GOOD EXAMPLE

Briefly explain the key principles of goal-setting theory. Discuss the extent to which these
principles are evident in the case and have helped to enhance employee performance by
highlighting relevant information provided in the case study. Make use of at least 3
appropriate academic references throughout.

This analysis of the Wells Fargo case study will define motivation and explain why motivated
employees are important in the workplace. It will also describe the key principles of Latham and
Locke’s goal setting theory, explain why the theory does not work in the case of Wells Fargo and
critique the goal setting theory by explaining a strength and weakness of the theory.

Armstrong (2018) argues that motivation is the level of intensity, direction and persistence that
accounts for the amount of effort an individual uses towards attaining their goals. Ganta (2014)
believes that motivation is important in the workplace as the more motivated an employee is, the
more productive that employee should be. This means that employers need to know their
employees very well to use different methods to motivate them based on each individual’s wants
and needs. It could be argued that the managers of Wells Fargo did not take into account their
employee’s wants and needs since the goal setting environment caused the company to have a
high level of employee turnover.

Latham and Locke’s 1979 goal setting theory argues that performance is higher if an employee’s
goals are challenging and specific, if employees participate in the setting of goals and when
employees receive feedback from their line managers. There are also three other factors which
can influence the relationship between goals and performance: goal commitment, task
characteristics and national culture. The company’s corporate goals can be influenced by
external factors such as competition and legislation but they can also be influenced by internal
factors such as the performance of the company and the core values of the company. These
corporate goals can influence an individual’s goals as the corporate goals will be passed through
the functional goals and the department goals and lastly passed onto an individual (Armstrong,
2018). This can be seen in the case of Wells Fargo as the Community Bank’s goal was consistent

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year-over-year growth and this goal was passed down to the local regions and the Wells Fargo
bank branches. Then, regional and local managers put pressure on their subordinates in order to
achieve this goal set by the Community Bank.

However, the goal setting theory does not work in the Wells Fargo work environment. This is
because the goals that the headquarter’s set were too challenging for the employees who were
directly dealing with the customers. The company’s vision is to ‘satisfy their customers’
financial needs and help them succeed financially’. This mission statement does not speak about
customer satisfaction highlighting the company’s need to recruit as many customers as possible
without considering their customer’s needs. This would lead employees to behave in an unethical
manner; this included opening unauthorized personal checking or savings accounts for existing
customers and falsifying bank records. This is because employees saw their colleagues who were
more likely to be praised and rewarded to be the high sales performers in the company and this
meant that employees wanted to receive positive feedback from their line managers, especially
since receiving feedback leads to higher performance levels.

The company’s goals are also too unrealistic meaning, although the goal setting theory argues
that goals should be challenging, in this case they are too challenging for employees and this has
led to the senior management accepting low quality accounts to increase the sales of the
company. This is because the Community Bank’s sales model emphasised sales volume and
‘relied heavily on consistent year-over-year sales growth’. The company was aware that this
model was ‘unattainable’ and accepted the fact that half of the regions would achieve these
goals. Wells Fargo is aware that employees create accounts that customers don’t need or use but
they are a necessary product of a ‘sales-driven organisation’. This led to the misconduct seen in
the organisation such as forging customer signatures and creating unnecessary accounts for the
customer, which does not serve the customer any financial need. This behaviour was encouraged
by Wells Fargo as they used a forced ranking system to rank their employees, which put pressure
on managers who offloaded that pressure to subordinates, in order for them to achieve
compensation and promotional opportunities.

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As shown by the Wells Fargo case study, the goal setting theory does not work in every work
environment and does have disadvantages. Shultz (2013) argues that the major issue with
Latham and Locke’s goal setting theory is that it can lead to unethical behaviour, which can be
seen in the Wells Fargo case. This is because employees may be near to reaching their goals so
their intrinsic motivation is reduced which, in turn, may increase risk taking behaviour in order
to reach this goal. This is because some organisations ‘emphasise the ends rather than the
means’. However, the goal setting theory does have some advantages as Buchner (2007) argues,
specific and difficult goals challenge individuals to draw on their existing skills to develop
innovative strategies; this can be motivating for an employee, however Wells Fargo focuses on
sales goals only without allowing employees to use their existing skill set.

This essay has defined motivation and has analysed a key motivation theory, Latham and
Locke’s goal setting theory. It has explained why this theory does not work in the case of Wells
Fargo and how it led to unethical behaviour in the workplace. Lastly, it critiqued the theory by
explaining a strength and weakness of this theory.

Word count: 943

Describe the way in which you would adapt the following elements of Wells Fargo’s
performance management system to eliminate fraudulent practices, making use of at least
3 academic references.

After analysing what went wrong in the case of Wells Fargo, some suggestions can be made on
how the company can adapt their performance management system to eliminate further
fraudulent practices in the future. This review of the case study will analyse Wells Fargo current
performance appraisal system, reward system and their disciplinary process and will also give
the company recommendations on how these three systems and processes can be improved.

Firstly, Armstrong (2018) argues that performance management is the set of activities, which are
ongoing, which improves performance of an individual and this will increase the results of the
organisation. Managers can manage the performance of their subordinates using performance

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appraisals. These meetings allow a manager to see if individuals are doing their job to an
appropriate standard and then communicating how the employee can improve and also how they
are finding their job at the company. Armstrong believes that appraisals are a key part of
performance management since it allows employees to improve their performance at work. An
issue in the case of Wells Fargo is that they use an evaluative appraisal approach. Evaluative
appraisal is when an employee’s performance is compared to a predetermined criteria and as
Boswell and Boudreau (2002) argue, these types of appraisals can support a company’s decision
in deciding an employee’s salary level, promotion and termination decisions. If an employee did
not meet their sales goals, they could have had a negative appraisal which might have included
career-hindering criticism from their supervisors meaning that employees would use unethical
tactics to reach their sales goals. Wells Fargo’s employees were also ranked against one another
which could have encouraged unethical behaviour so that individuals could be promoted before
their colleagues. These forms of evaluative appraisals could have led to the misconduct seen at
Wells Fargo such as the creation of unnecessary accounts in order for an employee to look like
they have achieved their goals. Appraisals could still be used within Wells Fargo but a different
form of appraisals. Instead of using evaluative appraisals, the company could use a
developmental type of appraisal. Bayo-Moriones et al (2020) argues that a developmental type of
appraisal focuses on an employee’s training needs, employees receiving feedback and guiding
employees based on this feedback. If Wells Fargo does implement a developmental style of
appraisal, they would need to take into account other factors of the job such as customer
satisfaction and abolishing the sales goals. Bayo-Moriones et al also found that using a
developmental style of appraisal increases employees performance.

The reward system at Wells Fargo could also be improved at Wells Fargo to prevent fraudulent
practices. Armstrong (2018) argues that there are two types of rewards: transactional and
relational. Transactional rewards are the cash benefits received by the employees whereas
relational rewards are the rewards which relate to the physical and psychological well being of
the individual. The current reward system at Wells Fargo is structured so that employees have to
meet a minimum predetermined criteria to be eligible for rewards, based on the number of
products sold per day, daily profit and the packages sold each per quarter. After reaching the
minimum predetermined criteria, employees could earn rewards based on “opportunities” such as

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products sold each day, daily profit and customer experience. If an employee received a reward,
it would be a financial reward since Wells Fargo does not offer their employees relational
rewards. This may have led employees and their managers to participate in unethical activities;
one manager taught his subordinates how to disguise unnecessary accounts for their family
members in the computer system. As Catania (2014) argues, Latham and Locke’s goal setting
theory can lead to unethical behaviour at work since there may be a conflict between personal
and organisational goals therefore the reward system may encourage unethical practice in order
to achieve the organisational goals. Wells Fargo could improve their reward system by offering
their employees relational rewards such as learning and development and the opportunity for
recognition and achievement. This can motivate employees to not participate in unethical
practices as then they won’t be recognised or respected for their work. Cacioppe (1999) also
argues that team based rewards are effective as some companies only give rewards to employees
who actively participate and this would encourage all members of the group to participate in
order to meet shared goals.

Lastly, Wells Fargo can improve their disciplinary process in order to prevent fraudulent
practices. Presently, Wells Fargo has been blaming their employees for misconduct without
analysing the circumstances behind why the employee may have broken the rules. The company
has been terminating employee’s contracts without considering the circumstances why the
employee may have been undertaking in fraudulent practices or they have not looked at the
circumstances around the employee, such as managers who may have encouraged the employee
to participate in unethical behaviour, even if they were not directly involved themselves. Verhoef
et al. (2015) found that the disciplinary process in certain organisations can have psychological
and professional effects since it can cause stress to an employee while also having an effect
professionally as the individual may find it hard to get a new job, especially after receiving
‘career-hindering criticism’ from their managers. To prevent termination, the company could
coach their employees. Coaching would involve activities to develop the appropriate skills,
abilities and attitudes of an employee and this can give employees help on how to achieve their
goals without being involved in any fraudulent activities.

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This essay has given recommendations to Wells Fargo on how the company can adapt their
performance management system to eliminate further fraudulent practices from occurring in the
company. It has analysed their current performance appraisal system, reward system and
disciplinary process and has critically discussed the consequences and given recommendations
on what could be improved.

References
Armstrong, M., 2018, Armstrong’s Handbook of Performance Management, An Evidence-Based
Guide to Delivering High Performance, 6th edition, London.

Bayo-Moriones, A., Galdon-Sanchez, J.E. and Martinez-de-Morentin, S., 2020. Business

Boswell, W.R. and Boudreau, J.W., 2002, Separating the developmental and evaluative
performance appraisal uses, Journal of business and Psychology, 16(3), pp.391-412, date
accessed 14th April 2021,

Bucher, T.W., 2007, Performance management theory: A look from the performer’s perspective
with implications for HRD, Human Resource Development International, 10(1), pp. 59-73, Date
accessed 8th April 2021,

Cacioppe, R., 1999, Using team–individual reward and recognition strategies to drive
organizational success, Leadership & Organization Development Journal, date accessed 14th
April 2021,

Catania, G., 2014, The unintended consequences of motivational techniques: Goal setting and
unethical behavior in the Maltese financial services industry, Procedia-Social and Behavioral
Sciences, 109, pp.1375-1385, date accessed 14th April 2021,

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Ganta, V.C., 2014, Motivation in the workplace to improve the employee performance,
International Journal of Engineering Technology, Management and Applied Sciences, 2(6),
pp.221-230, Date accessed 8th April 2021,

Independent Director of the Board of Wells Fargo & Company (2017) Sales Practices
Investigation Report, date accessed 15th April 2021, available at:

Shultz, T., 2014, Evaluating moral issues in motivation theories: Lessons from marketing and
advertising practices, Employee Responsibilities and Rights Journal, 26(1), pp.1-20, Date
accessed 8th April 2021,

Verhoef, L.M., Weenink, J.W., Winters, S., Robben, P.B., Westert, G.P. and Kool, R.B., 2015,
The disciplined healthcare professional: a qualitative interview study on the impact of the
disciplinary process and imposed measures in the Netherlands, BMJ open, 5(11), date accessed
15th April 2021,

Wells Fargo Bank (2019) Wells Fargo Today, Quarterly Factsheet, date accessed 15th April
2021, available at:
<[Link]

Sainato, M. (2019) Wells Fargo employees say little has changed since fake accounts scandal,
The Guardian, date accessed 15th April 2021, available at:
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employees>