Organizational Behaviour

(BOB 7024)

NAME FARZIHAN HASSAN

STUDENT ID 1161403585
ASSIGNMENT 1
LECTURER DR. ANISAH JUMAAT

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Table of Contents Page

Part A:
The Wells-Fargo Sham Account Scandal (Case Study) 3

Part B:
Question (i) 5
Question (ii) 8
Question (iii) 10
References 13

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 The Wells Fargo Sham Account Scandal

Wells Fargo & Company is an American international banking and financial services holding
company that founded on March 18, 1852 by its founder Henry Wells and William Fargo. As
of 2015, Wells-Fargo has 265,200 employees and its ranked 7th on the Forbes Magazine
Global 2000 list of largest public companies in the world and ranked 27th on the Fortune 500
list of largest companies in the United States in 2016. Wells-Fargo also listed as 22nd most
admired company and the 7th most respected company in the world in 2015.
Not only that, as of October 2015, the company had a credit rating of AA- and also known as
one of the "Big Four Banks" of the United States along with JP Morgan Chase, Bank of
America and Citigroup. Wells-Fargo operates across 35 countries and has over 70 million
customers globally. It is the world's second largest bank by market capitalization after
slipping behind JP Morgan Chase in September 2016, in the wake of a scandal involving the
alleged creation of over 2 million sham bank accounts by thousands of Wells-Fargo
employees.
It's all started when Wells-Fargo ex-CEO and Chairman, John G. Stumpf who was famous
with his "Cross-Selling" quote stating "The reason we picked 8: It rhymes with 'great'... If we
could have found something to rhyme with 10, we would have picked 10", had set-up an
impossible sales target to all Wells-Fargo sales representative to achieve by asking them to
ensure every customer that they served open eight banking products (credit cards, savings,
checking, mortgages, loans and CDs). It had putting too much pressure to all sales
representatives in Wells-Fargo of having to hit their sales target. They started feeling the heat
from their individual manager and supervisor whenever they didn't hit their sales target for
the said month, this is when the real problem surface. Unwanted sham accounts were created
simply to boost up their sales number, in order for them to achieve the "ridiculous" sales
goals that been set by the top-management towards them.
The ethics scandal erupted in public knowing on Sept, 2016 but it's not a shocking news for
employees in Wells-Fargo. This scandal had been happening for few years and few of the
Wells-Fargo employees have lodged a complaint pertaining this matter. One of the employee
wrote to the HR Department about employees opening sham accounts, forging customer
signatures and sending out unsolicited credit cards in 2005 and kept on complaining for 4
years on the row. Not only that, for years similar or identical complaints from other
employees keep on flowed in to the bank's internal ethics hotline, HR Department, individual

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managers and supervisors. Even in 2011, two cases of employees wrote letters directly to
Stumpf to notify him on the illegal activities that they had witnessed. But no one care!
Wells-Fargo had been fined $185 million by the Federal Regulators on the illegal practices
that have been happening in the organization. First case reported in 2013, have shown serious
flaws and at the same time Wells-Fargo started firing its employee in between 2011 and 2016
involving 5,300 mostly low-level employees.
Although sales representative in Wells-Fargo aware about this but they can't do anything
about it. In reality, they still need to meet their sales goals. One of ex-employee by the name
of Angie Pyden said "I pulled myself into that trap - sitting there doing things that I didn't
agree with because I felt like I didn't have a choice because I needed a pay check and afraid
of losing my job". She decided to quit after 3 years working at Wells-Fargo after few months
on her attempt suicide on Wednesday, Jan 16, 2013 because of the pressure that she been
going through while working at the bank.
Ex-employees file suits to Wells-Fargo because of their unfairly dismissal by the
organization. Some of these employees being fired just because of their complaint on the
fraud that being going on since 2005. Instead of being applaud by the organization, they
being fired because of trying to do the right thing. For them the culture that being set by the
top management is like "Lions Hunting Zebras". Targeting innocent people such as
immigrants who spoke little English and older adults with memory problems. However the
top management remain standing and even given paid and awesome package for their
retirement such as Carrie Tolstedt. She was the Head of Community Bank and responsible to
6,000 branches where the infractions took place, had been paid $124 million compensation
upon her retirement over the summer instead of being fired.
Ex-CEO John G. Stumpf only announced his retirement on Oct 12, 2016 after being slammed
during his hearing at House Financial Services Committee, one by one by the Democrats and
Republicans and his $41 million earning will be clawed back announced Wells-Fargo. The
new CEO, Tim Sloan previously was the COO of Wells-Fargo will be replacing Stumpf still
arise concerned among the public, congress and especially the employees because he still
culpable.

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Part B
i. Why do you think this issue occurs? Identify factors contributing to the issues
affecting the organization (Wells-Fargo). Using the Basic OB Model, you can
identify and discuss these factors along individual, group and organizational
level.

Wells-Fargo is known among the large American banks to be the king of "cross-
selling". For the organization, cross-selling is the heart of its bank and profitable to its
business as well. The knowledge of cross-selling was profitable and could led to high
sales goals had given the employees in Wells-Fargo an idea to meet their sales target.
By saying so, their employees will do just about anything in order for them to meet
their sales goals and at the same time keeping their jobs intact. This is when the
employees in Wells-Fargo began their unethical behaviour by opening fraudulent
accounts as a result.
These unwanted sham accounts were created simply to goose the income of bank
employees whose incentive programs rewarded them for opening as many as new
accounts as possible. Wells-Fargo's sales and compensation structure incentivized
employees to engage deceptive and obnoxious practices. On the other hand,
unchecked incentives by Wells-Fargo had lead to serious consumer harm.
There were few factors that can lead to this unethical issue that have been happening
at Wells-Fargo. Here we will examine the issue in individual, group and
organizational level prospective based on Basic OB Model.

Individual Level
Wells-Fargo has five primary values that are based on its vision and provide the
foundation for everything that the organization do and one of it is "Diversity and
Inclusion". All of us aware that no two persons are similar. The world has huge mix
of people with different background, religion, castes, race, culture, behaviour, age,
marital status, nationality, educational qualification, political affiliation, levels of
ability, personality, gender, values and many more which vary across the globe. Same
goes to workplace diversity that tends to consist of social, economic and political
visible and non visible differences which might not have a direct co-relation origin
from the work place, but certainly have undeviating impact on work attitude and work
performance.
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From the observation, Wells-Fargo employees were feeling the pressure that been
imposed on them by their individual manager or supervisor. Overly aggressive goals
and performance pressure have caused them to behave certain way. Same goes to
anxiety at work that caused and impacted employees' ethics and moral in doing
something that they knew weren't right. The employees mind set were more on human
opt for self-protection as a survival mechanism in the face of pressure and they tends
to less concerned about ethics.
As mentioned earlier, no two people are similar even though they have similar
educational qualification, age and gender. Their physical attribute and the way they
handle thing will be different. It's no different with Wells-Fargo employees. Due to
constantly hound, berate, demean and threaten by their individual manager and
supervisor to meet the "ridiculous" sales target, they willing to do whatever it takes to
reach their quotas. Some of the employees will get it done fast and some of them
didn't based on their intellectual and physical abilities. Employees who did not reach
their quotas were often required to work hours beyond their original working hours
and no compensation will be given to them for that extra work time and even
threatened with termination.
Some of Wells-Fargo employees that earlier on hesitated or reluctant to follow the
foot step of their other colleagues at the end give in even though it against their
believe and moral values. Employees with high self-monitors able to adapt and
adjusting their behaviour with the situation that happening within the organization.
Although they knew this was unethical behaviour and wrong thing to do but they still
did it for the sake of saving their job and they really need the paycheck at the end of
the month to pay all their expenses.

Group Level
In group level point of view, employees at Wells-Fargo feel strongly about their
group partly because, as research indicates, shared experiences amplify our perception
of events. This is what we call "Social Identity Theory". Wells-Fargo employees have
emotional reactions to the failure or success of their group because their self-esteem
gets tied to whatever happens to the organization.
Based on this theory, individual manager and supervisor at Wells-Fargo started to
hound and threaten their subordinates in order to make sure their team performance is
on the top notch and poor performance is not allow at all. For them as long as their
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subordinates can achieve the sales target, they don't really care what and how they do
it. Their team glory is more important because successful teams translate their
common purpose into specific, measurable, and realistic performance goal. Even
though they knew that their colleagues were opening sham accounts, they just tried
not to see it because once their group achieve the sales target that given to them, not
only they receive recognition but the handsome incentive that came together with the
praise. Wells-Fargo employees practicing "moral muteness" or people's reluctance to
communicate their moral concerns and speak up about the unethical behaviours in the
workplace.
Besides that the employees tried to segment their identities into different roles rather
than integrating these into a more unified whole. For them anything that happened at
work and how they behaved during working time nothing to do with their moral
values that they imposed at home and after working hours. The employees focused on
the respects in which their actions were harmless as long as they didn't do it after their
working hours and ignored the downstream implications and consequences on what
they did.

Organizational Level
In organizational perspective, working culture play major part in Wells-Fargo sham
accounts scandal. Wells-Fargo created a culture vulnerable to fraudulence. Even the
ex-CEO was guilty of self-delusion, explaining that he initially believed the practices
were harmless because empty accounts were "auto-closed" after certain period of
time. This shown that he accepted this ethics violation. When we said the working
culture in Wells-Fargo, there are two primary characteristics seem to capture the
essence of the organization's working culture;
Aggressiveness - The degree to which organizational activities
emphasize maintaining the status quo in contrast to growth.
Outcome orientation - The degree to which management focuses on results
or outcomes rather than on the techniques and processes used to achieve them.
"Cross-Selling" has been seen as Wells-Fargo's forte and the bank itself not shy to
flaunt it. Wells-Fargo had been campaigning and preaching to all employees about
their "impossible sales target and putting pressure to employees to achieve it. The
bank's "Gr-eight" campaign wanted all their employees to make sure all their

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 customers to open 8 banking product accounts and if they do not meet their sales
target they will be terminated. This type of leadership, leading by fear and
intimidation and not to forget their aggressiveness had been in Wells-Fargo bank's
culture since the beginning and the end lead to unethical behaviour by Wells-Fargo
employees.
Besides that, the bank's sales and compensation structure that giving reward to their
employees whenever they reach their sales target didn't have reasonable based ground
to determine employees performance. Unchecked incentives that could lead to serious
customer harm. Wells-Fargo employees can't help themselves to be trap into the
culture that been circulating around the organization because they already being
control by them. Wells-Fargo organization structure can be seen as an archery target.
In the center are the executives, and radiating outward in rings grouped by function
are the managers, then the specialists, then the workers. This is known as "circular
structure". Wells-Fargo's the top management that creating the working culture at the
organization will be at the center and spreading its vision outward.

ii. You are at the beginning of your studies in organizational behaviour. What
other knowledge about human behaviour in organizations will help you to better
understand the issue faced by Wells-Fargo?

Wells-Fargo's scandal shocked people in banking industry since the scandal erupted
to public knowing in Sept 2016. Since then public start putting interest and scrutiny
of Wells-Fargo's culture. The employees at Wells-Fargo called the culture as "soul
crushing" due to fear and daily intimidation by their individual manager and
supervisor. Their individual manager and supervisor keep on pressuring them to reach
extreme sales goals that causes some of them breaking the law by opening sham
accounts.
But its more than eyes can see. Wells-Fargo employees blaming their top
management because of the working culture that they nurture in the organization and
John G. Stumpf blaming his rouge employees whose misdeeds that landed him on the
hot seat and investigated by the regulators, prosecutors and the Senate Banking
Committee. The finger pointing keep on pointing without looking at bigger picture.
It's understandable if the employees were doing precisely the thing that they were
asked to do by the management, even if such asking was tacit or implicit in shared
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group norms. Clearly this action showed that informal incentives were at play,
seminal employee behaviour predictably. This is the "tone from the middle", where
many company leaders fail to look closely enough and consider it far more
conscientiously. The "tone from the middle" is a firm's culture.
In banking industry, "identity priming" phenomenon appears unique and it show
bankers when primed to think of themselves as bankers. It's because bankers tendency
of cheating are higher compare to other profession such as plumbers, teachers, doctors
or other professions that we might think of. It is just business' mentality, which can
eliminate personal feelings, values and ethics from professional situations. By saying
so, business mindset leads to dishonesty and lack of consideration for other things like
moral issues. In such a human nature that we are persistently incentivized to indulge
our baser instincts and prevailing business culture in the banking industry weakens
and undermines the honesty norm.
Group acceptance was also one of the informal incentives that causes the scandal in
Wells-Fargo occurred. Wells-Fargo employees tends to mimic their peers' behaviour
and to refrain from doing anything others unlikely to approve. When "operational
issues" like extreme sales goals help build a certain mindset in employees, in this
case, the belief that successful managers must push their subordinates aggressively,
that mindsets will carry on, even after the bank removes those sales goals from
employees KPI.
In conclusion, deterrents to speaking up and no sense of "organizational citizenship
behaviour" among the employees had created loop hole and in the other word
"leadership blind spot", as a result of misguided reverence for their culture and its
ability to inoculate the bank from systematic problems. Scared of telling the truth
because of afraid to be uncomfortable and accountable for speaking up. Not protected
by the organization whenever employees trying to flag out unethical sales activities
and chances to be terminated is high.
Last but not least, "there are none so blind as those who will not see", and leadership
doesn't always have to start at the top but the tone from the middle prevail.

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iii. Based on your knowledge about OB, What advice would you give to the person
(s). Involved in this issue?

Based on my examination on the unethical behaviour scandal that happening at

Wells-Fargo, there are few ways we can help the organization to fix and make things
slightly better or even fixing the issue entirely if we do it right.

Culture
First thing first, we need to fix the working culture that been in the organization for a
long time. It would be advisable for Wells-Fargo to hired an external culture experts
to review the working culture in order to get unbiased review especially from
uninvolved party rather than the bank itself.
Wells-Fargo that known as an organization that really strong in its working culture
that mentioned earlier, shown even its ex-CEO Mr. Stumpf was someone that had
highly opinion of the Wells-Fargo's culture seems to be unwavering despite consistent
evidence to the contrary. He stated "culture of the company is strong and is based on
ethics and doing "what's right", he either in "denial" state or "tone-deaf" or both. By
saying so, this culture need to be stop and change before its damage the company
work ethics entirely.
We are aware culture is not something can be changed overnight or few months or
few years, or maybe it can't be changed at all. But it's better late or never.
Nevertheless, the review need to start from the beginning when it all started. Finding
the root of the problem that triggered employees to behave in certain way that at the
end causing illegal misbehaviour by opening sham accounts. This will help the
organization to understand where is the cultural weaknesses that need to be
strengthened up and fix entirely.

Organization Plan
Wells-Fargo need to review their business plan especially on their "cross-selling"
strategy. The organization need to come up with reasonable sales target that
achievable for their employees to achieve and incentives that given out is well
checked and balanced.
Besides that Wells-Fargo is advisable to start investing in how to improve employees
training, monitoring and control for team members. The organization is require to
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make sure all the employees know their boundaries and ensure they are not crossing
the line and constantly aware that engaging in suspicious and illegal activities are not
acceptable and legal action can be taken towards them.

Gaining trust
Wells-Fargo need to restore the trust back from the public that was and currently still
their customer that using their banking services for so many years. The organization
focus need to change 360' degree. It need to focus more on the customer relationship
instead of product focus. Not only that, it is advisable for Wells-Fargo to hire a
consulting firm that can assist them to review and examine records from 5 years back
on consumer and small business bank accounts and credit cards that were opened by
the employees illegally. By doing so, they can start by refunding all the money that
been taken away from their loyal customers illegally. Even though this small gesture
couldn't get their customer trust 100% but it will slightly help in terms of fixing
unspoken emotionally feeling towards their current and future customer perspective.

Change of Mindset
Even with all the changes that going to be implemented in Wells-Fargo, by taking
away the sales goal or refunding the customers their rightful right but still, human
mindset will endure it inside their minds, even after the organization removes it.
For a start, the mindset of top management at Wells-Fargo need to change
accordingly and eventually their subordinates will follow their leads. For example,
incentives matter a lot when they are salient, or foremost in the employees' mind and
at the same time, it's hard for the employees to ignore the threat of losing their job or
even the threat of embarrassment in front of others if they couldn't achieve their sales
target.

Change top management entirely

Wells-Fargo had fired 5,300 employees due to the unethical behaviour that been
going on in the organization. Instead of firing the Head of Community Bank, Ms.
Tolstedt, that in charge in overseeing the bank pertaining to the scandal issue, the ex-
CEO Mr. Stumpf blaming Wells-Fargo low-level employees and making them paying
the price for putting him in difficult situation. While others in top management team
remain silent and safe from termination.
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When Mr. Stumpf announced his retirement to public, regulators, back on Oct, 2016,
Wells-Fargo called upon Tim Sloan to take over the CEO's role to replace him. But
there is still unanswered question among the regulators, public and employees that the
new CEO is also culpable that lead to the unethical behaviour scandal at Wells-Fargo.
Previously he was a COO for Wells-Fargo and his been in the organization for almost
30 years.
In order for Wells-Fargo to move forward without any hiccup in management team,
the organization need to do a thorough clean up. Wells-Fargo's current management
team need to be removed entirely and change to a new team. By saying so, the
organization need to start fresh and only uncorrupted culture mindsets are suitable to
run the organization smoothly without having to worry about unnecessary problems
from other elements. At the same time, their focus and belief would be different from
the current team that running Wells-Fargo all this while. There will be more new
ideas, positive energy and most important of all the unethical behaviour could be
avoided among the employees.

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References

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Wrong, and how is it Fixing it? The Morning Call, P.1. Retrieved from
https://www.mcall.com
2. Newman, R. (2016, September 17). How did the Wells Fargo debacle happen? Asbury
Park Press, P.1. Retrieved from https://www.app.com
3. Kouchaki, M. (2016, September 15). How Wells Fargo's Fake Accounts Scandal Got
So Bad. Fortune, P.1. Retrieved from https://www.fortune.com
4. Levine, M. (2016, September 9). Wells Fargo Opened a Couple Million Fake
Accounts. Bloomberg View, P.1. Retrieved from https://www.bloomberg.com
5. Tippett, E. C. (2016, October 7). This is How Wells Fargo Encouraged Employees to
Commit Fraud. New Republic, P.1. Retrieved from https://www.newrepublic.com
6. Kupter, Scott, J., S. (2016, September 29). Wells Fargo: What Drives Toxic Corporate
Culture? Forbes, P.1. Retrieved from https://www.forbes.com
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CNN Money, P.1. Retrieved from https://www.money.cnn.com
8. Egan, M. (2016, October 25). Wells Fargo Workers Describe Mental Health
Nightmares. CNN Money, P.1. Retrieved from https://www.money.cnn.com
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can Finally Understand. The Guardian, P.1. Retrieved from
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10. Grandel, S. (2016, September 29). How Wells Fargo's Phony Accounts Scandal
Makes J.P. Morgan Look Good. Fortune, P.1. Retrieved from
https://www.fortune.com
11. Pehz, J. F. (2016, October 14). As Wells Fargo's Earning Fall, New CEO Wishes
Scandal was Handled Earlier. Los Angeles Times, P.1. Retrieved from
https://www.fortune.com
12. Cowley, S. (2016, October 26). At Wells Fargo, Complaints About Fraudulent
Accounts Since 2005. The New York Times, P.1. Retrieved from
https://www.nytimes.com
13. Harrington, R. (2016, October 26). Former Wells Fargo Banker Shares Her Story of
the Crushing Stress from Having to Open So Many Needless Customer Accounts.
Business Insider Malaysia, P.1. Retrieved from https://www.businessinsider.my
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14. Corkery, Cowley, M., S. (2016, September 16). Wells Fargo Warned Workers
Against Sham Accounts, but 'They needed a Pay Check'. The New York Times, P.1.
Retrieved from https://www.nytimes.com
15. Shen, L. (2016, October 16). Wells Fargo CEO Tim Sloan Just Apologized to His
Employee. Fortune, P.1. Retrieved from https://www.fortune.com
16. Corkery, Cowley, M., S. (2016, October 13). Wells Fargo's New Boss is Same as The
Old Boss to Congress. The New York Times, P.1. Retrieved from
https://www.nytimes.com

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