Journal of

Information
Volume 29
Systems Issue 3
Education Summer 2018

Teaching Case
“What Gets Measured, Gets Managed”
The Wells Fargo Account Opening Scandal
Paul D. Witman

Recommended Citation: Witman, P. D. (2018). Teaching Case: “What Gets Measured, Gets
Managed” The Wells Fargo Account Opening Scandal. Journal of Information Systems
Education, 29(3), pp. 131-138.

Article Link: http://jise.org/Volume29/n3/JISEv29n3p131.html

Initial Submission: 13 December 2017

Accepted: 7 February 2018
Abstract Posted Online: 13 June 2018
Published: 18 September 2018

Full terms and conditions of access and use, archived papers, submission instructions, a search tool,
and much more can be found on the JISE website: http://jise.org

ISSN: 2574-3872 (Online) 1055-3096 (Print)

 Journal of Information Systems Education, Vol. 29(3) Summer 2018

Teaching Case
“What Gets Measured, Gets Managed”
The Wells Fargo Account Opening Scandal

Paul D. Witman
School of Management
California Lutheran University
Thousand Oaks, CA 91360, USA
pwitman@callutheran.edu

ABSTRACT

Wells Fargo & Co.’s Community Banking unit had enjoyed a strong, positive reputation for decades. Wells Fargo, as a whole,
had avoided most of the problems of the 2008 financial crisis, only to stumble into its own crisis in late 2016. The Community
Banking unit was accused of opening millions of unauthorized accounts, firing employees for violating policy without addressing
the root causes of those violations, and failing to detect and prevent these sorts of issues before they became widespread. Impact
on consumers was widely varied, from new checking accounts that sometimes caused no significant impact, to new credit
accounts that generated fees and caused negative impacts on consumer credit scores. How did the bank’s approach to information
management contribute to this problem? What could the bank have done differently to detect, respond to, and prevent future
instances of improper account opening? What does the bank need to do going forward to prevent future problems and regain
customer trust?

Keywords: Corporate governance, Information for decision-making, Risk management, Audit, Cross-selling, Ethics

1. OVERVIEW opened for their customers, including ATM cards, savings and
checking accounts, credit cards, mortgages, etc. Incentives and
Another key gauge of how we are satisfying the needs disincentives were tied to how well these branch employees
of our customers is how many products they have with performed in relation to their new product sales goals
us. In fourth quarter 2013, the average Retail Bank (Independent Directors – Wells Fargo, 2017).
household had 6.16 Wells Fargo products, up from It’s reasonable to ask, if profitability is the fundamental
6.05 in fourth quarter 2012. (Wells Fargo, 2014, p. 7) goal, why were Wells Fargo employees not directly measured
on customer profitability? This question will be explored later
Wells Fargo Corporation CEO John Stumpf was often in this case study. It’s also a good practice to ensure that
cited as using the slogan “eight is great,” encouraging metrics and incentives are properly aligned with corporate
employees to get the average customer “product” count for a goals. Kerr (1995) notes that incenting particular behaviors,
customer to eight (Garrett, 2016). “Products” in the Wells while expecting different behaviors, is both common and
Fargo culture referred to all types of banking and credit dangerous.
accounts, as well as other services. More products translated Wells Fargo’s organization structure, particularly related
into more information about the customer, which would in to the Community Bank, is shown in Figure 1. Note that
turn lead to higher profitability.
Wells Fargo Corporation is a large U.S.-based banking
company with operations in consumer, business, and
investment banking. Their branch banking operation (the
“Community Bank”) has branches in over 35 states and,
through the years 2010-2015, was one of the engines of
perceived growth for the company. One of the key metrics that
Wells Fargo tracked and reported was “products per
household,” which they used as a way of tracking the breadth
of their relationship with their customers. To help drive
growth of this number, for each of its branch employees, Figure 1. Wells Fargo Organization Chart
Wells Fargo tracked the number of new “products” that person (Wells Fargo Reports, as of September 2016)

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the Community Bank had its own auditing and risk Profitability: At a corporate level, this refers to the overall
management units. Those had solid line (direct) reporting balance between income and expenses. At the individual
relationships to the head of the Community Bank and dotted customer and business unit levels, profitability attempts to
line (indirect) relationships to their respective corporate units. capture the same principle, but reflects the necessity in some
The long-term impact of this scandal is not yet clear. cases to estimate the actual income and expense that are
Immediate impacts included lower traffic in the bank’s attributable to a specific customer or business unit
branches and fewer new accounts and deposits from (Investopedia.com, N.D.).
consumers. And, at least in the short term, large organizations Metrics: These are measurable values pertaining to
have pulled their business from Wells Fargo’s corporate business operations that can be counted and reported on a
banking division. These include the states of California and monthly, weekly, daily, and even continuous basis. The
Illinois, who froze their business dealings with the bank objective of capturing and reporting metrics is usually to help
(Glazer, 2016). Some cities have also reduced or eliminated the organization focus on accomplishing goals that its
their business ties to Wells Fargo, in part because of the new management has deemed to be important to achieve, including
account scandal, but also due to other concerns such as high-level goals of revenue and profitability, as well as finer-
funding for socially unfavorable projects (Chappell, 2017). grained goals related to things like customer service, sales
Scandals don’t often appear overnight. John Stumpf’s results, etc. (Investopedia.com, N.D.)
predecessor created the phrase “eight is great,” doubling the Culture: Corporate culture refers to the beliefs, values, and
number of products per customer that the bank hoped to sell behaviors that govern how employees of a company interact
(McLean, 1998). The “Jump into January” sales campaign, with each other and with outsiders, including customers and
which particularly ramped up pressure in the first month of suppliers. Sometimes this is explicitly documented; more
each year, started in 2003. Significant volumes of “bad often at least some aspects of a corporate culture are tacitly
behavior” didn’t start surfacing until 2011, and the scandal defined, but not explicitly documented (Tayan, 2016).
itself became fully public in 2016 (Independent Directors – Ethics: A system of moral and social principles that in
Wells Fargo, 2017). business are used to guide interactions among employees and
In addition to published reports, this case study includes between employees and other stakeholders, such as customers
comments from three former Wells Fargo employees (names (Investopedia.com, N.D.).
changed): Incentives: In managing employee behavior, incentives are
often used to encourage or discourage particular behaviors or
• Lawrence, a teller with the Community Bank for five results. Done well, incentives support positive aspects of
months in 2015 corporate culture and encourage behaviors that lead to positive
• Bernie, who started as a teller and became a branch business outcomes (Kerr, 1995).
manager for over five years starting in 2009 Risk and risk management: Risk refers to the uncertainty
• Sam, an information technology executive with two of various events happening – both good and bad. Most
different banking units over an eight year period commonly, risk management focuses on “downside” risk – the
risk that unfavorable events or results will take place. In
All three shared their perspectives based on the published banking, this takes a number of forms – risk of fraud, risk of
reports and their own experiences. All had left Wells Fargo borrowers not paying back a loan, etc. Risk management
before the story became public, and each separately expressed includes the tasks of identifying risks, estimating probabilities
surprise that it had taken so long for the scandal to become of occurrence, and determining likely impacts. It also includes
public. the function of identifying and assessing steps that might
mitigate either the risk of occurrence or of the impact
2. TECHNICAL AND BUSINESS BACKGROUND (Investopedia.com, N.D.).

2.1 Key Terms 2.2 Rationale for Product Sales Goals

Key terms relevant to the case include banking, cross-selling, Sam, the IT executive, said that Wells Fargo had an intense
profitability, culture, ethics, incentives, risk, and metrics. corporate focus on sales and especially cross-selling, referring
Understanding these terms is important to grasping the impact to that as Wells Fargo’s “sacred cow.” He pointed out that
of information and of decisions made by the various even the IT organizations were part of the process, as the IT
participants in these situations. systems were required to capture and report sales-related
Banking: The banking industry is responsible for a variety metrics.
of financial management functions, most fundamentally The Community Bank had a somewhat arbitrary goal of
including taking deposits from customers for safe-keeping and eight products per customer. (For the purposes of this case
earning interest and making loans to customers to support study, products and accounts are used somewhat
those customers’ financial needs (Investopedia.com, N.D.). interchangeably, with products being a more general term that
Cross-selling: The process of leveraging an existing includes ATM cards, online banking, and other services.) The
relationship with a customer to attempt to provide that rationale for this target is shown in Figures 2 and 3, below.
customer with additional goods and services. In banking, that Figure 2 indicates that the propensity of customers to add
often means opening additional accounts or providing new products goes up the more products they have. So more
additional services, like ATM cards, online banking, or products are a self-sustaining path – if customers join the bank
financial planning (Investopedia.com, N.D.). and can be persuaded to add more products, that increases the
chances that they’ll add even more products in the future
(Tayan, 2016).

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settlement with two federal financial regulatory agencies and

the City of Los Angeles and agreed to a penalty of US$185
million.
This practice of creating accounts to meet key metrics
conflicted with systems that the bank itself had put in place to
prevent this type of issue:

• Customers were to be notified when new accounts

were opened for them.
o In many cases, employees would modify the
notification address and phone information so that
the customer would not be alerted.
• New deposit accounts needed to have funds deposited
into them for the accounts to stay active.
o Employees would often move funds to those
accounts temporarily, then move the money back.
Figure 2. Products per Customer vs. Future Purchases Many customers didn’t notice the opening of the
(Tayan, 2016, p. 8) accounts or the funds movement on their
statements. This was a practice known as
But in the larger picture, why are more products a good “simulated funding.”
thing? It appears that customers with more products are more
• Auditors reviewed new accounts periodically.
profitable to the bank, as shown in Figure 3. The base level of
o However, access to records by corporate-level
profitability, a customer with three products, is profitable to a
auditors was limited by the Community Bank
certain extent. A customer with five products, though, is
management.
believed to be three times more profitable than the three-
product customer.
The bank also had systems in place to measure results,
There are many reasons for this effect. For example,
often in terms of new accounts opened, at the staff member,
customers with more accounts tend to be “stickier” and stay
branch, and regional levels. And while simply measuring and
with the bank longer, so the bank doesn’t need to spend
reporting results can affect behavior, Wells Fargo also had
marketing dollars to replace them. In addition, customers with
strong management motivations in place aimed at reinforcing
more products tend to give the bank a higher “share of wallet”
the task of meeting or exceeding the metrics. The metrics were
so that the bank can earn additional revenue on those deposits
deliberately tough to meet, referred to as “50-50” goals, with
or loans (Witman and Roust, 2008). Finally, the additional
senior managers expecting that only 50% of branches would
information provided by the products gives the bank better
be able to meet the goals.
information with which to make decisions on how to interact
Bernie, the former branch manager, said that his branch
with the customer.
goals were clearly tough to meet – the goals had been set
based on prior year results, which included a one-time
increase in branch activity. In addition, each of his two
personal bankers (a rank above teller) had a goal of 8 product
sales per day, but the branch’s goal was for 25 sales per day –
9 more than his two personal bankers were expected to
produce. When he asked, he was told to “figure it out” – meet
the numbers “without regard” to other considerations.
Individual personal bankers were assessed by their
managers, usually several times per day, on how many
accounts they had opened that day, that week, and that month.
Lawrence said that tellers were measured on their compliance
with scripted talking points and metrics for referrals for
product sales. Their results were compared to their individual
goals and their contribution to the branch’s goals. Meeting or
exceeding goals might be rewarded with cash incentives of
Figure 3. Retail Banking Profit per Customer $250-800. But failing to meet goals was often met with
(Tayan, 2016, p. 8) threatened and actual penalties – demotion and termination
3. TIMELINE OF EVENTS among them, primarily for personal bankers (the lowest-level
staff), but also for branch managers and others up the
3.1 The Scandal Becomes Public management chain.
In September of 2016, it was revealed that Wells Fargo Measurement and incentive programs continued up the
employees had been systematically opening new accounts that organization chart to include the branch and regional
customers had not authorized. In many cases, the accounts management teams. They would have weekly, sometimes
were opened and then closed a few days later, but often the daily, conference calls to check on results, and it was
accounts stayed open for weeks or months, and often without important to the managers to have good numbers to report.
the customer’s knowledge. Wells Fargo announced a Further up the organizational chain, though, at the senior

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management levels, incentives were tied less to the immediate little revenue to the bank if the consumer did not actively use
achievements and more toward longer-term results. the card. As a result, the bank’s incentive system seems to
have provoked behavior that was not beneficial to any of its
3.1.1 Ethics rules: The bank had ethics rules in place that stakeholders – customers, employees, management, or
could and should have prevented the actions in this scandal shareholders.
(Tayan, 2016). Indeed, the first statements from the CEO,
John Stumpf, just days after the scandal broke in September 3.2 Elements of the Scandal
2016, indicated that the problem was employees who didn’t 3.2.1 Sales pressure: Branch staff, both tellers and personal
live up to the bank’s culture and ethical standards: “if they're bankers, many of whom earned near the minimum wage, were
not going to do the thing that we ask them to do – put often under significant pressure to “sell” products – to open
customers first, honor our vision and values – I don't want new accounts or provide new services. This pressure came not
them here” (Glazer and Rexnode, 2016). just in the form of the potential for earning incentives, but also
In addition to the bank’s ethical standards (their Code of in pressure from managers to produce or risk losing their jobs.
Ethics and Business Conduct), the bank provided a hotline for All branch staff, and particularly personal bankers, were
employees to call to report ethical concerns. The company’s viewed to a great extent by the bank as sales people,
2015 annual report notes that “We require all team members responsible for “selling” a certain volume of new products in a
to adhere to the highest standards of ethics and business particular time period. Branch, district, and regional managers
conduct” (Wells Fargo, 2015), and employees are encouraged would often hold conference calls on a daily or more-frequent
to call the EthicsLine anonymous tip line to report suspected basis to check on the progress against that day’s goals,
ethical violations (Independent Directors – Wells Fargo, increasing pressure on the line employees.
2017). Bernie’s experience flew in the face of this statement; As an example, one Wells Fargo customer had two
he said that his experiences with Human Resources led him to accounts opened, one for each of his two great-grandchildren.
believe that HR leaned more toward meeting the goals than Some years later, the account owner discovered a total of
doing it ethically. twelve accounts, rather than the original two, with ten of the
accounts empty and dormant.
3.1.2 Egregious abuses: Between 2011 and 2016, Wells Not surprisingly, competition even without explicit
Fargo terminated many people for failing to meet goals incentives can be a strong motivator. Shelley Freeman was the
(amounting to 1% of its workforce every year). Wells Fargo Lead Regional President for Florida from 2009-2013. She
terminated an additional 5,300 of its 110,000+ employees for went a step further to add pressure, routinely exhorting her
abusing the account opening process. In addition, in some staff to do better by calling out her region’s performance
cases it is alleged to have terminated (often on fake charges) relative to the other regions, and encouraging them to do what
and “blacklisted” employees from the financial industry if the it takes to be ranked first among the Wells Fargo regions.
employee had complained about the sales goals or made
allegations of improper conduct (Associated Press, 2017). Yet • Why would something as simple as a conference call
it did not change the fundamental measurements that seem be perceived as raising pressure on staff, particularly
likely to have triggered the misbehavior by those employees. to do things that are disallowed by the corporate ethics
policies?
3.1.3 Business value: Wells Fargo, as part of its annual • How could senior managers better balance the
reports, told its shareholders that having many accounts with importance of meeting sales goals with the importance
each household would ensure that it would be the “primary” of doing quality work and meeting ethical standards?
bank for that household, and thus have a strong and long-
lasting relationship. In many cases, though, because so many 3.2.2 Employee turnover rates: One common indication of
of these accounts and products (a total of at least 3.5 million an organization’s health is the rate of staff turnover – how
new accounts over 6 years (Stempel, 2017)) were never used, many employees are leaving an organization in a given period
and often charged no fees, the bank found itself spending staff of time. Employee departures can be for a number of reasons:
time to open the account, to cover up the opening, to fund the resignations, firings for failure to meet quotas, firings for
account, and perhaps later to close the account. And if a failure to comply with ethics rules, geographic moves, staffing
customer noticed an issue and complained, bank staff would level adjustment, and others. Most critical in this case is the
spend time to resolve the issue and perhaps compensate the number of staff departures due to resignations and due to
customer by reimbursing any fees paid. failure to meet quotas or to comply with ethics rules.
Bernie recounted a conversation with a state-level Bernie commented on the high turnover rate as a common
executive who touted the sales of over 1 million products phenomenon at Wells Fargo. He also noted that turnover
during a particular reporting period, and that about 250,000 allowed his rapid ascent in the organization – from teller to
were still open at the end of that period. This indicates that service manager in just 18 months.
around 75% of the products sold had not been kept by the When the scandal became public in 2016, Wells Fargo
customers. reported that over 5,300 employees had been terminated for
The net effect of these fraudulently opened products was failure to comply with corporate ethics rules (specifically,
generally not a financial gain for the bank, but merely a win customer consent requirements). Only nine of these
for staff metrics and shareholder reporting. The reported total terminations were for management staff above the branch
fees claimed by the bank related to these fraudulent accounts manager level. The rates of these types of terminations varied
was only $2.6 million. Even the credit card accounts, which by region, with California, Arizona, and Florida ranking
often had fees associated with them, were worth relatively highest in terms of numbers of allegations of violations and in

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terms of numbers of resignations or terminations due to those This highlights the pressure not just on line employees, but on
violations. Wells Fargo recorded information about the stated managers as well.
reason for each departure so that it had a way to count how Both Bernie and Lawrence reported accounts being
many departures were related to ethics issues or to failure to opened for them without their consent. Lawrence had four
perform up to standards. unauthorized accounts, including a credit card, before he left
the bank after five months. The credit card was intercepted or
• When do employee departures represent a problem for sent to an incorrect address, as he never received it. Bernie had
a company? What criteria could have enabled Wells five products, including credit protection services with a
Fargo to detect this symptom of the problem and see monthly fee. He noticed that each month a personal banker
the bigger issue it represented? would manually credit the monthly fee back to his account.
• If you were in charge of Human Resources at Wells The relatively higher targets of the “Jump into January”
Fargo, what type of data would you want to be campaign seemed to provoke some of this behavior, with
reported so that you could detect this or similar employees stating that they were asked to identify friends and
problems? family for whom they could open accounts as soon as January
began. In addition, friends and family were a relatively easy
3.2.3 “Jump into January” and 1Q sales goals: In 2003, sales target for many employees throughout the year. It was
Wells Fargo’s Community Bank created its “Jump into also alleged that at least one district-level manager taught
January” sales campaign to help start sales off strong in the employees how to hide the family relationship in the online
first month of the year. Daily sales targets were set higher in systems that the bank used to try to detect such activity.
January, and management emphasized these higher goals and
rewarded staff who were able to meet them. Staffers reported • Was this behavior really “wrong”? What if the family
that they were asked by managers to identify friends and members agreed to these new accounts? Does it
family for whom they might open accounts in January. They violate reasonable ethical standards?
also reported that they frequently “sandbagged” – holding • What additional controls could Wells Fargo have used
back accounts they could have opened in December, so that to detect and respond to family-based account
they had more new sales to start with in January (Independent openings?
Directors – Wells Fargo, 2017, p. 21). • What characteristics of the new product sales metric
Senior managers at the bank observed the risk that the provoked selling to family and friends?
Jump program created in adding more sales pressure to the
first month of the year. However, Division President Carrie 3.2.5 Selling to vulnerable populations: Part of the role of a
Tolstedt was reluctant to end the program because she was regulatory system is to protect vulnerable members of society
“scared to death” that such a change would impact sales from abuses by powerful entities, like corporations. In
throughout the year (Independent Directors – Wells Fargo, incenting its staff to open accounts to protect their own jobs
2017, p. 25). Instead, in 2013, she replaced Jump into January (and management’s), Wells Fargo arguably triggered
with a new program called “Accelerate,” which ostensibly behaviors that were particularly egregious. Wells Fargo staff
focused more on customer experience and spread the reportedly went beyond opening accounts for family members.
measurement out beyond January to the first three months of In many cases, they “sold” an account as requiring a different
the year. However, some employees viewed “Accelerate” as type of account to go with it, or added additional accounts to a
more of a name change and a longer time span, but no real new customer’s records after the customer had left the bank
change in direction or methods from “Jump.” office. Often, this behavior took place with customers who
were not native English speakers or who were elderly. Some
• Is sandbagging a problem in and of itself? Does the act of these new accounts were “harmless” – no fees or direct
of moving a legitimate sale from one month to another impact to customers. But multiple accounts, particularly
constitute a problem? Why or why not? unused credit lines, can have a negative impact on a credit
• Are there advantages to starting off a measurement report and can be an avenue for fraud and other risks
period with strong numbers? How could the advantage (MyFICO.com, N.D.).
of a strong start help to manage performance At some branches, Wells Fargo employees reported that
throughout the entire time period? Are there they would routinely go out to locations frequented by day
disadvantages as well? laborers and pay each of them a small sum to come back to the
• What could the bank have done instead to start the bank branch and open accounts (Payne, 2017). The laborers
year off strong without creating undue sales pressure? often spoke little English and did not understand what they
were signing up for. In many cases, this exposed the laborers
3.2.4 Selling to family members and staff: Many Wells to monthly or annual fees and other obligations to the bank. If
Fargo staff members, in the push to meet daily quotas, would the laborers were undocumented, this could also have
often open accounts in the name of friends or family members. increased their immigration enforcement risk.
As noted previously, idle accounts often had little direct and
immediate impact on the account holder, as long as there were • What information could Wells Fargo have captured
no fees. As one example, cited by the board’s investigative (or would you expect it already had) that could have
report, “a branch manager had a teenage daughter with 24 helped it to detect this issue?
accounts, an adult daughter with 18 accounts, a husband with
21 accounts, a brother with 14 accounts, and a father with 4
accounts” (Independent Directors – Wells Fargo, 2017, p. 36).

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3.2.6 Funding rates: Numbers of new accounts were one In January of 2017, Wells Fargo announced their new
target metric, but Wells Fargo seemed to have recognized that metrics and incentives program which eliminated specific
an empty or unused account was likely not a particularly sales quotas. The incentives also focused on customer
profitable one. The bank had controls and metrics in place that satisfaction, was more team-based (at least for entry-level
periodically measured what they called the “funding rate” – staff), and carried more of an oversight function to ensure
the percentage of new accounts that showed some evidence of proper behavior. Wells Fargo hoped that this new incentive
being used by their owners. Most commonly, for deposit program would encourage the correct behaviors while
accounts, this was measured by the percentage of accounts discouraging the bad behaviors that precipitated the scandal.
that had money moved or deposited into them and for that
money to remain there for a period of time (Independent
Directors – Wells Fargo, 2017, p. 21).
There are certainly reasons why a customer might open an
account and then not fund or otherwise use it. The bank might
have offered an incentive of some sort to open the account or
the account might have been created for a future need.
However, the bank used this metric, across the bank and by
region, to assess the “quality” of its sales. Lower funding rates
generally indicated lower quality of sales.
The bank noticed that its funding rate was significantly
lower in some parts of the country than in others, and that the
funding rates had declined over time, even as far back as 2012.
Bank staff were also reported to have “simulated” funding of
an account by moving funds from another of the customer’s
accounts for a short period of time, and then moving the
money back.

• What metrics might be applied to other “products” to

ensure that they were being used? Consider products Figure 4. Wells Fargo Incentive Metrics Compared
like ATM cards, debit cards, and credit cards? (Wells Fargo, 2017)
• How could the bank have detected these “simulated
funding” incidents? • What was wrong with just measuring sales and also
• How could the bank have responded to the reduced holding employees to a high ethical standard?
funding rate? • Do you think the immediacy of the prior incentive
system (immediate credit for each sale) contributed to
3.2.7 Metrics tracking and changes: Based on its the problems? What value does it add to delay the
fundamental target of eight products per customer, Wells recognition of a sale? What risks does that delay add?
Fargo relied on the relatively simple target metric of counting • What do you think about Wells Fargo’s new metrics?
the total number of products sold to each customer, averaged What are the pros and cons of these new metrics
over the customer base. This metric was advanced by relative to the corporate goals of high ethical standards
encouraging new sales of products to existing customers on AND high profitability?
the assumption that additional products would bring the bank
more information about each customer as well as a larger 3.2.8 Bypassing customer controls: Most banks have
“share of wallet” (proportion of the customer’s total banking controls in place to help prevent fraud of all types, both
business). internally- and externally-generated. Often, this includes
While these metrics worked for several years (at least automatic notification to customers of changes in their
1998 to the mid-2000s), the evidence that they began to break accounts or other services. But here again, Wells Fargo staff
down started to appear in 2005. More serious issues became appear to have found ways around these controls. In some
visible in specific regions with particularly strong pushing of cases, they were reported to have used the e-mail address
the sales goals. Ultimately, the scandal emerged with the “noname@wellsfargo.com” to sign a customer up for online
revelation of millions of unauthorized accounts and thousands banking services (Egan, 2017). Many banks also notify
of employees fired for improper activity, with many more customers of changes via e-mail and/or via paper mail to their
fired for failing to meet sales goals or, allegedly, for raising home addresses.
ethical concerns.
Wells Fargo measured not just product sales, but also tried • What data could Wells Fargo have examined to
to incorporate some assessment of product profitability. For identify potentially false or misleading e-mail
example, Bernie noted that a home equity line of credit addresses or other notifications?
(HELOC) counted for a much higher score than a standard • Thinking unethically for a moment, if your employer
checking account. He also noted that he had observed personal did notify customers of changes in their accounts, how
bankers selling HELOC accounts to people who had very could you prevent the customer from being aware of
recently bought homes. The home would likely have little the change?
accumulated equity, and the account would likely be closed
soon after, but the banker got “credit” for the HELOC sale.

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3.2.9 Audits and information access: Like all banks, Wells • What were some of the business (e.g., financial,
Fargo has a number of internal audit and risk management management, marketing) failings of this measurement
functions. In most cases, those departments report to and incentive plan?
executives in the corporate management structure, as well as • If you view the raw measurements of “new accounts”
to their respective committees on the Board of Directors. As or “new products” as pieces of data, what must be
shown in Figure 1, the Community Banking division had both done to turn that data into actionable information, on
an Audit and a Risk Management function. Each reported which Wells Fargo can make informed decisions?
directly to the President of the Community Bank, and
indirectly to their respective units in the corporate office. The The following questions may require additional research:
corporate risk and audit leaders then reported to the board,
giving the Community Bank stronger control of the raw data • Did the employees have to undergo periodic ethical
that eventually was seen by the board. This was an training?
organizational decision that Wells Fargo made, and it carried • When employees called the EthicsLine to report
both pros and cons with it. ethical violations, what happened?
The Chief Operational Risk Officer for the corporation, • When employees were fired for opening too few
Caryl Athanasiu, did not view compensation issues or sales accounts, was there a fair process for this? Did
practices as her responsibility. She took a somewhat narrower employees sometimes complain that perhaps there
view of risk, focusing on creating risk management programs were other issues involved? Were there any long-term
and supporting individual business units only in the event of impacts on those employees?
serious breakdowns. This obviously did not include the • Is it possible that firing some employees for failing to
unforeseen reputational risk that the scandal ultimately meet goals was done deliberately to create even more
produced (Independent Directors – Wells Fargo, 2017, p. 61). sales pressure? Or was the additional pressure an
In some cases, the Community Bank units leveraged that unexpected side effect of those firings?
stronger control to remove information from reports to the
Board. For example, in 2013, Claudia Russ Anderson, 5. CONCLUSIONS
Community Banking Risk Officer, was able to convince Chief
Risk Officer Michael Loughlin to exclude information about This case study provides a detailed look at the information
sales practices from a board report. Russ Anderson claimed gathered and used in a real-world business setting. The
that the report as written made the problem seem “so much behaviors of bank employees and managers can be examined
worse than it is” (Independent Directors – Wells Fargo, 2017). in ways that help to understand how corporate culture can
change over time, and how information management can
• Why is control of information flow fundamental to the contribute to that. It can also help to understand how the right
problems that Wells Fargo experienced? metrics (data to gather), coupled with reporting and
monitoring those metrics over time (turning that data into
4. CLOSING QUESTIONS information), are critical to achieving and sustaining business
results.
The following questions are provided to spark additional We encourage you to analyze each of the components of
thought and research into the information flows and this case, to understand what could have gone wrong, and to
management inside Wells Fargo. We hope to also invite identify ways to improve the likely outcome. No one is
consideration into how to use information more effectively to immune from making imperfect decisions, so it is important to
manage organizations, incentivize the right behavior, and understand how we are asking employees to make decisions,
detect inappropriate behavior in a timely manner. and whether we are getting the correct results.

• Why would the bank choose to measure its 6. ACKNOWLEDGEMENTS

employees’ performance based on products per
customer rather than measuring performance more The author thanks the three Wells Fargo alumni who provided
directly on customer balances and profitability? personal insights; his reviewers, including the anonymous
• How would you propose measuring the profitability of reviewers; Barbara Witman and Robert Deuson; and the
a particular customer? What data would you need to student reviewers for their helpful feedback.
track? Think broadly! Could you measure the
profitability impact of staff interactions with the
customer? How?
• What information could Wells Fargo have used to
resolve this issue before it was subject to a $185
million penalty?
• If you were running the Wells Fargo Community
Bank, what results would you measure to ensure
against such problems while still pushing for
profitability?
• What ethical dilemmas did Wells Fargo create in their
staff through their original measurement and incentive
plan?

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 Journal of Information Systems Education, Vol. 29(3) Summer 2018

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