Wells Fargo, Ethics, and OBM


By Daniel B. Sundberg, PhD

bSci21 Contributing Writer

In September of 2016, a scandal began unfolding at Wells Fargo Bank that, so far, has resulted in the resignation of the CEO, thousands of employee terminations, more than $185 Million in fines, and the dismantling of much of the company’s sales goal and bonus system. What caused this? In simple terms, it was because of a “pay for performance” sales bonus program. But more accurately, it was because of several organizational practices that can teach us a lot about ethics, and the value of a behavioral approach to workplace performance.

So, what happened at Wells Fargo?

Over the course of more than 5 years Wells Fargo Bank employees fraudulently opened over 2 million accounts without customer consent, and engaged in a number of other unethical sales behaviors, all to reach high sales numbers. Was it “bad apples”, who were out to cheat customers? No, the behavior occurred because the environment supported it, and here are 4 contributing factors, from a behavioral perspective:

  1. Poor Goal Setting. Goal setting has been long known to be an effective means of improving performance (Locke & Latham, 2013). However, when set improperly, goals can encourage all sorts of undesired behavior just as well. In the 2010 annual report, Wells Fargo CEO reported: “I’m often asked why we set a cross-sell goal of eight. The answer is, it rhymed with “great.” Perhaps our new cheer should be: ‘Let’s go again, for ten!’” (p.6). This goal of 8 banking products (e.g. checking account, credit cards, loans, etc.) per household is a very high one for the industry. Such high goals, also known as stretch goals, are much more likely to encourage unethical behaviors compared with other goal and pay systems (Locke, 2004). Additionally, those goals were set based not on the customer’s individual financial needs, but on the bank’s objectives.
  2. One-dimensional goals and measures. Wells Fargo heavily rewarded employees for achieving goals related to sales of banking products. While, focusing on sales and performance is critical for any business, it is a short-term goal. Wells Fargo did focus on customer satisfaction measures, which is longer-term, but such measures do not appear to have been as heavily incentivized at the individual performer level. This created very strong contingencies to sell as much as possible, creating a “do whatever it takes” sales culture. Pay for Performance guru Bill Abernathy argued that effective pay systems should incorporate measures and goals across 7 specific organizational dimensions (of which, sales is one), to effectively balance short and long term objectives, and encourage ethical practice (Abernathy, 2014).
  3. Low Focus on Behaviors. Goal and pay for performance systems often focus on results – the outcomes of behavior, but effective performance management requires a focus on behaviors as well. This is especially true when ethics are at risk. In Wells Fargo’s case, the organization asked for one set of behaviors, but effectively rewarded another (e.g. “don’t let your employees open fake accounts! But here’s a bonus for doing just that”). By focusing only on the result of number of accounts opened, they were communicating the message that behaviors didn’t matter, unless they were bad enough to get caught.
  4. Leadership Behavior. Large-scale issues such as the Wells Fargo scandal ultimately start and end with the behaviors of leaders within the organization. Unfortunately, senior leaders failed to act in a meaningful or timely way to encourage ethical practice, nor did they model the appropriate behavior. For example, while more than 5,000 “bad apple” employees were fired over the course of 5 years for fraudulently opening accounts, the vast majority of the people fired were front line employees. No senior leaders, who were setting the contingencies for this behavior, were fired for this unethical behavior. Additionally, there were some reports that individuals who reported unethical behavior to the internal ethics line were fired shortly thereafter, sending the message that leadership wasn’t just turning a blind eye to this behavior, they were actively supporting it.


Does the example of Wells Fargo, and the many other companies that have had issues with pay-for-performance indicate such systems are bad for ethics? No, certainly not. Pay for Performance systems, when used appropriately can be a very valuable tool for organizations (Abernathy, 2001, 2011; Lazear, 2000). The main point here is that preventing unethical behavior with these systems depends in large part on leadership behavior, and very carefully and intentionally designing the system. This means leaders taking the time to set clear, challenging yet attainable goals which support customer objectives. It also means creating a pay system that rewards ethics and long-term objectives just as strongly as it does short-term goals. Finally, it means leaders modeling and reinforcing appropriate and ethical behavior daily, and creating systems and processes that make engaging in that behavior easy and reinforcing.

Do you have experience with pay for performance systems?  We would love to hear your stories in the comments below, and remember to subscribe to bSci21 via email to receive the latest articles directly to your inbox!

Abernathy, W. B. (2001). An analysis of twelve organizations’ total performance systems. In L. J. Hayes, J. Austin, R. Houmanfar, & M. C. Clayton (Eds.), Organizational Change (pp. 240–272). Reno, NV: Context Press.

Abernathy, W. B. (2011). Pay for profit. Atlanta, GA: Performance Management Publications.

Abernathy, W. B. (2014). Beyond the Skinner Box: The Design and Management of Organization-Wide Performance Systems. Journal of Organizational Behavior Management, 34(4), 235–254. http://doi.org/10.1080/01608061.2014.973631

Lazear, E. P. (2000). Performance pay and productivity. The American Economic Review, 90(5), 1346–1361. http://doi.org/10.1126/science.151.3712.867-a

Locke, E. A. (2004). Linking goals to monetary incentives. Academy of Management Executive, 18(4), 130–133. http://doi.org/10.5465/AME.2004.15268732

Locke, E. A., & Latham, G. P. (Eds.). (2013). New developments in goal setting and task performance. New York, NY: Routledge.


Dan SundbergDaniel B. Sundberg, PhD, is a behavior analyst dedicated to creating meaningful change for individuals and organizations using the science of human behavior. Dan has worked in a variety of organizations, including non-profits. Additionally, Dan spent two years as a university lecturer, teaching undergraduate students how to improve the workplace with behavior analysis

Dan earned his B.A. in Psychology at the University of California at Berkeley, M.S. in Organizational Behavior Management from Florida Institute of Technology, and Ph. D. in Industrial/ Organizational Behavior Management from Western Michigan University. During this time, some of the best thinkers in behavior analysis and OBM mentored Dr. Sundberg as an academician and business professional.

Dan is currently Regional Manager of Consulting Services at ABA Technologies, where he helps to develop and deliver OBM consulting services. Dan is also a guest reviewer for the Journal of Organizational Behavior Management, and in his spare time he creates behavior-based products that allow people to manage their time and accomplish their goals. He also has a special interest in building effective work practices and cultures for start-up companies, and increasing the positive effects of organizations working towards an environmentally sustainable future.  You can contact him at [email protected].

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4 Comments on "Wells Fargo, Ethics, and OBM"

  1. This is a great explanation of how organizational ethics go south by only focusing on results. Thanks Dan.

    • Daniel B. Sundberg | January 5, 2017 at 4:00 pm | Reply

      Thanks Brett! Results are very important, and in situations like these results + behaviors is even more important.

  2. Gordon Bourland, Ph.D., BCBA-D | January 5, 2017 at 1:20 pm | Reply

    I think the explanation of the unethical behavior of thousands of Wells Fargo employees, “… the behavior occurred because the environment supported it,”” is accurate but incomplete. Undoubtedly, as indicated in the article, multiple factors in the Wells Fargo work environment contributed to many employees emitting what is considered unethical if not illegal behavior (the cautions noted regarding “pay for performance” contingencies certainly are germane). Yet, numerous employees working in the setting environment presumably contacting the same environmental factors as those facilitating unethical behavior, BUT did NOT emit such behavior. Why might some employees emit unethical behavior and others in the same environment NOT do so? I suspect that numerous contributing factors for emitting ethical behavior and not emitting unethical behavior could be involved. I think that one very relevant one, though, is behavioral history. Throughout behavior analysis work exists indicating that an organism’s behavioral history influences its behavior when contacting a given set of contingencies and other environmental factors. This reality was noted clearly in early experimental analysis of behavior work. By extension, the Wells Fargo employees did not enter the work environment as ahistorical, organisms (analogous to the old philosophical notion of being a tabula rasa). Instead each employee had her or his unique, individual behavioral history, those of some employees having produced repertories resistant to behaving unethically upon contacting the pernicious contingencies etc at Wells Fargo while other employees’ behavioral histories resulted in their being susceptible to behaving unethically in the same setting. We must be very careful that our analyses of behavior do not omit the contributions of behavioral history.

    • Daniel B. Sundberg | January 5, 2017 at 3:58 pm | Reply

      Yes, good points Gordon. The behavioral analysis is certainly not complete without taking into account individual behavioral history. There were no doubt lots of people who contacted those same contingencies but did not engage in that behavior. I imagine Wells Fargo, and most organizations, would very much like to have many more of those sorts of people.

      From and organizational perspective, individual behavioral history is very difficult to assess. Even the very best employee selection instruments have only limited predictive ability, regarding future behavior. Really the only thing an organization can control are the on-the-job contingencies it establishes to encourage ethical and desirable behavior.

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