Can you please answer the question no.3 from problem solving perspective.

answer no.1 and 2 from application of chapter content. Do not answer too shortly please.

here is another pic of picture no 2 if you have trouble reading. Hope this will help

CELLUS Proto Attorn openi know frauc Management in Action S FARGO cial qui 1998. or e saw revenue Actoriana for bilim Aincrease According or you could Wells Fargo's Sales Culture Fails The Company How do you sell money? This is a fundamental chal- lenge for retail banks, and Richard Kovacevich had a solution. He saw banks as stores, bankers as salespeo- ple, and financial instruments as consumer products. Much like a deli worker asks if you'd like to upsize that combo or add dessert to your order, a banker should encourage you to add a credit card, savings account, or loan to your portfolio. Kovacevich called it "cross- selling, and he based it on the fact that customers with several accounts are much more profitable to a bank an customers with a single account. How many ac counts should a customer have? Eight, according to the "Going for Gr-Eight" initiative he launched as CEO of Norwest in 1997. Why eight? Because, Kovacevich said, "It rhymes with GREAT!"126 SALES PRACTICES AT WELLS FAD Norwest merged with Wells Fargo in 1990 retained the Wells Fargo name, and ko the helm as president and CEO. He saw te as the bank's most important goal and cro the way to achieve it. Bankers could ear $500 and $2.000 in quarterly bonuses for his targets, and district managers could increase nual compensation by up to $20,000. Accordi mer Wells Fargo worker Scott Trainor, "If yo sell, you had a job."128 The strong sales culture transformed Wells Farm bottom line, as evidenced by a 67 percent increase the bank's stock from 2006-2015. Unfortunately culture had a dark side. Steven Schrodt, who worked a Wells Fargo branch in Lincoln, Nebraska, before signing due to severe sales pressure in 2012, remember 318 PART 4 Organizing ers encoura Auto open and Others al custom and strangers for busin scovered a high-perfo mo A customer had appli and somehow line of credit. "So the is uns, because raging those who hadn't reached sales accounts for their family members and employees who worked at Wells between 2004 and her former employees describe searching for 2011 told NPR the fraud was pervasive and that manag customers at retirement homes and local bus crs were heavily involved. One former banker recalled sitting at a conference table with her managers in a win- who grew tired of asking friends, family dowless, locked room and receiving a "formal warning wers for business adopted more convert tactics to sign. Her managers told her that bankers who didn't Wells Fargo employee recalls the day be meet sales goals were not team players, and poor team high-performing co-worker's secret for members would be fired and forced to carry the mark istomer had applied for a home equity loan on their permanent records. how also ended up with a $20.000 personal For bankers who did play by the rules, the outcome dit "So then I realized how he was doing all was bleak, "They ruined my life," says Bill Bado, a for because he was basically tagging on other mer Pennsylvania branch worker H Bado repeatedly refused to open fraudulent bank accounts and credit docts in the same application so they wouldn't cards, made calls to bank's ethics hotlins, and even sent y notice when they signed the documents,"131 an e-mail to HR about his supervisors pressuring him phlems started to emerge in 2009. At this point to engage in unethical RSPs: just over a week after Kovacevich was gone, John Stumpf was presi- e-mailing HR, Bado was terminated for excessive tardi- and CEO, and Kovacevich's sales culture was ness. Another former employee lost her job after e-mail- embedded. To investigate potential problems in ing Stumpf directly about the fraud: Stumpf has claimed il sales practices (RSPs) in the bank's branches he doesn't recall the e-mail. Wells Fargo established an internal task force in 2012 The task force concluded that the unethical behavior AFTERMATH dae to a small set of "rogue" individual branch Stumpf resigned from Wells Fargo in October 2016, workers. Wells Fargo subsequently fired more than and Timothy Sloan took over as CEO, Sloan immedi- 5.000 "rogue" bankers between 2013 and 2016.133 ately discontinued labeling branches "stores" and over- hauled the bank's incentive compensation plan, shifting WELLS FARGO ADMITS TO FRAUD: the focus to customer satisfaction and drastically redac BLAMES PROBLEM ON WORKERS, ing the emphasis on sales goals. Sloan restructured the NOT CULTURE organlation to fully centralize the bank's risk and HR In September 2016, the Office of the Comptroller of functions, consolidating much of the strisk control the Currency (OCC), the Consumer Financial burcucracy into a new office of a hics, oversight, and Protection Bureau (CFPB), and the Los Angeles City Integrity, accountaale to the board's risk corn Attorney publicly fined Wells Fargo $185 million for Anitin spits of Sloan's cfforts, another scandal was opening millions of bank accounts without customers' brewing knowledge. 14. 135 The bank openly admitted to the Earlier in 2016, executives at Wells Fargo had real- fraud, but executives noted that Wells Fargo had off ized that hundreds of thousands of car loan castomers cial policies in place in their Sales Quality Manual re had been charged for unnecessary auto insurance.* quiring customers' consent for each specific solution An internal report revealed that the costs of the gratu or service and expressly prohibiting bankers from itous insurance resulted in auto loan defaults for more opening multiple accounts to increase incentive com than 270.000 customers and the repossession of ap- pensation. In an interview with The Wall Street proximately 25.000 vehicles. Federal probes into the Journal, CEO Stumpf maintained there was no incen- insurance debacle shed light on yet another slew of in- live to do bad things adding "the 1% that did it wrong. ternal issues with compliance, controls, and board over- sight of operations at Wells Fargo. * In a report who we fired, terminated, in no way reflects our culture released in October 2017, OCC regulators slammed nor reflects the great work the other vast majority of the people do -137 Former workers tell a different story. managers at Wells Fargo Dealer Services (the bank's auto loan unit) for ignoring customer complaints, fail- While there was no shortage of internal publica- Lions advising Wells employees on how to conduct ing to monitor contractors, and general laziness in re- sponding to problems that had been unfolding since at themselves, including the Wells Fargo Code of Ethics the least 2015.107 and the Wells Fargo Team Member Handbook," In July 2017, Wells Fargo publicly admitted it became Pressure inside branches was so intense that formal aware of the auto insurance scandal a year prior guidelines did little to deter underhanded sales tactics. Interestingly, when the Senate Banking Committee an interview with NPR. one former employee said asked, as part of the September 2016 hearings related to ankers at her branch were expected to sell a ridicu- RSP fraud, if executives were confident that this type s amount of products and that pressure and fraud of fraudulent activity does not exist" in other areas, Former curred cven at the bank's headquarters. CHAPTER 8 319 Organizational Culture, Structure, and Design 3. What do you think regulators should age permanent change in Wells Fare prevent similar problems in the bro industry? ald do not Fargo's cute broader bank the bank insisted problems were limited to individual employees in the community banking division." Senator Sherrod Brown has since alleged that Wells Fargo "pure and simple lied to this committee-and lied to the public" in failing to disclose the auto insurance problems during the 2016 hearings. W9 Sloan has main- tained there are fundamental differences between the RSP and auto insurance scandals, with only the former being fueled by sales incentives, 10 Wells Fargo has experienced substantial losses in rankings, reputation, and bottom line.' Federal regula- tors continue to impose severe penalties and restric- tions reflecting concerns with the bank's ability to manage potential operating risks, 152, 153 mework as a poin describe the organi Application of Chapter Content 1. Using the competing values framework of reference, how would you describe the zational culture under CEO Kovacevich an CEO Sloan? Provide examples to suppo conclusions. 2. How do you think new branch employees learned the culture at Wells Fargo? 3. Describe how Wells Fargo can use the 12 mecha nisms for culture change to drastically improve its culture. 4. Is Wells Fargo's structure more organic or mechanis tic? Explain. 5. What is the most important lesson from this case! Discuss. FOR DISCUSSION Problem Solving Perspective 1. What is the underlying problem in this case from the regulators' perspective? 2. What role do you believe Wells Fargo's executive lead- ership played in the RSP and auto insurance scandals? prential cus and some redit. "So then I raging those who had en accounts for their family reached a performer employees describembers and eyes the searching stomers at retirement homes and local grew tired of asking friends, family er business adopted more conventi dele Wells Fargoc c e recalls the de meets for high-performing co-worker's secret te goed er had applied to home equity on the per A custoso ended up with a $20,000 Feb then I realized how he was doing was bleak "They medy as basically aging on other hecause he was basically again ans. In the same application so they wouldn't refused to be cards made all to wtien they co the documents 'sha started to emerye in 2009. At this point, e-mail to HR this peripe m ich was gone, John Stumpf was presi to engage in unethical RSP w what e-mailing HR Bado was terminated for and can and Novacevic sales culture hess. Anvermehrer mat tentandbedded. To investigate potential problems in ing Stumpf directly about the freed: Sumoham ed deep les practices in the bank's branches he doesn't recall the e-mail established in internal task force in Wells F arce concluded that the unethical behavior AFTERMATH small set of "rogue" individual branch Stumpf resigned from Wells Fargo in October 2016 wils deu Wells Fargo subsequently fired more than and Timothy Sloan took over as CEO Sloan immed ately discontinued labeling branches stores and over hauled the bank's incentive compensation plan, shifting the focus to customer satisfaction and drastically reduc ing the emphasis on sales goals. Sloan restructured the o blems started to emerge in 2009 d Kovacevich was gone nail sales The task is due to a small se workers. Well 5.000 rogue ban rogue bankers between 2013 and 2016 133 SFARGO ADMITS TO FRAUD MES PROBLEM ON WORKERS NOT CULTURE In September 2016. The the Currency Protection Bureau Attorney publicly fined w opening millions of knowledge. 1.1 pensation. 136 In mber 2016, the Office of the Comptroller of Organization to fully centralize the bank's risk and HR rrency (OCC), the Consumer Financial functions, consolidating much of the vast risk control on Bureau (CFPB), and the Los Angeles City bureaucracy into a new office of ethics, oversight and y publicly fined Wells Fargo $185 million for integrity, accountable to the board's risk committee." e millions of bank accounts without customers And yet, in spite of Sloan's efforts, another scandal was Ledee 134, 135 The bank openly admitted to the brewing but executives noted that Wells Fargo had on Earlier in 2016, executives at Wells Fargo bad real policies in place in their Sales Quality Manual re- ized that hundreds of thousands of car loan customers had been charged for unnecessary auto insurance. e customers' consent for each specific solution An internal report revealed that the costs of the gratu- service and expressly prohibiting bankers from itous insurance resulted in auto loan defaults for more ing multiple accounts to increase incentive com than 270,000 customers and the repossession of up 136 In an interview with The Wall Street p roximately 25.000 vehicles. Federal probes into the Camal CEO Stumpf maintained there was no incen insurance debacle shed light on yet another slew of in Live to do bad things adding "the 1% that did it wrong. ternal issues with compliance, controls, and board over who we fired, terminated, in no way reflects our culture sight of operations at Wells Fargo. 1 In a report nor reflects the great work the other vast majority of released in October 2017, OCC regulators slammed the people do." Former workers tell a different story. managers at Wells Fargo Dealer Services (the bank's While there was "no shortage of internal publica auto loan unit) for ignoring customer complaints, fail- tions advising Wells employees on how to conduct ing to monitor contractors, and general laziness in te sponding to problems that had been unfolding since at themselves, including the Wells Fargo Code of Ethics least 2015.14 and the Wells Fargo Team Member Handbook,"138 the In July 2017, Wells Fargo publicly admitted it became pressure inside branches was so intense that formal aware of the auto insurance scandal a year prior. guidelines did little to deter underhanded sales tactics. Interestingly, when the Senate Banking Committee In an interview with NPR, one former employee said asked, as part of the September 2016 hearings related to bankers at her branch were expected to sell "a ridicu- RSP fraud, if executives were confident that this type lous amount of products and that pressure and fraud Former of fraudulent activity does not exist in other areas, 319 CHAPTER occurred even at the bank's headquarters. Organizational Culture, Structure, and Design