Introduction
The Wells Fargo controversy resulted from the company’s workers’ tremendous pressure to fulfill cross-selling sales goals. Cross-selling entails offering more products to current consumers. Wells Fargo staff utilized strategies such as coercing relatives and friends into opening bank accounts. They bought bank cards in customers’ names who never sought them and forged customers’ biometrics on paperwork. Wells Fargo’s dishonest actions led to the firing various employees and supervisors. One must consider Wells Fargo’s sound justification, background, evolutionary steps, change concepts, second-order adjustments, and cultural shifts to examine why the bank went from good to exceptional.
The Rationale for Selecting the Organization
One of the 11 businesses that Jim Collins selected in his book “Good to Great” as having successfully transitioned from an innovative business to a great one was Wells Fargo. Wells Fargo, a well-known provider of financial services, was established in 1852 in San Francisco as a tiny starting business (Friedmann, 2020). Nevertheless, it has experienced tremendous expansion and employs 8000 people as part of a privately owned corporation. Wells Fargo has unquestionably improved over the years, going from good to great. Wells Fargo has successfully adapted to the current and the future, even though company methods and the economic climate have evolved.
The Southern California employees of Wells Fargo utilized aggressive tactics in 2013 to achieve daily cross-selling goals. For opening new accounts and giving out credit and debit cards without customers’ knowledge, often by faking paperwork, 30 Wells Fargo staffers were dismissed (Tayan, 2019). Several observers asserted that the company’s rehearsal of setting everyday sales goals put employees under minimal pressure. For the quantity and range of goods they were expected to sell, branch managers were given quotas. The shortfall was carried over to the next day’s aims if the branch did not meet its objectives.
Background
Henry Wells and George William Fargo instituted Wells Fargo to cater to express transport in the Pacific Coast region. Earlier, they had formed the American Express company by merging three other companies to cater to the New York region. Wells Fargo was built on firm values, according to the policy spelled out in 1869 (Hurley & Hurley, 2020). It does business reasonably and does not propose to take advantage of anybody. Built on such a solid foundation, Wells Fargo in the 1850s and 1860s grew along with the economy based on mining and expanded throughout the country. When they undertook the delivery of letters, they had to adopt stagecoaches and ponies for delivery purposes.
In 1857, Overland Mail, affiliated with Wells Fargo, accepted “government contracts to deliver mail between the Missouri River and California.” In 1888, Wells Fargo and Company’s Express established rail transport from the coast to the Atlantic and across the oceans to Europe and Asia (Gil López et al., 2021). Wells Fargo soon offered refrigerated railcars for the transport of food products. A significant change happened in 1905 when Harriman, in charge of Wells Fargo, decided to split railroad transport and express services and moved the headquarters of Wells Fargo and Company Express to New York. The express path was unsuccessful, and very soon, it faced strong opposition from the domestic express business that the federal government consolidated.
Steps in Wells Fargo’s Evolution From “Good to Great”
Wells Fargo successfully created lasting value for its customers, staff, and investors by embracing its objective of supporting customers with dedication and enthusiasm. It evolved from a mediocre to an exceptional business. The authors of Jim Collins’ book “Good to Great” claim that Wells Fargo’s success is mainly attributable to its executives’ ability to place the right people correctly at the correct times (Barthélemy, 2022). For instance, 1600 Crocker Investment bankers were eliminated from their jobs since Wells Fargo executives believed they would not fit the Well Fargo culture. Even before the merger, it was determined that the Crocker management would have to be sacked because they had more luxurious offices and better benefits than the Wells Fargo managers. It was discovered that Dick Cooley, the CEO of Wells Fargo Bank, put people before institutions during a time of deregulation. As a result, Cooley paid close attention to his people resources and developed them into highly versatile workers.
The shift to the banking business helped Wells Fargo become the influential institute it is today. In 1905, under the leadership of Harriman, Wells Fargo joined the Nevada National Bank, and very soon, in 1924, the merger took place between the Wells Fargo Bank and Union Trust Company (Teo & Kimes, 2019). Later, Wells Fargo expanded from San Francisco Bay Area into Southern California (Teo & Kimes, 2019). In 1969, the bank turned national and began “a continental advance through nonbanking subsidiaries” (Teo & Kimes, 2019). Mergers with the Crocker Bank in 1986, with “First Interstate in 1996, and Norwest in 1998” helped Wells Fargo expand across 23 states and offered financial and mortgage services nationally and internationally (Teo & Kimes, 2019). According to Jim Collins, the greatness of an organization cannot take place overnight but only through a series of intelligent measures that can give it a push in the right direction. This is very much evident in the case of Wells Fargo. It started as an Express Company and expanded throughout the country, but at a certain point, it shifted to banking. After that, intelligent and consistent measures were taken to keep the banking industry expanding.
Change Principles Used by Wells Fargo to Create Change
Change principles are the fundamental rules or laws that govern change. The first change management code that Wells Fargo used is connecting the transformation with the purpose, goals, and the organization’s values. For example, to emphasize customer support more than cross-sell initiatives, Wells Fargo eliminated product sales goals and changed branch-level awards to highlight customer provision instead of cross-selling KPIs (Tayan, 2019). The second change principle Wells Fargo used is adding more training and control measures and new procedures for validating account openings. For instance, Wells Fargo eliminated aggressive product sales goals that drove employees to open illegitimate accounts (Heitger et al., 2021). Wells Fargo modified the composition of its board of directors and increased team member pay and perks (CEO Says Wells Fargo Has Transformed After Scandals; Lawmakers Are Skeptical, 2019). Wells Fargo’s third change-making tenet is that it must be planned such that benefits outweigh risks. For illustration, Wells Fargo abolished product sales targets and rearranged branch-level rewards to place more emphasis on client service than cross-sell measures (Tayan, 2019). It discreetly created new processes for confirming account openings and added more training and control measures.
Accepting error as a normal by-product of change is the fourth concept that Wells Fargo applied. For instance, Wells Fargo hired a private accessing firm to find potentially illegitimate accounts to evaluate all accounts since 2011 (Shichor & Heeren, 2021). Five thousand three hundred employees who had participated in the account opening incident were fired by Wells Fargo (Teo & Kimes, 2019). Change is a loss for someone is the fifth premise that Wells Fargo employed. For instance, Wells Fargo admitted to opening several accounts without customers’ consent (Tayan, 2019). The firm’s profits decreased as third-quarter earnings decreased (Austin-Campbell, 2021). In anticipation of a potential downturn, the bank increased its nonperforming loan reserves and accumulated costs associated with a scandal involving phony accounts.
Second-Order Changes Accomplished by Wells Fargo
Wells Fargo’s second-order changes include a profit-oriented strategy and a mission-driven approach. Wells Fargo used the mission-driven strategy to grow into a fantastic organization. The recent history of Wells Fargo and U.S. Bancorp, two banks with roots in Minnesota, can be used to illustrate this. Wells Fargo has concentrated on offering excellent customer service and growing its banking services in the Western areas over the last ten years (“History of Wells Fargo – Wells Fargo,” n.d.). On the other hand, U.S. Bancorp has concentrated on boosting its earnings through cost-cutting and centralization efforts. U.S. Bancorp appeared to be doing well in the short term due to profit improvements, but over time, it lost its client base and experienced issues with its staff, which caused its growth to fall. Bancorp had to be sold to a smaller Milwaukee banking organization since its stock had lost nearly most of its worth. However, despite the recent recession, Wells Fargo could maintain steady growth and consistently build its shareholder value.
Wells Fargo’s worth increased twofold above U.S. Bancorp’s. George, age 70. Wells Fargo produced lasting value for its clients, staff, and shareholders by pursuing its objective of serving people with passion and commitment. It evolved from a good to an exceptional business. Wells Fargo created an internal information system in the late 1980s to acquire a competitive edge (Chiriță et al., 2020). The bank attempted to escape an economic crisis brought on by too many leveraged buyouts and commercial real estate loans during this time. It began accumulating data on its clients and used it as a guide to assess forecasting data in the context of small business loans because it believed that using information technology would enhance its national presence in the small business market. Computers were employed for back-office tasks, decreasing paperwork. Due to these actions, Wells Fargo had “more than 16% of all small-business loans” by 1995. Wells Fargo gained a competitive edge thanks to new computer technology by facilitating loans for the mass market at reasonable costs.
Wells Fargo was the first bank to employ “digital certificates” to verify its customers’ identities for online payments. For a technological edge, VeriFone Corporation and Wells Fargo collaborated. The company received six awards from Global Finance Magazine in July 2005 for its use of technology, including “Best Integrated Consumer Bank Site,” “Best Integrated Corporate/Institutional Bank Site,” “Best Web Site Design (corporate category), “Best Web Site Design (consumer category), “Best Information Security Initiatives,” and “Best Corporate/Institutional Internet Bank in the US.” The business won the Q4 Online Banker Scorecard by Watchfire GomezPro in December 2004. As a result, Wells Fargo is a firm that has benefited from employing technology for its banking services and has been acknowledged as the finest in the industry for online banking and its customer-centric approach.
Changes in The Cultural Paradigm as A Result of The Change Process
Wells Fargo altered their approach to team member motivation. Workers will no longer receive individual bonuses or demotions for exceeding sales goals. The focus of branch employees was altered from selling to helping clients. A situation that drives people to perceive and pay for services and items that gratify both explicit and hidden desires and demands can be influenced by management (Ribble & Park, 2022). When such desires are satisfied, individuals could be motivated to make new purchases or search for other services and goods to satisfy their requirements better. Providing outstanding customer service is essential since it promotes brand loyalty and simplifies worker responsibilities. This encourages corporate growth, in turn. By providing exceptional customer service, businesses may recover their client acquisition costs, keep expertise on board, and foster brand loyalty.
The Hedgehog concept, which incorporates three fundamental criteria: doing what one can do best, what delivers more financial benefits, and what one is enthusiastic about, disciplines good to outstanding organizations’ thought processes. Wells Fargo became passionate about providing its customers with services that could potentially develop and expand. Wells Fargo’s significant assets were its interpersonal skills and culture of accountability. With its entry into the banking sector, these were put in place. Greatness came from Wells Fargo with the appropriate people at the junction of their banking services, their passion for helping people, and the growth of their networks. The business followed the “Hedgehog” road to success, nevertheless, by remaining focused on its mission of helping people through banking.
Significant firms succeed because of their leaders, or “Level 5 leaders,” who have the vision, humility, and discipline to choose the correct individuals for the appropriate jobs and dare to dismiss the wrong ones. Right from the start, Wells Fargo had several outstanding leaders at the leadership. Richard Kovacevich led Wells Fargo through several mergers to become one of the most prominent financial organizations in the United States (Pound, 2019). He led the organization as a transformative leader, using catchphrases like “Mind share with heart sharing equals the share of the market.” Workers must be driven and dedicated to their jobs and understand what they do.
Conclusion
In conclusion, Wells Fargo transitioned from good to great by pursuing its goal of assisting clients with zeal and commitment; It has successfully generated long-term customers, employees, and investors. Second-order improvements at Wells Fargo entail a profit-driven approach and a purpose-oriented strategy, which helped Wells Fargo develop into a terrific company. Wells Fargo practices change management principles to implement changes, transitions, and interruptions. The company adhered to its vision and mission with commitment, enthusiasm, and discipline, ensuring the proper people were hired for the right jobs, firing the general public, and utilizing technology.
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