The Wells Fargo scandal is real and an ongoing controversy. Wells Fargo sales culture went from being considered the most successful and stable to fraudulent with a tarnished repertoire. When the scandal was discovered the blame shifted from the managers to employees to the top executives. The downward spiral began with environmental pressures of unrealistic company goals. Wells Fargo illegal activity flooded news outlets and faced many fines, civil and criminal suits. In order to prevent and fix these transgressions, we will need to focus on the atmosphere of the company during and after the scandal.
The employees at Wells Fargo went through intense pressure from management (high expectations) to hit unrealistic sales targets. If those sale numbers were not met, they risked losing their jobs. Some of these employees were processing sham sales, which involves “fictitious sales” (Hopwood, Leiner, & Young, 2012, p. 412). The bank was willing to create those pressures and to take those risks, just to surpass its competitors. The goal was to continue the cross-selling strategy to fulfill impossible quotas, however , it came with a cost.
Cross-selling is a straightforward and lucrative strategy. The idea is selling products as much as you can to your existing customers (not only that, an existing customer who loves your product). The principle makes sense and is well known in the financial industry. Wells Fargo was known as the “king of cross-sell” in which, employees were encouraged to sell at least eight products. The sales tactic only revealed the intense pressure, and the measures employees would take to satisfy the companies quotas. Remember, that fraud is “committed for a variety of reason such as to cover poor performances” and “other reasons relate to general greed and cover-up” (pg 431). Which in this case, expectations rose and the processing of fraudulent accounts only increased and worsened. Wells Fargo’s scenario is a case of employee fraud and corporate culture. “ the corporate culture can actually supply the pressure that could drive employees to commit fraud” (Hopwood, Leiner, & Young, 2012, p. 389). One factor is “excessive pressure to perform” which is explained as “hostility toward the company, providing rationalizations for employees to cheat consumers, vendors, and the company itself and to violate regulations” (Hopwood, Leiner, & Young, 2012, p. 389).
Saving the reputation
The first recommendation for a fix in the Wells fargo’s scandal is ways of saving the companies reputation. Large organizations that perform risk assessments, analyzes the vulnerabilities and identify its weaknesses; focuses on the companies image and reputation. Examples of company image and reputation; which is explained in the text, breaks it down as “quality of the company’s products and services and its good name” (Hopwood, Leiner, & Young, 2012, p.137). Wells Fargo was seen as “ the best-run, best-managed bank in the country,” said bank analyst Dick Bove. “And that image has been shattered” (Roberts, D., & Rothacker, R.). In a report, investment banking and research firm FBR & Co. said Wells Fargo likely lost the “special status” and “more positive brand image” it held among regulators (Roberts, D., & Rothacker, R. (n.d.)). Why should employees and consumers trust this company after such a horrifying scandal? To start, the company should apologize! Sending out a statement to news outlets recognizing all instances that occurred, including the accusations from the employees. Then, on to fixing the financial harm by providing (offering its regrets to customers) an average refund to all consumers that suffered from these unauthorized accounts. Lastly, eliminating the unrealistic sale goals in order to reinforce their service culture and being consistent with the company’s true commitment of providing great services.
Safe working environment for employees
In order to provide a great service culture, there must be a better commitment in providing a great place to work and fixing its sales culture. While a top Wells Fargo executive stated that “the workers involved in the aggressive sales were lower-level employees”(Puzzanghera, 2016) or also statements from Chief Financial Officer John Shrewsberry, explaining that “It was really more at the lower end of the performance scale, where people apparently were making bad choices to hang on in their job”; is not a good enough excuse, hence the undeniable intense pressure it caused in the company. The pressure from Wells Fargo’s toxic sales culture and business strategies, is what directly led to the widespread fraud of opening those accounts in the first place. To fix this issue, the company must ensure its employees that their goals are actually “helping drive the company’s mission” (Duggan, 2016). Also, it would be a good idea to involve employees when setting and reviewing goals for the company. So employees can make the right goals and can feel a part of the team; which would reflect a healthy working environment. If the company goal is to be truly committed to the best interest of the customer (or the approach of wanting to satisfy all customers financial needs), then the employees goals should reflect that; instead of the unrealistic sale goals/ targets prior.
Another idea of a fix, is to create a safe working environment by improving its monitoring of employees activities and to identify improper sales tactics firsthand. Though the company took full responsibility of creating bank accounts without its consumers permission, they did not admit to the wrongdoing or the action of its employees. Wells Fargo fired an estimate of 5,000 employees for the improper sales practices; afterwards tried enforce correct actions in the company. Another idea is to make “Wells Fargo’s chairman and chief executive roles to be held by separate people” (Roberts, D., & Rothacker, R.). Which does fit under the level of Segregation of duties designed under internal control process of control activities (Hopwood, Leiner, & Young, 2012, p.55). Once those positions are separated and organized, management discretion should come into play. “ With respect to accounting discretion, its legitimate use – is to allow for differences between circumstances, companies, and industries” (Hopwood, Leiner, & Young, 2012, p. 423). Internal problems will resolved by having new middle management and new executives focused on their own tasks and departments to affirm the company’s true mission.
New Strategy to meet Sales
Cross-selling is the company’s best business tactic and even the previous CEO John Stumpf stated after the scandal that the company loves cross-selling and was not abandoning the strategy. (Roberts, D., & Rothacker, R.). Soon after an announcement was made “to eliminate all sales goals for credit cards, checking accounts and other retail banking products as the financial giant tries to repair its image”. Which Is the best decision for the company for it will take some time to figure out a new and better financial strategy. A recommendation is to evaluate and have meetings regarding a new way to commit to new realistic goals, successfully gain more consumers and sales the right way.
Conclusion
In conclusion, Wells Fargo has a lot of work to do in order to gain the trust of new and existing consumers and employees. From fixing the unrealistic sale goals to discovering new tactics, the company’s troubles are not over. Corporate culture was a main issue in Wells Fargo’s case and internal control processes should be taken into consideration to fix its companies problems. After the huge scandal, Wells Fargo managed to still stay afloat, while other banks struggled. However, they must keep going into the right direction by using these fixes as a stepping stone and it would certainly help Wells Fargo to be stronger, after the crisis.