight accounts to each client from the initial three accounts. The CEO got convinced that the salespeople would achieve these goals, and communicated the same to the shareholders in the company's 2010 annual reports. He described the target of eight as being rhymed with great, and they were going for ten. Having failed to reach these goals and the constant threats from the supervisors, the salespersons cut corners and resorted to illegal tactics because they feared losing jobs or being embarrassed in front of their colleagues. In the cases, they failed to attain these targets, they were condemned or even fired (Emmanuel, 2016). The employees described the working environment as a soul-crushing culture (Ochs, 2016).
Reluctant to Act
Ochs (2016) noted that the bank's executive team and the board were too slow to address the fraudulent with seriousness despite and warnings for years. They were slow to see its gravity and breath resolve it effectively. Cowley (2016) stated that, as early as 2005, when Stumpf became the bank's president, Julie Tishkoff, its then administrative assistant notified the human resources department through a letter than the workers were opening sham accounts, forging client's signatures as well as sending unsolicited credit cards. Julie constantly complained for another four years and identical complaints were presented by some workers through the human resource personnel, the company's internal ethics hotline, and individual supervisors. With less action being taken to address the problem, the author reported that employees wrote letters directly to Stumpf in 2011 describing the illegal acts they had seen.
While testifying before the Congress, Stumpf said that he and the entire executive became aware of the issue in 2013 (Cowley, 2016; Ochs, 2016). Though still, after learning of the scam in 2013, as he purported, it took him two years to invite independent investigators, in 2015, to investigate the issue. The executive members termed the fraud practices as minor isolated incidents, indicating how blind the leaders were to see the significance of this crisis. The leaders failed to consider the impact this fraud had on the bank reputation as an institution with a 'culture of caring' and the customers. They argued that they did not think that the clients could have been charged fees for these sham accounts, until 2015 when they realized that customers were being affected. The leaders considered the forging of signatures, stealing identities and secretly transferring money as causing less harm and simply violating customers' trust; thus, it did not provoke their active involvement. The slowness to act on this crisis was also seen when the management fires only 1% of culprits each year (Ochs, 2016), and the CEO's comments that it was impractical to execute a perfect job policing thousands of workers (Sorkin, 2016).
Deterrents to Speaking Up
Ochs (2016) noted that the crisis in Wells Fargo is a leadership blind spot which represents a governance breakdown. The investigations showed that the executives and the board discouraged ignored and also retrenched workers who voiced their concerns over the unethical practices and the soul-crushing culture. The whistleblowers who reported the scam through the company's ethics hotline were fired while the emails directly sent to the CEO, and a petition bearing 5,000 signatures of workers to have the sales quotas lowered were ignored.
Recommendations for Resolving this Scam
The management should review its employees' code of conduct and clearly take them through warning them of the consequences of breaches. It should also create a climate of teamwork and trust, and which accommodates effective challenges. Such a step will create a culture where people's concerns and questions will be welcomed and heard without fear of victimization. The employees will feel free, comfortable and accountable for speaking up. Therefore, all obstacles that deter the employees from speaking up must be eradicated. The management must see the current rotten culture and engage all in efforts to repair it. It must be able to listen and protect the workers who report wrongful activities. All the managers and the supervisors must develop structures that will support questioning and collaborations in problem-solving initiatives.
Wells Fargo should also review and revise its sales goals, and adjust its compensation structure to include factors such as the level of customer service. Additionally, it should review how the various level managers and the supervisors are evaluated and dismiss those threatening workers over the sales targets. The management must also pay more attention to the process and not the end results as the CEO predisposed. By keenly following how things are being done, the management will be able to identify possible errors and mistakes and rectify them on time.

References
Cowley, S. (2016, October 11). At Wells Fargo, complaints about fraudulent accounts since 2005. Retrieved February 20, 2017, from The New York Times : https://www.nytimes.com/2016/10/12/business/dealbook/at-wells-fargo-complaints-about-fraudulent-accounts-since-2005.html
Emmanuel, G. P. (2016, December 3). The real reason Wells Fargo employees resorted to fraud. Retrieved February 21, 2017, from The Week magazine: http://theweek.com/articles/652186/real-reason-wells-fargo-employees-resorted-fraud
Ochs, S. M. (2016). The leadership blind spots at Wells Fargo. Harvard Business Review, https://hbr.org/2016/10/the-leadership-blind-spots-at-wells-fargo.
Sawayda, J., Baird, H., Jackson, J., Urban, M., & Herdon, N. (2015). Case 9 - Enron: Questionable Accounting Leads to Collapse.
Sorkin, A. R. (2016, September 12). Pervasive sham deals at Wells Fargo, and no one noticed? Retrieved February 21, 2017, from New York Times: https://www.nytimes.com/2016/09/13/business/dealbook/pervasive-sham-deals-at-wells-fargo-and-no-one-noticed.html
Sorkin, A. R. (2016, September 12). Pervasive sham deals at Wells Fargo, and no one noticed? Retrieved February 20, 2017, from The New York Times: https://www.nytimes.com/2016/09/13/business/dealbook/pervasive-sham-deals-at-wells-fargo-and-no-one-noticed.html
Tippett, E. C. (2016, October 7). How Wells Fargo encouraged employees to commit fraud. Retrieved February 20, 2017, from The Conversation Africa, Inc.: http://theconversation.com/how-wells-fargo-encouraged-employees-to-commit-fraud-66615
Watkins, M. D. (2013, May 15). What is organizational culture? And why should we care? Harvard Business Review, https://hbr.org/search?term=michael+d.+watkins.