HR Chapter 01: Mini Case: Organizational Culture Gone Wrong

The power of organizational culture is rarely as obvious as it was at Wells Fargo Bank. Whether positive or negative, culture within an organization drives employee behavior, sometimes in ways that are either not intended or not desired. Consider the case of Wells Fargo Bank where employees were pressured to cross-sell products to their customers. While trying to increase revenues and customer loyalty through selling multiple products is a fine strategy, in this case things went a bit too far.The bank managers emphasized cross-selling and had a goal for each customer to use up to eight products from the bank such as checking and savings account, mortgage loans, and credit cards. Personal bankers who worked at bank branches faced daily, sometimes hourly, sales goals to generate 10 to 20 product sales per day. District managers met multiple times each day with branch managers and employees to track their progress. This high-pressure environment was clearly intense and very competitive. Employee performance results were scrutinized and those who fell short were subjected to additional coaching by their managers. Incentive plans at the bank rewarded employees on the basis of the number of products, or accounts, they set up. Lacking good checks and balances, employees who wanted to earn bonuses took the shortcut and made up fake accounts. This shows how incentive schemes can go offtrack without proper monitoring. Under intense pressure to show new accounts being opened, tellers and personal bankers made up fake names and e-mail addresses for phantom customers, just to meet their quotas.Over 3.5 million fake deposit and credit card accounts were set up by employees desperate to meet unrealistic sales goals. Many auto loan customers were forced to take unneeded auto insurance and hundreds of thousands of customers were signed up for online banking without their knowledge or consent. When the scandal was first made public, the bank placed the blame on employees and fired over 5,000 employees accused of establishing the fraudulent accounts. However, as the investigation continued, it became apparent that the problems went much deeper than several thousand rogue employees acting on their own. Rather, authorities determined that widespread, systemic unethical behavior existed at the bank. The culture fostered this highly competitive, results-driven approach, and branch managers turned a blind eye to what they may have seen.A congressional investigation along with investigations from multiple government agencies consumed bank leadership and tarnished the Wells Fargo brand with its customers. The CEO resigned after the scandal broke. In an unusual decision, the bank's board did not provide him with a severance package and asked for repayment of bonus awards he had received in recent years. The Head of Retail Sales also resigned. Further, the bank paid penalties in excess of $185 million to regulators and over $2.5 million in restitution to customers harmed by the scandal. The loss of trust that customers felt after the scandal has led to negative outcomes for the bank. Credit card applications declined significantly, and loan applications are also far lower than in the past. The bank has posted poor operating results as time and money must be invested in researching and correcting these unethical practices.Organization culture and values set the stage for how employees will behave. HR practices such as incentive plans guide employee conduct. In the case of Wells Fargo Bank, the culture was one of "win at all costs" coupled with incentives that drove employees to meet the only goal for which they were financially rewarded, opening new accounts, one way or the other.Wells Fargo Bank tarnished its own brand image, and the loss of trust that customers felt led to negative outcomes for the bank. The unethical activities that Wells Fargo Bank encouraged and extensively carried out are to be blamed for this outcome. Which of the following statements, if true, would weaken this claim? a. The organization revised its incentive plans to include contributions of employees apart from meeting sales targets. b. The organization focused on cross-selling as the sole revenue-earning activity. c. The organization's district managers met with branch managers and employees multiple times each day to track their sales progress. d. The organization used substantial financial rewards to motivate employees to meet sales targets.

a. The organization revised its incentive plans to include contributions of employees apart from meeting sales targets.

The power of organizational culture is rarely as obvious as it was at Wells Fargo Bank. Whether positive or negative, culture within an organization drives employee behavior, sometimes in ways that are either not intended or not desired. Consider the case of Wells Fargo Bank where employees were pressured to cross-sell products to their customers. While trying to increase revenues and customer loyalty through selling multiple products is a fine strategy, in this case things went a bit too far.The bank managers emphasized cross-selling and had a goal for each customer to use up to eight products from the bank such as checking and savings account, mortgage loans, and credit cards. Personal bankers who worked at bank branches faced daily, sometimes hourly, sales goals to generate 10 to 20 product sales per day. District managers met multiple times each day with branch managers and employees to track their progress. This high-pressure environment was clearly intense and very competitive. Employee performance results were scrutinized and those who fell short were subjected to additional coaching by their managers. Incentive plans at the bank rewarded employees on the basis of the number of products, or accounts, they set up. Lacking good checks and balances, employees who wanted to earn bonuses took the shortcut and made up fake accounts. This shows how incentive schemes can go offtrack without proper monitoring. Under intense pressure to show new accounts being opened, tellers and personal bankers made up fake names and e-mail addresses for phantom customers, just to meet their quotas.Over 3.5 million fake deposit and credit card accounts were set up by employees desperate to meet unrealistic sales goals. Many auto loan customers were forced to take unneeded auto insurance and hundreds of thousands of customers were signed up for online banking without their knowledge or consent. When the scandal was first made public, the bank placed the blame on employees and fired over 5,000 employees accused of establishing the fraudulent accounts. However, as the investigation continued, it became apparent that the problems went much deeper than several thousand rogue employees acting on their own. Rather, authorities determined that widespread, systemic unethical behavior existed at the bank. The culture fostered this highly competitive, results-driven approach, and branch managers turned a blind eye to what they may have seen.A congressional investigation along with investigations from multiple government agencies consumed bank leadership and tarnished the Wells Fargo brand with its customers. The CEO resigned after the scandal broke. In an unusual decision, the bank's board did not provide him with a severance package and asked for repayment of bonus awards he had received in recent years. The Head of Retail Sales also resigned. Further, the bank paid penalties in excess of $185 million to regulators and over $2.5 million in restitution to customers harmed by the scandal. The loss of trust that customers felt after the scandal has led to negative outcomes for the bank. Credit card applications declined significantly, and loan applications are also far lower than in the past. The bank has posted poor operating results as time and money must be invested in researching and correcting these unethical practices.Organization culture and values set the stage for how employees will behave. HR practices such as incentive plans guide employee conduct. In the case of Wells Fargo Bank, the culture was one of "win at all costs" coupled with incentives that drove employees to meet the only goal for which they were financially rewarded, opening new accounts, one way or the other.Wells Fargo Bank lost face in the corporate world, its CEO and its Head of Retail Sales resigned, and the bank paid penalties to regulators and restitution to its customers. Which of the following can be seen as the primary reason for this downfall? a. Presence of employees who acted as whistle-blowers when unethical activities occurred within the bank b. An incentive plan that focused more on intrinsic rewards than on extrinsic rewards c. Engagement of employees in upselling rather than in cross-selling, despite management's focus on the latter d. A negative organizational culture that overemphasized meeting sales targets

d. A negative organizational culture that overemphasized meeting sales targets

The power of organizational culture is rarely as obvious as it was at Wells Fargo Bank. Whether positive or negative, culture within an organization drives employee behavior, sometimes in ways that are either not intended or not desired. Consider the case of Wells Fargo Bank where employees were pressured to cross-sell products to their customers. While trying to increase revenues and customer loyalty through selling multiple products is a fine strategy, in this case things went a bit too far.The bank managers emphasized cross-selling and had a goal for each customer to use up to eight products from the bank such as checking and savings account, mortgage loans, and credit cards. Personal bankers who worked at bank branches faced daily, sometimes hourly, sales goals to generate 10 to 20 product sales per day. District managers met multiple times each day with branch managers and employees to track their progress. This high-pressure environment was clearly intense and very competitive. Employee performance results were scrutinized and those who fell short were subjected to additional coaching by their managers. Incentive plans at the bank rewarded employees on the basis of the number of products, or accounts, they set up. Lacking good checks and balances, employees who wanted to earn bonuses took the shortcut and made up fake accounts. This shows how incentive schemes can go offtrack without proper monitoring. Under intense pressure to show new accounts being opened, tellers and personal bankers made up fake names and e-mail addresses for phantom customers, just to meet their quotas.Over 3.5 million fake deposit and credit card accounts were set up by employees desperate to meet unrealistic sales goals. Many auto loan customers were forced to take unneeded auto insurance and hundreds of thousands of customers were signed up for online banking without their knowledge or consent. When the scandal was first made public, the bank placed the blame on employees and fired over 5,000 employees accused of establishing the fraudulent accounts. However, as the investigation continued, it became apparent that the problems went much deeper than several thousand rogue employees acting on their own. Rather, authorities determined that widespread, systemic unethical behavior existed at the bank. The culture fostered this highly competitive, results-driven approach, and branch managers turned a blind eye to what they may have seen.A congressional investigation along with investigations from multiple government agencies consumed bank leadership and tarnished the Wells Fargo brand with its customers. The CEO resigned after the scandal broke. In an unusual decision, the bank's board did not provide him with a severance package and asked for repayment of bonus awards he had received in recent years. The Head of Retail Sales also resigned. Further, the bank paid penalties in excess of $185 million to regulators and over $2.5 million in restitution to customers harmed by the scandal. The loss of trust that customers felt after the scandal has led to negative outcomes for the bank. Credit card applications declined significantly, and loan applications are also far lower than in the past. The bank has posted poor operating results as time and money must be invested in researching and correcting these unethical practices.Organization culture and values set the stage for how employees will behave. HR practices such as incentive plans guide employee conduct. In the case of Wells Fargo Bank, the culture was one of "win at all costs" coupled with incentives that drove employees to meet the only goal for which they were financially rewarded, opening new accounts, one way or the other.Robert, a manager at a publishing company, has recently acquired a large order with a turnaround time of two months. To complete the project on schedule, he sets unrealistic productivity targets for his employees with hefty financial rewards for those who meet the targets. This results in employees falsifying data to earn the rewards. In this case, the best way to curb such unethical behavior would be to: a. replace all extrinsic rewards with intrinsic rewards. b. lay off all employees found guilty of falsifying information. c. encourage a "win at all costs" culture. d. move away from a results-driven approach.

d. move away from a results-driven approach.