Goals gone wild
Was it goals gone wild? Or was Wells Fargo’s scandals attributable to a blind spot in leadership
Please read the attached article concerning Wells Fargo (discusses cross selling of client’s bank accounts).
Further, it was just reported that Wells Fargo revealed the bank made an error that could be the reason for hundreds of foreclosures.The report (Links to an external site.)Links to an external site., filed to the Securities and Exchange Commission, said 625 customers were “incorrectly” denied a loan modification or were not offered a modification, all of which should have qualified.Out of those cases, 400 homes were foreclosed, something Wells Fargo defends might have happened anyway. To make up for the mistake, Wells Fargo has accrued $8 million to remedy affected customers, the report said.That amount averages $12,800 per borrower but the company did not say how much each individual would get or how the compensation would be distributed.
On Wednesday, the bank agreed to pay a $2.09 billion penalty (Links to an external site.)Links to an external site. for issuing mortgage loans it was aware contained incorrect income information. The bank agreed to pay the civil penalty under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 for the actions, which the government said contributed to last decade’s financial crisis.
In June, Wells Fargo agreed to pay $5.1 million (Links to an external site.)Links to an external site. to settle charges of financial misconduct, after the SEC learned the bank generated large fees by improperly encouraging retail customers to actively trade market-linked investments, which were intended to be held to maturity.
The latest finding adds to the bank’s growing list of problems, including a scandal in 2016 (Links to an external site.)Links to an external site. after regulators found the bank had opened millions of accounts without customers’ permission to meet quotas and generate sales bonuses.
In addition, the SEC found that Wells Fargo did not properly investigate employees who were engaged in the practice and supervisors systematically approved the transactions, despite internal policies prohibiting similar practices.
Could some of the issues experienced by Wells Fargo be attributable to wrong goal setting? Wrong Reward setting?
According to General Electric’s Steve Kerr, an expert in reward and measurement systems, “most organizations don’t have a clue how to manage ‘stretch goals’” (Sherman, 1995).
He advises managers to avoid setting goals that increase employee stress, to refrain from punishing failure, and to provide the tools employees need to meet ambitious goals. Integrating hese ideas, he urge managers to think carefully about whether goals are necessary and, if so, about how to implement a goal-setting system. In particular, he encourage managers to ask themselves the questions listed in the warning label in Table 1 (below) when considering the use of goals.
table 1
Goals may cause systemic problems in organizations due to narrow focus, unethical behavior, increased risk taking, decreased cooperation and decreased intrinsic motivation. Use care when apply Goals in your organization.
This cautious approach to setting goals is consistent with King and Burton’s (2003) claim that goals should be used only in the narrowest of circumstances:
The optimally striving individual ought to endeavor to achieve and approach goals that only slightly implicate the self; that are only moderately important, fairly easy, and moderately abstract; that do not conflict with each other; and that concern the accomplishment of something other than financial gain.
The attached articles attributes the wrong doing issues to a blind spot in leadership.
Answer the following questions:
1. How did Wells Fargo reward or goal setting negatively affect the company concerning their scandal involving the cross selling of accounts. (need to read attached article to understand cross selling of accounts issue)
2. What advise would you provide the leadership on how to best respond to these growing issues and scandals? Is turning a blind spot to the problems helpful to Wells Fargo?
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