In: Operations Management
Wells Fargo: Setting the Stagecoach Thundering Again
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What is your assessment of the financial performance of Wells Fargo during John Stumpf’s tenure as its Chief Executive Officer (CEO)?
The employees need to meet impossible “quotas” to earn financial incentives, by any methods they can to increase profits and meet goals for the company during John Stumpf’s tenure.
What is the rationale of the “cross-sell” strategy? Was the strategy appropriate for Wells Fargo? What challenges related to the cross-sell strategy started to surface in 2011?
The rationale of the “cross-sell” strategy is to increase profits for stockholders, maximize the existing buying potential from customers. I think it is appropriate for Wells Fargo, because by utilizing their existing customers to maximize profits, it is cost efficient. It can also increase profits for the company. I think the financial incentives and “quotas” had a negative effect for the employees, the impossible “quotas” and juicy financial incentives led employees to work toward the goal and neglected the methods of doing it so. The implementation was effective in an unhealthy way, it made the employees scared of not meeting the goals.
What are the key elements needed to develop and sustain an ethical corporate culture (see Schwartz 2013)? Were these elements present at Wells Fargo during the period of misconduct?
The three elements include (1) the existence of a set of core ethical values infused throughout the organization in its policies, processes, and practices; (2) the establishment of a formal ethics program, including a code of ethics, ethics training, an ethics hotline, and an ethics officer; and (3) the continuous presence of ethical leadership — that is, an appropriate ‘tone at the top’ as reflected by the board of directors, senior executives, and managers. While each of these three elements is distinct, they also overlap, relate to, and reinforce each other. They did not, they simply let the misconduct happened under their watch, it seemed the leadership was really disconnected with the employees.
What constitutes ethical leadership (see Schwartz 2013)? Why is it important? What are the qualities of an ethical leader? Were they present in the leadership of Wells Fargo during the period of misconduct?
Ethical leadership is leadership that respect ethical values and beliefs, ethical leadership can work alongside with profit chasing, while responsible leadership weakens the importance of ethic. I don’t see any ethical leadership within the period of misconduct because the leadership was blind by the goals that they set for the company. Responsible leadership is making business decisions that considers both shareholders and stakeholders. Stumpf and Tolstedt definitely did not demonstrate responsible leadership, because they did not consider their stakeholders, by using their unethical business practice.
What changes would you recommend the new CEO make to restore the reputation of the bank while also improving financial performance? (Hint: You should outline plans for improving the culture and compensation systems, at a minimum.)
New CEO needs to encourage employees and reshape the existing company value and culture, he needs to reconnect with his employees and invest time into them. The employees’ intellectual prosperities need to be utilized by the leadership, and they need to continue reshape public’s opinion about the company in order to gain the trust back.
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