Wells Fargо & Company’s Organizational Leadership

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Table of Contents

Organizational Leadership Analysis and Abilities
Leadership Theories
Case Study on Team Building Aspects at Wells Fargo & Company
Pros and Cons of the Leadership and Team Strategies at Wells Fargo & Company
Conclusion
References

Wells Fargo & Company a leading multinational financial institution that has its headquarters in San Francisco, California. Founded on March 18, 1852, the firm has experienced consistent growth over the years because of its leadership strategies and innovative products that meet customers’ needs in the local and international market (Stachowicz-Stanusch & Amann, 2018). It has spread its operations from banking to financial services and insurance as a strategy of increasing its profitability. When it started its operations about 167 years ago, the level of competition was relatively low. However, that has changed over the years as new firm emerge offering similar products both locally and in the global market.

The management of this institution has been keen on finding ways of overcoming this challenge to ensure that it remains competitive in the market. According to Kunreuther and Useem (2018), the ability of a firm to achieve its vision in the current competitive business environment depends on the leadership style it embraces. In the past, large corporations like Wells Fargo & Company enjoyed a market monopoly that made it possible for them to dictate terms of service in the market.

However, the global business environment has changed, and a dictatorial form of leadership is becoming less effective in managing employees within a firm. The focus of this paper is it to analyze styles and principles of leadership at Well Fargo & Company.

Organizational Leadership Analysis and Abilities

When analyzing an organization’s leadership, Klepper (2019) argues that it is prudent to start by looking at its management structure. It helps to understand the source of authority within the firm and the manner in which power is shared among individuals in different managerial positions. Wells Fargo & Company, just like many other large corporations, has a board of directors, which is currently chaired by Ms. Elizabeth Ashburn Duke (Wilson, 2014).

The board has a supervisory role over the top management unit of the firm. It approves major development projects within the firm. It gets regular updates about the operations of the firm through the president and chief executive officer, Mr. Timothy J. Sloan, who is also a member of the board. The president has a team of top executives, which includes the chief financial officer, chief operating officer, marketing director, and human resource manager among others. The company has regional managers who are responsible for directing activities of the firm in the overseas market.

The ability of the current management unit at Wells Fargo to achieve the firm’s vision has been demonstrated in different ways. From the financial perspective, the net income of the company in the financial year that ended in 2018 was US$22.39 billion, which was a significant increase when compared with that of the previous year (Klepper, 2019). The company is currently one of the leading financial institutions in the global market. It currently has a workforce of over 258,700 people both locally and at the global level. The concept of diversifying its products in the market enabled it to overcome the 2008 global economic recession that affected numerous financial institutions in North America and Europe.

Klepper (2019) also notes that the firm’s leadership has also proven capable of balancing the need of customers, employees, shareholders, and the government to ensure that its operations remain sustainable. Despite the able leadership of this firm, it is important to note that Wells Fargo has been rocked by a series of scandals and lawsuits that make leadership strategies questionable. The following are some of the main leadership concerns that have emerged at this firm over the recent past:

High-Interest Rates Charged to African-American and Hispanic Borrowers

In 2009, Wells Fargo & Company, it emerged that Wells Fargo was charging African-Americans relatively high-interest rates when they borrowed from the bank (Kunreuther & Useem, 2018). It was considered as a deliberate and an unfair strategy of limiting accessibility of loans to these minority groups. In that case, it also emerged that the company colluded with leaders of churches in the African-American community to convince the congregants to take subprime mortgages despite the obvious risks.

Over 50% of those who took such loans ended up losing their homes during the bubble burst, and the majority was African-Americans (Izzo & Vanderwielen, 2018). In a society that is keen on embracing social principles that promote equality, Wells Fargo is still considered a firm that exploits minorities. In this suit, the company agreed to pay US$ 175 million as compensation to the affected group (Kunreuther & Useem, 2018). Such issues often affect the image of a firm in the international market.

Money Laundering Suit

Financial institutions have a legal obligation to report any suspicious activities in the accounts of their customers, which may relate to money laundering. Bolea and Atwater (2016) explain that a sudden transfer of large sums of money from one account to another should be reported to relevant authorities for further investigation. However, it was established that from 2004 to 2007, drug traffickers used services of this financial institution to undertake their activities. Earnings of these criminals passed through this bank and it failed to report about the same. It was an indication that the leadership of this company was only concerned about making money at the expense of their legal and social responsibility.

Executive Compensation

In the modern competitive business environment, firms are paying their workers depending on their perceived worth. It is possible to find cases where two employees in the same job group earning different amount of salary because of their perceived value in the company. Klepper (2019) believes that even though the pay of employees is based on their contribution to the firm, it is necessary to avoid huge pay gaps. At Wells Fargo, the earnings gap between the top managers and junior employees is wide. In 2014, the earning of the then Chief Executive officer John Stumpf was 473 times that of a median employee (Kelly, 2015). Such a huge pay gap shows that the top executives are not focused on elevating the living standards of their workers.

Discontent Registered by Female Employees

The management of Wells Fargo has been accused of being insensitive to the plight of women working in the company. Relevant authorities within the firm rarely take cases of sexism and misdemeanor against female workers seriously.

It is also reported that women are less likely to be promoted to senior managerial roles even if they have the needed academic qualifications and experience. Attempts by lobby groups to address these concerns with the top level of management of this firm have had minimal impact. The decision by the board of directors to appoint Elizabeth Duke as the chair is viewed by a section of the female employees as a ploy to silence them.

Management’s Approach to Handling Scandals and Suits

Large corporations often have to deal with various scandals and suits because of varying reasons. Shrewd leaders know how to overcome these challenges in a way that protects finances and image of the firm in the market. Most of the suits brought against the firm are often settled out of court. Malcher (2016) explains that one of the reasons why these companies prefer out of court settlement is that it makes it possible to address the conflict without having to admit the guilt.

Court processes are not only expensive but they also have serious implications on the image of a firm. The decision to elevate Elizabeth Duke as the first woman to chair the board of directors at the company was another major public relations initiative. Before her promotion, a section of female employees felt that the firm was thwarting their effort to climb the career ladder at this firm. Such claims can no longer be believed because a woman currently heads the firm.

Some of the allegations and scandals at this firm may have serious implications in the long term. Claims of embezzlement by executives, facilitation of money laundering and drug trafficking, wide pay gaps, and discontentment among a section of the employees are issues that show major weaknesses at the top management unit of the company.

In 2015, Wells Fargo was ranked the largest bank in the world by market capitalization, but it slipped to the second position in 2016, the third position in 2017, and the fourth position in 2018 (Puzzanghera, 2019). The consistent drop every year is a clear indication of a serious problem at this company that needs to be addressed. It is an indication that the current leadership at the firm is not doing enough to protect the firm’s position as a market leader in the banking industry.

Leadership Theories

Leadership theories can help in understanding some of the challenges that a firm faces in the market. Wells Fargo & Company was once the largest bank in the United States. However, JPMorgan Chase, Bank of America, and Citigroup have overtaken it (Kunreuther & Useem, 2018). It is an indication that a problem exists that needs to be addressed by the management unit of this firm. It is necessary to review some of the leadership theories discussed in this unit and determine their relevance to this firm.

Coercive Power

Coercive power refers to the ability of a leader to force followers to act in a given way, failure of which they may be subjected to some form of punishment (Kelly, 2015). It is a common type of leadership where the manager has the capacity to punish employees in various ways. At Wells Fargo, the top management unit has the power to dismiss junior workers on various grounds. One of the common excuses that firms use to dismiss employees considered less desirable is the claim of underperformance. Having a coercive power over employees may not be an entirely bad thing. In fact, the tool makes junior officers to have respect towards their superiors.

However, when it is misused to settle scores and to mistreat workers, then a firm can lose some of its most talented workers. According to Johnson and Johnson (2013), successful companies know that hiring and retaining top talents is one of the ways of achieving success in the market. When the management unit uses coercive power to frustrate such workers, it may not be easy to realize growth. Capozzi (2018) observes that top managers of Wells Fargo have been accused in the past of high-handedness when it comes to addressing gender inequality at the firm.

Dogmatism

Dogmatism, according to Bolea and Atwater (2016), refers to the tendency of laying down principles and beliefs as undeniably true without taking into consideration the opinion of others or evidence that may prove otherwise. In the current dynamic and highly diversified workplace environment, dogmatism is one of the most dangerous principles that a manager can embrace. This principle has worked well in religion, where people believe in the Supreme Being and life after death without questioning the evidence behind such beliefs (Johnson & Johnson, 2013). However, management is becoming a science where beliefs and principles should be tried and tested.

A belief that a woman cannot be as good a manager as a man is misleading. Klepper (2019) argues that many women have proven that they are worthy of leadership in the political, business, and religious arenas. The dogmatism that the then chief executive officer of this company once embraced that women should be at home taking care of children can be a major factor that would lead to its downfall. A leader should be open-minded and capable of embracing change when it is necessary.

Situational Theory of Leadership

The theory holds that managers need to choose the best principles of leadership based on the situation they face at every given time (Klepper, 2019). It is not possible to embrace a specific style of leadership at all times. Sometimes a leader should be a teacher who guides employees on how to undertake a given activity. In other instances, he should be strict in fighting vices that may affect the success of the company.

He or she may also need to be a motivator, challenging the current capacity of the employees with the aim of improving their output. The approach that managers at Wells Fargo take when dealing with different challenges should be based on the issue they are trying to address. Although the authoritarian style of management is becoming less popular, sometimes it may be the only option when addressing a major problem among employees.

Case Study on Team Building Aspects at Wells Fargo & Company

Wells Fargo has been keen on promoting team-building initiatives to help create cohesion among its employees. In February 2019, the management of Wells Fargo Home Mortgage initiated a Breakthrough Training Program at its Reno offices in Nevada to improve the firm’s performance (Puzzanghera, 2019). The company was one of the top four American financial institutions involved with the subprime mortgages that led to a massive loss of wealth to many Americans. As such, there is mistrust between the American community and the firm’s home mortgage. The firm realized that the only way of addressing the problem would be to create trust and cohesiveness among its own employees.

In this initiative, the company brings together employees from different regions to discuss challenges they face in the workplace, fears that customers have towards these products, and ways in which these fears can be addressed. The forum also makes it possible for employees to discuss their personal concerns and ways that the management can help to overcome them. When employees are convinced about the safety of these products, they can easily sell them to customers.

They can start by inviting their family and friends to purchase these products. As more people benefit from these products, public trust will be restored and the company will start making profits from its mortgage products.

Pros and Cons of the Leadership and Team Strategies at Wells Fargo & Company

The analysis of the leadership style and principles at Wells Fargo & Company shows that the firm often uses coercive leadership principles when addressing issues relating to employees concerns. One of the good things associated with this form of leadership is that it gives the manager the power to decide the path that should be taken to address a given problem (Bolea, & Atwater, 2016). In many cases, employees’ demands such as high salaries and reduce working hours may have a negative impact on the firm’s overall performance. Coercive power makes it possible for the top leaders to reign upon rogue employees and bring sanity within the firm. This form of leadership is also effective when addressing emergencies.

The management may not have time to consult different stakeholders when trying to respond to an emergency. Having a near-absolute power is important for the leader in making quick decisions, which may help protect the firm from a possible collapse. Pottruck (2015) believes that coercive power would enable the management unit to address the conflicting interest of shareholders, employees, customers, suppliers, and the firm itself. Customers would want low prices for products they purchase and suppliers need high prices for their delivers, employees’ high wages, shareholders high dividends, and the firm needs to grow. Using the coercive form of leadership, the company can find a perfect compromise where all the stakeholders would feel comfortable.

Coercive power has weaknesses that should not be ignored. One of its greatest challenges is that it does not foster a consultative environment where stakeholders can share ideas and the best option taken. It assumes that the manager is knowledgeable enough to make the right decision (Kelly, 2015). Another bad thing associated with coercive leadership is that junior employees do not feel their views matter when making decisions within the firm.

They have to wait for the top leaders to make decisions. In such an environment, it is impossible to foster creativity and innovativeness. Some talented employees would consider leaving such a firm when they feel frustrated by a system that does not allow them the freedom to make decisions that affect their work.

Conclusion

Wells Fargo & Company is one of the largest financial institutions in the United States. The company has faced numerous challenges in the market that saw it drop from being the leading bank in the country to being in the fourth position. Some of the problems that the firm faces are directly related to poor management principles. Embezzlement, money laundering, racially biased policies, tax evasion, and sexism are some of the major issues that this company has been battling for the past two decades.

These issues are all related to the leadership at the firm. It is apparent that Wells Fargo is concerned with making money at the expense of fostering a united society that is free from corruption, racism, and other social vices. It is not possible for a firm to achieve sustainable growth if it ignores societal needs.

References

Bolea, A., & Atwater, L. (2016). Applied leadership development: Nine elements of leadership mastery. New York, NY: Routledge.

Capozzi, R. (2018). The growth mindset: Leadership makes a difference in wealth management. Hoboken, NJ: New Jersey Wiley.

Izzo, J. B., & Vanderwielen, J. (2018). The purpose revolution: How leaders create engagement and competitive advantage in an age of social good. Oakland, CA: Berrett-Koehler Publishers.

Johnson, D.W., & Johnson, F.P. (2013). Joining together: Group theory and group skills (11th ed.). Upper Saddle River, NJ: Pearson.

Kelly, B. (2015). The bit coin big bang: How alternative currencies are about to change the world. Hoboken, NY: John Wiley & Sons.

Klepper, W. M. (2019). The CEO’s boss: Tough love in the boardroom. New York, NY: New York Columbia University Press.

Kunreuther, H., & Useem, M. (2018). Mastering catastrophic risk: How companies are coping with disruption. New York, NY: Oxford University Press.

Malcher, M. (2016). User group leadership. Apress, New York, NY: Springer.

Pottruck, D. S. (2015). Stacking the deck: How to lead breakthrough change against any odds. San Francisco, CA: Jossey-Bass.

Puzzanghera, J. (2019). Wells Fargo reaches $240-million settlement in accounts-scandal lawsuits. Los Angeles Times. Web.

Stachowicz-Stanusch, A., & Amann, W. (Eds.). (2018). Management education for corporate social performance. Charlotte, NC: Information Age Publishing, Inc.

Wilson, R. M. (2014). Stagecoach robberies in California: A complete record, 1856/1913. Jefferson, NC: McFarland & Company, Inc., Publishers.

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