Wells Fargo Organisation Analysis Essay Example

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Wells Fargo Organisation Analysis

Wells Fargo Organisation Analysis


Wells Fargo is an American financial institution that offers extensive and diversified financial services to individuals, small businesses, and large commercial firms (Wells Fargo 2017). The bank suffered from reputational damage and loss in the market as a result of the sales tactics in the retail banking division. According to Forbes (2017), the problems at the institution started when the CEO insisted that employees should ensure that customers purchased eight products from the bank. The unrealistic sales targets created excessive pressure leading to managers and staff resorting to fraud by opening millions of deposit accounts and credit cards for consumers without their knowledge. The fake accounts earned US$2.6 million in fees, but the discovery of the fraud meant that the bank had to pay back over US$185 million in settlement, fire thousands of employees, and lose the trust of millions of its customers (Cowley & Kingston 2017). This essay provides an analysis of the problem facing Wells Fargo and makes recommendations to resolve the challenge and improve organisational effectiveness.


An evaluation of the case shows that organisational design played a key role in allowing the fraud to take place. According to Cowley and Kingston (2017), the opening of fake accounts happened because of excessive levels of decentralisation in the organisation. Samson and Daft (2015) define centralisation as the hierarchical level at which decisions are made. In the case of a decentralised organisation, decision making happens at lower levels of the structure. While decentralisation has been associated with increased performance and efficiency, Samson and Daft (2015) argue that firms should evaluate their organisational situation before determining the appropriate level of decentralisation. In the case of Wells Fargo, the decentralisation went to an extreme level with the head of divisions given the right to run departments as they pleased to the point that they were not accountable to superiors, lateral colleagues, and subordinates (Cowley & Kingston, 2017). The lack of centralised decision making also allowed branch managers to encourage employees to create unwanted accounts to meet the sales goals.

Businesses like Wells Fargo operate in an increasingly complex environment with substantial uncertainties. The firm has to adapt to the changes that take place in the environment to be successful. According to Samson and Daft (2015), there is a critical relationship between organisational culture and the external environment where success only comes where the internal culture adapts to the external environment. According to Cowley and Kingston (2017), evidence of the fraud at Wells Fargo could be seen as early as 2004 when the head of the firm’s branches set unreachable goals. It is well known that the 2007/2008 financial crisis reduced the level of trust in the financial system. Despite the change in the external environment, the bank continued with its aggressive sales targets during and after a recession period where consumers lost trust in financial institutions. The subsequent revelation of the fraud has had a permanent impact on the bank’s credibility with customers and regulators. Additionally, the bank may never grow as fast as it did before the fraud despite spending over $400 million to clean up the scandal (Shen, 2017). It is apparent that challenge facing the organisation originated from a failure to adapt to the external environment.

Ethical issues also played a role in creating the challenges facing Wells Fargo. Managers often have to deal with moral dilemmas in their course of work. At Wells Fargo, managers and employees had to decide whether to do what is right or follow the sense of duty to their bosses and organisation. Most employees made the decision to ignore the morality of their actions to please their managers and keep their jobs. This points to an organisational culture that does not encourage ethical behaviour. The unethical culture can be confirmed by evidence that the bank fired employees who warned senior managers about the fraud. The firm also tried to force consumers into private arbitrage to avoid lawsuits (Cowley & Kingston 2017). Evidently, ethics played a key role in creating and worsening the problems facing Wells Fargo.


As stated, Samson and Daft recommend that businesses evaluate their organisational characteristics before determining the appropriate decision-making level that will enhance performance. Given that Wells Fargo operates in a challenging business environment where consumer perception is central to success, it is recommended that the firm centralises decision making during and after the current crisis. The senior management, with close supervision from the board, should make most business decisions and rely on modern technologies to communicate the decisions to branch managers who will implement the decisions. Centralisation will lead to a better response to the crisis while ensuring that similar sales practices will not occur.

Regarding adaptation to the external environment, it is recommended that Wells Fargo seeks a new CEO and senior managers from outside the organisation. According to Cowley and Kingston (2017), the bank took the decisive step of firing the CEO and the head of retail banking. However, the new CEO has a long career as a senior executive at Wells Fargo. In order to institute the changes needed in the bank’s internal environment and adapt to the uncertain business environment, it is crucial for the bank to move beyond cosmetic changes to its management. In fact, a change in Wells Fargo’s Board is also necessary as they failed in their supervisory role for over a decade and would be unlikely to encourage significant changes in the bank’s operations.

The third issue that is identified in the case is a failure in ethical decision making. The recommended solution is a change in organisational culture. This will be through cultural leadership where a new management team defines and uses signals and symbols to influence culture by creating values and using day to day procedures and rewards to reinforce the values (Samson & Daft 2015). Instead of focusing on sales targets like the former CEO, the new management team should create an organisational culture that prioritises ethical decision making. In the long run, ethical decision making will mitigate the reputational damage and allow the firm to regain its market position.


Cowley S & Kingston JA 2017, Wells Fargo to Claw Back $75 Million from 2 Former Executives, The New York Times, available from https://www.nytimes.com/2017/04/10/business/wells-fargo-pay-executives-accounts-scandal.html?mcubz=2&_r=0

Forbes 2017, The Wells Fargo fake accounts scandal: A Timeline, Forbes, available from https://www.forbes.com/pictures/fkmm45eegei/where-wells-went-wrong/#28f5563ecf64

Samson, D & Daft, R 2015 Management, 5th Asia Pacific Edition, Cengage Learning.

Shen, L 2017, Wells Fargo Says Sales Scandal Could Hurt Growth Permanently, Fortune, available from http://fortune.com/2017/04/13/wells-fargo-report-earnings/

Who we are, 2017, Wells Fargo, available from https://www.wellsfargo.com/about/corporate