Create a case study from your own newspaper article or articles 1. Summarize the

Question

Create a case study from your own newspaper article or articles

1. Summarize the article/s, what is happening and why is this important?

2. How does this article relate to strategies (connect the dots, there are overlaps, in most of the topics (i.e. external, internal, rationale for biz level strategy, mergers-alliances, global strategies, etc.)

3. Make recommendations (how the company may better implement the strategy or strategies, (i.e. what makes these strategies successful? (look at notes and book). Remember connect the dots (such as successful global strategy can be determined by entry mode and risk, which is based on country-level stakeholders, internal analysis of firm, alliances, acquisitions etc.)

Remember be specific, name what particular strategies are used and use complete sentences.

Explanation / Answer

The Wells Fargo case - Reduction of Workforce. Is it the right decision by the Management?

Case studies used in business schools portray dilemmas faced by managers and top management. Students diagnose the problem and recommend actions. They are to learn at least as much from failure as from success. And in that case, there must be an educational treasure trove in the recent experiences at Wells Fargo, regarded as one of the best-managed banks in the world.

Wells Fargo & Company is an American multinational financial services company headquartered in San Francisco, California, with central offices throughout the country. It is the world's second-largest bank by market capitalization and the fourth largest bank in the U.S. by total assets. For years, Wells Fargo has prided itself on putting culture first and size second. Its culture is built around the idea of One Wells Fargo, imagining themselves as the customer. Its vision includes the mission of helping its customers succeed financially. Given this context, incentives were put in place several years ago to encourage front-line employees to develop deeper relationships defined by the number of the bank’s services utilized with existing customers. However, the goals on which the incentives were based were so lucrative that they raised the temptation to cheat by establishing fake new accounts and even transferring token amounts of funds between these accounts without customers’ knowledge. When the practice became so prevalent that it began to generate numerous customer complaints and evidence surfaced regarding systematic cover-up of the practice in the ranks.

Wells Fargo, plans to lower its employee headcount by 5 percent to 10 percent in the next three years as part of its ongoing turnaround plan, the company announced very recently. The move is part of an effort to make the bank more efficient, as the sector moves online, CEO Tim Sloan said. The firm is also trying to recover from a series of damaging scandals. The bank attracted public outrage in 2016 after it emerged that sales associates had opened millions of accounts without customer permission. Wells Fargo switched up its executive ranks following the scandal but other investigations into its sales practices unearthed issues in its auto lending, mortgage and wealth management. Recently, US regulators fined the company $1bn to settle claims of misconduct related to mortgage and auto loans. And also, the US Federal Reserve, citing widespread consumer abuses and other compliance misconduct, issued an unprecedented order that restricted the firm's growth pending governance improvements. None of this has helped the firm's financial position. The bank has 265,000 employees, meaning the reduction would result in a loss of between 13,250 and 26,500 jobs. The decline will be a mix of displacements and team member attrition, the chairman said. The CEO of the bank assured that they are addressing past issues, enhancing their focus on customers, strengthening risk management and controls, simplifying their organization, and improving the team member experience. He also said that the firm would provide affected employees with support, and that the bank will remain one of the largest employers in the US even after the reduction of the workforce. Wells Fargo became US sugar’s lead bank in 2014 after presenting the company’s chief financial officer with a comprehensive proposal encompassing debt financing, treasury management and investment banking solutions. One of the primary reason they chose Wells Fargo is due to the size of its portfolio in food space and agribusiness. The CFO of the U.S Sugar Company said that Wells Fargo understood the food industry very well, thus they understood their sugar business very well, and also the Well Fargo has always been very easy to work with as they are good listeners and bring the best possible solution for the sugar company.

At the same time recently the scenario changed totally and number of causes for the alleged fraudulent behavior at Wells Fargo were put forth. They included poor leadership, improper incentives, inadequate auditing and poor control, questionable organizational practices particularly human resource management, and human behavior traits in general. A former employee suggests that the problems might not have occurred if the Audit team had been given sufficient power and resources to do their work. He also reveals that Wells Fargo has no HR presence at the local level, which means there is no buffer between rogue managers and conscientious employees. It was disclosed very recently that an insurance company with which Wells Fargo had a contractual relationship had, over a period of nearly 12 years, been requiring as many as 800,000 of the bank’s auto loan recipients to take out insurance on autos that were already insured. Wells Fargo management claimed that it was unaware of customer complaints collected by the insurance company. Further, when made aware of the problem including thousands of borrowers who could not make the extra payments and subsequently had their autos repossessed, management made provision to reimburse only those customers taking out auto loans in the last five of the twelve years, according to the Federal Office of the Comptroller of the Currency.

A complete case study would, contain much more information about the problem and the thinking behind decisions. But in the meantime, we can at least ask ourselves and ponder about what we might learn from what we know from this case. Of course there will be the obvious lessons concerning the cost of management greed, dishonesty, and cover-up.

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