Known as the Wells Fargo scandal, it started in 2016 and recently got new developments. Wells Fargo provides financial services, and the scandal concerns unlawful cross-selling tactics utilized by the company’s employees (Tayan, 2019). In itself, cross-selling is widely used, influencing people to invest in services additional to those they are buying. However, Wells Fargo employees were “opening new accounts and issuing debit or credit cards without customer knowledge, in some cases by forging signatures” (Tayan, 2019, p. 2). Despite multiple controls present, the company did not prevent the scandal.
The company used different levels and types of control, but they all failed due to lack of management and pressure on employees. Wells Fargo implemented concurrent control with strict rules and protocols but did not provide enough managers to monitor the staff (Lumen Learning; Tayan, 2019). These rules explicitly prohibited illegal cross-selling while the company’s strategy dictated unrealistic tactics. Feedback control extorted assigned quotas with specific numbers and types of services to be sold daily; otherwise, the target was added to the next day (Tayan, 2019). These targets pushed employees to violate the prohibitions and ultimately led to the scandal. Wells Fargo aimed to strengthen their values and visions by normative control dictating acceptable behavior (Lumen Learning; Tayan, 2019). Some forms of proactive control were implemented too. The company had a “hotline to notify senior management of violations,” various bonuses awarded for the risk management and adhering to the company’s culture, triggers for bonuses recoupment, etc. (Tayan, 2019, p. 2). However, Wells Fargo did not have objective control and top-down control. The latter contributed to why managers did not realize the scope of the problem and could not react timely and appropriately.
Wells Fargo needs to establish solid top-down control to monitor the staff and expand their management numbers. Tactics should have sufficient tactical control and not just a description. Although operational control allowed detecting the issue resulting in firing several dozens of employees, it proved to be just a little piece of a much larger problem. The company’s strategy needs revision to resolve it completely. All other controls were ineffective simply because strategic management asked for unrealistic progress from employees.
References
Lumen Learning. (n.d.). Why it matters: Control. Principles of Management, Module 15. Web.
Tayan, B. (2019). The Wells Fargo cross-selling scandal. Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance No. CGRP-62 Version 2, Stanford University Graduate School of Business Research Paper No. 17-1, 1-16. Web.