MANAGEMENT OF ORGANIZATIONAL BEHAVIOR AT WELLS FARGO BANK

Answer

Background of Wells Fargo
Wells Fargo & Company is a multinational firm specialized in offering financial services to individuals as well as small and large businesses. It is headquartered in California but operates managerial offices across the USA and abroad. Wells Fargo is ranked as the fourth largest banking institution globally, in terms of market capitalization and still merits among the big four in the US market by total assets. In 2015, the bank had risen to become the largest bank in the world by market capitalization, however, the ‘illegal manipulation and fake bank accounts’ scandal committed by its employees in 2016 tainted its reputation prompting massive exit by customers. In spite of the billions of losses instigated by the scandal, Gara (2020) reports that Wells Fargo has continued to suffer from poor leadership after the exit of two CEOs and sanctions by the Federal Reserve against asset growth. Wells Fargo was founded in 1852 by William Fargo and Henry Wells. It has since grown both organically and inorganically, through acquisitions and mergers with other financial institutions. By end of 2019, the bank had 8,050 branches and 13,000 ATM locations globally. Its revenues as of 2019 was $85 billion. Currently, the bank has 258,700 employees globally.
19.0 Organizational Behavior
Organization behavior (OB) is considered to be a complex and least understood element of academics on modern management. However, the bottom-line is that it concerns itself with the way people behave in organizations. It analyzes both group and individual patterns of behavior made by people as they attempt to deal with the other complex issues within the modern organization. This statement is seconded by Christy and Mullins (2016) who state that organizational behavior is the study of people’s behavior within the organizational set up. A more detailed presentation is given by Christy and Mullins (2016) who associates organizational behavior mastering of group and individual behavior, patterns of structure, the workplace environment, and technologies used to improve organizational effectiveness and performance. Logically, organizational behavior is seen to revolve around four elements; people, environment, structure, and technology. As evident at Wells Fargo, People form the internal social systems in organizations, structures determine the relationships among people, technologies provide resources that facilitate work, while the internal and external environment represents the wider ecosystem within which the firm operates.
Efficiently aligning these elements is supposed to enhance the effectiveness of operations, thus maximize productivity and profitability. Rhoden (2016) elaborates that managers have to understand both the positive and negative impacts of organizational behavior on an organization. Literature drawn from the banking sector shows that managers who possess an understanding of the multidisciplinary nature of organizational behavior, namely cultural systems, personality systems, and social systems, have a deeper understanding on how to deal effectively with the individuals within the organizational setting. This is because disciplines such as sociology, anthropology and psychology enable them to understand humans and how best to handle them to achieve their goals. Secondly, managers with OB skills have a better understanding of human beings and easily deploy OB concepts such as psychological contract to meet the expectations of the individuals and groups thus motivating them to perfect better (Taylor, 2018). Understanding others creates self-insight and self-knowledge which are important personality traits for people working in the service industry such as banks.
Third, managers who understand organizational behavior have increased knowledge on the work environment and how the set-up of the organization affects performance. This statement is seconded by the systems theory which compares organizations to machines with inputs, output, throughput, and feedback loops (Barbaranelli et al, 2019). Just like the machines, effective alignment of the four elements of organization behavior will optimize organizational effectiveness thus setting it up for goal achievement. These sentiments are evident at Wells Fargo where managers with an understanding of organization behavior tend to interact with the employees and other stakeholders to optimize their output and value proposition delivered to the end customers. This way, Wells Fargo has managed to achieve high customer satisfaction rating in 2011 until the 2016 scandal triggered a negative customer impression (Burns, 2015). In addition, over the years of operations, Wells Fargo has proven that managers with superior OB knowledge lead more effectively thus improving productivity and profitability.
As much as it is admirable for managers to understand organizational behavior, it has proven to have its disadvantages, challenges, and limitations. First, mastering organizational behavior increases chances of unethical and immoral manipulation of people within organizations. This is one of the major concerns raised against organizational behavior, especially at Wells Fargo where the managers used the techniques and knowledge on OB to manipulate systems and employees into unethical practices that led to the scandal. This example justifies that managers who lack a strong moral and ethical grounding could easily capitalize on the limitations of organizational behavior to meet their selfish ends (Wood et al, 2016). Similarly, managers could use their knowledge on interpersonal skills, communication, and motivation to manipulate others into subjugating human welfare. This is seen in situations where some managers delegate their responsibilities to unpaid interns. Secondly, organizational behavior is prone to the law of diminishing returns.
Over emphasis on organizational behavior could be counterproductive in the long run since employees become used to the antiques used by the managers to push them into productivity. To override this shortcoming, it is important that managers are consistently trained to embrace new skills to enhance productivity. The third set back with organizational behavior is behavioral bias. Overly depending on organizational behavior theories such as social exchange theory and psychological contract model could narrow the thinking of managers. As a result, managers who apply contingency management models are likely to thrive because they believe in tailoring solutions to each organizational challenge. Regardless of these setbacks, managers who understand organizational behavior have shown higher levels of efficiency in handling individuals and groups compared to those who lack the knowledge (Griffin et al, 2020). Because of this, it is important that managers constantly seek new ways to make organizational behavior workable in their workplaces rather than ignoring it all together.
Organizational behavior directly impacts the role of managerial work and people. According to Pradhan et al, (2018) the concept of positive organizational behavior, which takes a positivist or functionalist approach entails scientific studies on what makes human life worth living. Unlike other leadership models that questions ‘what is wrong with individuals and groups’ the concept of positive organizational behavior seeks ways to complement traditional psychology as it focuses on things that determine what organizations and the managers can do to enhance the well-being and satisfaction of the people. This concept of organizational behavior concerns itself with creating engaged and happy workplaces where positive traits namely talents and character strengths, in addition to positive relationships such as love and friendship thrive (Omar, S., Jayasingam & Bakar, 2019). Proper implementation of organizational behavior enables organizations to create a workforce where people operate as a large family pursuing similar goals. Achieving such an objective is highly admirable as it enhances engagement and happiness of employees while making it easier for the managers to allocate and coordinate resources.
In the case of Wells Fargo, it is understood that improper management of organization behavior could lead to wastage of valuable resources and poor customer relationships. These experiences have come first hand after the scandal and thus, the organization is taking all the steps necessary to find a leader who will create a positive organization behavior that maximizes the positive impact of OB on all the stakeholders. In addition, positive organizational behavior encourages managers to switch from the traditional focus on process and outcome to developing people’s emotional, spiritual, and social capital. This way, the workplace becomes more accommodative of the diverse needs of the employees. Positively orienting employees enables them to exhibit strengths while creating a strong psychological capacity that promises performance improvement at all the levels and departments in an organization (Omar et al. 2019). Currently, Wells Fargo is working on achieving this desirable position in regard to positive organizational behavior.
20.0 Challenges Wells Fargo Faces and Possible Solutions
20.1 Leadership Dynamics
Leading is an essential element of organizational management. It enables leads to effectively manage organizational behavior by coordinating activities of people and aligning their efforts to the objectives and goals of an organization. The process of leading involves making important choices on the appropriate organization behavior and actions to be taken by the work teams (Fischbacher-Smith, 2017). To lead efficiently and effectively, a leader should understand the leadership dynamics of a given industry. The two main challenges associated with leadership dynamics at Wells Fargo are; lack of value based leadership, and over emphasis on transactional leadership.
According to annual reports by Wells Fargo, leadership plays a significant role in commanding results. This is because leaders closely control the people and create an environment where teamwork and empowerment can thrive. As a result, leadership is an important element in the successful operation of businesses. The company’s corporate governance report further reiterates these sentiments noting that organizational leadership entails creating and sustaining a functional leader-follower relationship (Jordan, 2016). The two way process of leadership influences not only the performance of the organization, but also the individuals. Whereas leadership is easy in theory as evident in leadership literature, in practice, it is quite elusive. Not everyone can lead. Even worse, not every successful leader can continue to perform competently when transferred to another industry. In the same manner, high performing leaders from other companies and industries have failed to perform effectively at Wells Fargo. Wack (2019) insists that company has had a leadership gap since 2016. Since then it has had three CEOs who have failed to fully restore the bank to its former position as a market leader.
The declining performance prompted the board to appoint Charles Scharf, a former head at Visa and Bank of New York Mellon as the new CEO. This was after a lengthy search for a leader who matches the company’s culture. In spite of the new appointment, the company has failed to address its internal challenges, ranging from identifying the right strategy, and correcting the reputation of the scandal plagued firm (Ochs, 2016). These sets of challenges, in addition to regulatory failure point at a lack of value based leadership. As explained by Jordan (2016) the organizational behavior at Wells Fargo was compromised after the leadership pressured employees into meeting unrealistic targets. As a result, the employees created more than 2 million fake credit card and bank accounts from which they charged fees, in spite of the accounts being unauthorized. This example shows that the failure by the leadership to understand the behavior of individuals when setting targets could lead to formulation of unrealistic goals that encourage unethical behavior. Regulators have blamed the company’s leadership for failing to oversight and create tighter controls against fraud. According to Jordan, (2016) this is a pointer at the lack of value based leadership since good leaders, are not the ones who emphasize on goals but rather, on how these goals are met. To such leaders, the goals are as valuable as the means to reaching them.
Wells Fargo can solve this particular problem on lack of value based leadership by encouraging the use of transformational leadership. Vito, Higgins and Denney (2014) explain that this approach to leadership has been proposed as a solution to most problems facing modern organizations. It emphasizes the need for leaders to revitalize organizations. Unlike transactional leadership which emphasizes on commercial exchange between the leader and follower, transformational leadership is about promoting higher levels of commitment and motivation by generating and sharing a common vision to the followers. Assuming that Wells Fargo adopts transformational leadership, then it will cultivate trust, justice, and loyalty. In the long run, it will transform the output of the organization and protect it against scandals in future. In spite of the advantages such as encouraging ethical and honest conduct especially when undertaking organizational change, transformational leadership does not offer a perfect solution since it is prone to misuse (Vito et al, 2014). This statement emanates from the reality that some of the disadvantages of transformational leadership include being overly focused on the bigger picture. Its success is therefore directly proportionate to the willingness by the individuals in the organization to support the leaders in achieving common goals.
Secondly, it puts pressure on the groups and teams in organizations. By virtue of this leadership approach distributing accountability to everyone, it could become burdensome to some individuals who might feel overwhelmed by the responsibilities. Similarly, the increased pressure heightens chances of employee burnout (Kokemuller, 2016). The emphasis on meeting ambitious deadlines, vision, and organizational goals could create health issues and burnout. Third, this approach to leadership is dependent on the ability of the leader to provide continual communication. Failure to do this could compromise its effectiveness in addressing the current issues plaguing Wells Fargo.
20.2 Relation between New Technologies and People Behaviors
Technology is a vital element in the banking sector. Over the past years, the banking sector has consistently embraced new advancements in technology. This includes transitioning from physical banking to the use of mobile banking systems. Similarly, the industry has shifted from dispensing cash through the counter to using digital currencies and Automated Teller Machines (ATMs) (Kumar, 2019). Another significant change is seen in the way money is being wired through mobile phones and other electronic systems. Wells Fargo has been an early adopted of these technologies. Currently, it is working on block chain crypto currencies which could change the future of banking, as it promises traceability, and enhanced remittances. Other technologies that will change the banking landscape and the way human beings interact with technology is artificial intelligence, cloud computing, Internet of Things (IoT), Data Science, and Natural Language Programming (NLP) (Kumar, 2019). All these technologies will improve the operations of financial institutions including easing transactions, and timelier customer relationship management.
On the other hand, technology poses the threat of risk of data security. Because of the sensitivity of personal information, customers expect that Wells Fargo and other banks will keep their information such as personal identification numbers and other credentials safe from fraud. Christy and Mullins (2016) lament that making the systems fool proof is a hard task for the banks. This reality has made some customer skeptical of the digital banking system. Apart from this issue, there is widespread resistance to automation and digitalization of banking activities and process. Most employees have resisted the introduction of new technologies fearing that they might be rendered redundant. These fears have created resentment for digitalization of the banking industry (Cocco, Pinna & Marchesi, 2017). Likewise, there are instances where technologies have failed to meet the anticipated needs, in spite of the high capital investments made by the banks. Even as banks such as Wells Fargo continue to embrace the dilemma of using technologies, it is inevitable that technology is entwined with human behavior and thus, its use will impact corporate behavior.
To solve this dilemma, Wells Fargo needs to embrace two solutions. First, it should train its employees on the positive impact of technology on the individuals and organizational behavior. This point is seconded by the theory of technological determinism which argues the technological consequences are inevitable and should be expected across organizations (Christy & Mullins, 2016). Similarly, the employees should be encouraged to embrace technology because its features such as compactness, increased portability, connectivity, low energy use and decreased operational costs will translate into more productive and profitable organizations. On the other hand, the employees will benefit from work-life balance which is a win-win for the organization and the employees. Such training sessions will enlighten the employees and make them appreciate technology while nurturing positive organization behavior. Employees who are knowledgeable on the advantages of technology will have a better understanding of the interactions between social and technological factors as shown in chart below. Even though the training will be helpful, it is possible that some employees will resist change (Odor, 2018; Rosenbaum, More, & Steane, 2018). This is a normal process and resistance should be expected. In such a case, change management models such as Kurt Lewin’s and McKinsey 7-S model could be used to eradicate the barriers to change.
Chart 1: Interaction of Technological and Social Factors in Wells Fargo
The second solution is for Wells Fargo to understand the phases of technological introduction and design effective measures to deal with the challenges at each stage. These stages are summarized in the chart below.
Chart 2: Stages in Introduction and Adoption of Technology
Proper implementation of these stages will reduce instances of exposure to cyber security risks while further enabling the management to prepare the employees to avoid instances of surprise which is a leading cause of resistance to organizational change (Agrawal, 2016).
21.0 Conclusion
This paper uses the case of Wells Fargo. I have personally experienced some of the challenges facing the organization thus I could relate to them while writing this paper. To begin with, I based my judgment on organization behavior on the 2016 scandal that led to loss of reputation, customers, and introduction of stricter regulatory measures by the regulators of the banking industry. Considering this scandal and other issues affecting Wells Fargo such as inability to appoint an effective leader, the paper focused more on answering two questions. First, it present a critical explanation why managers should have an understanding of organizational behavior. It further draws examples from Wells Fargo to justify how the knowledge impacts roles of managerial work and people. This section defines organizational behavior as the process of mastering group and individual behavior, patterns of structure, the workplace environment, and technologies used to improve organizational effectiveness and performance. It applies concepts such as social exchange theory and psychological contract model, and the need to improve emotional, spiritual, and social capital.
The second section of the paper provides a description of challenges facing Wells Fargo in relation to organizational behavior. These challenges are widely categorized under the options of leadership dynamics and the increasingly complex relationship between technologies and human behavior. In this section, it is relatable that the lack of strong leadership led to the scandal which points at poor corporate governance. An analysis showed that the challenges point at the lack of value based leadership. To solve this challenge, the transformational leadership approach is proposed. Its advantages and disadvantages are equally discussed. The second issue was associated with the possibility of resisting organizational changes introducing new technologies. In addition, the technologies could create new challenges such as cyber security which will likely alter the prevailing organizational behavior. This issue could be solved by training, applying change management theories and mastering the phases of technology adoption and introduction, and addressing the challenges at each phase.
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