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Situation Analysis

Situation

In early 2011, The Wall Street Journal documented sales culture at Wells Fargo, and learned the company was conducting a cross-selling strategy to its customers in the organization. In 2013, The Los Angeles Times conducted its investigation, and determined individual bankers at Wells Fargo were pressured by managers to produce sales that were aggressive and at the same time mathematically impossible. The American Bankruptcy Institute Journal had discovered individual bankers at Wells Fargo opened as many as 1.5 million checking and savings accounts as well as more than 500,000 thousand credit card accounts without customers consent. In addition, employees received bonuses from the organization by conducting such activities. After The Los Angeles Times discovered the incident, in early 2016, the Los Angeles City Attorney and the Office of the Comptroller of the Currency from Consumer Financial Protection Bureau, reached a verdict and concluded that employees at Wells Fargo were engaged in illegal activities by opening accounts without customers authorization. Wells Fargo was fined in the amount of $185 million dollars for opening close to two million bank accounts including checking, savings, and credit card accounts. It was than when it was confirmed and became clear, Wells Fargo had engaged in fraudulent activities.

The cause of this fraudulent activity was because employees at Wells Fargo were pressured by their managers to order credit cards for pre-approved customers without permission from their clients. When employees filed for credit card requests, they used their own information to hide their illegal actions they were performing to prevent customers from not discovering the activities that were taking place in the organization. As mentioned early, not only employees filed for credit card requests, but they also created fraudulent checking and savings accounts, in which that process sometimes required employees to get involved by moving the money out from legitimate accounts. To do this, employees used a process called pinning. In this process, they set up clients PIN number to 0000 and the employees had control over their client accounts which made it possible for them to enroll their clients in online banking programs. In late 2016, it was discovered that Wells Fargo employees, also issued unwanted insurance policies that included life insurance policy by Prudential Financial and renters insurance. This discovery came into light when three whistle-blowers from Prudential leaked this fraud activity.

Magnitude

The estimated impact of the situation is significantly big. As a result of this incident, Wells Fargo agreed to pay close to $3 billion dollars in settlements. In addition, in 2017, the organization paid another $142 million dollars due to agreement with consumers who had accounts opened in their names without permission. Within the companys leadership culture, there was an intense pressure from Wells Fargo higher-ups to its employees to perform as high as 20 sales per day. According to rumors, there were reports where employees experienced frequent crying as well as high levels of stress and anxiety which led to vomiting and panic attacks. At one point, one employee even consumed sanitizer to deal with the pressure. As a result of this fraudulent activity, 5,300 employees were terminated by Wells Fargo ever since the scandal was reported. When the news broke down in 2016, Wells Fargo CFO John Stumpf, accepted responsibility for the incident that took place. Although, he refused to resign from the organization. In September 2016, Mr. Stumpf had to face a hearing before the Senate Banking Committee, and he agreed to forgo $41 million in stock options that had not yet vested after being urged to do so by the company's board. (Wells Fargo Account Fraud Scandal, n.d., para. 7). A month later, John Stumpf resigned form Wells Fargo and he was replaced with Timothy Sloan.

The incident created great deal of problems and issues in operations at Wells Fargo. After the scandal was made public, Wells Fargo profits were decreased in the first quarter. The organization suffered increase expenses due to payments to law firms and other consultants that were participating in negotiations of this fraudulent event. The bank is also under pressure from Wall Street to cut costs and aims to cut another $1.5 billion of expenses in 2021, which will include laying off workers. (Edwards, 2021). Over the next three to four years, Wells Fargo said it hopes to eliminate $8 billion of expenses by closing 500 branches by 2021. In addition, they plan to cut 46 million square feet of office real estate from 15% to 20% by the end of 2024. The organization came up with the idea of cutting costs through investing in technology while decreasing their trust in their sales organization. Wells Fargo reputation was deeply ruined. After the scandal was announced, the state of California proceeded with its suspension in doing business with Wells Fargo. John Chiang, the California State Treasurer, immediately removed the bank as bookrunner on two municipal bond issuings, suspended investments in Wells Fargo, and removed the bank as the states broker dealer, stating the companys disregard for the well-being of Californians as the reason for the decision, and indicated the suspension would last for a year (Tayler & Harris, 2019). The city of Philadelphia and the State of Illinoi also followed with the same procedure by ending their relationship with Wells Fargo.

BASED ON THE SITUATION ANALYSIS PROVIDED ABOVE, CAN YOU PLEASE COMPLETE THE FOLLOWING QUESTIONS BELOW?

c. Affected employees: Which employees are affected most? Some? All? How are they likely feeling and reacting to the current challenges?

2) The Communications Plan (8 pages): Describes the steps the organization should take to communicate strategically about the specific challenge and the desired outcomes for the organization, internal (employee) communication, and employee actions. Make sure to use the SMART approach for all objectives.

a. Organization/Business Objectives (3): What are the desired changes in our organization/business environment or competitive position?

b. Communication Objectives (3): What are the desired changes in the awareness, understanding and support of employees that will contribute to the organization/business objectives?

c. Communication Strategies (3): Ways to organize communication: Where, when, and how to engage employees so they know, feel and, do what we want them to.

d. Audiences: Who are the specific employee groups that communication will be directed to. What do we know about how each employee group consumes information and how to best reach and engage them in action?

e. Messages and Proof Points (3 of each): What messages do our employees need to think, feel and do what we want them to? What are the 2-3 proof points to support each message that will make these messages credible?

f. Communication Tactics (3): Specific ways to engage employees in the plan, each tactic supporting one message, and fulfilling at least one strategy, and achieving at least one objective.

g. Communication Channels (3): Which communication channels will you use to reach your targeted employee audiences? Support your choices by connecting your channel choices with: awareness, understanding, acceptance, commitment and ownership.

h. Implementation: The structure and timeline covering the implementation of tactics, considering people, logistical, and estimated budget resources.

i. Assessment: The metrics/measures you will use to determine whether the communication plan has been successful. Must connect with your SMART objectives and outcomes.