Wells Fargo and Business

Leadership Using the Hedgehog Concept

Collins was not incorrect in the way he described the leadership at Wells Fargo. When Collins and his research team were carrying out the research, the relied on interviews and newspaper articles plus the performance of the company on the stock market. All this combined resulted in their assumption that the leadership and change in strategy by Wells Fargo was resulting in the increase in stock price. It is true that for a company to become a great company it needs to identify the three things pointed out by Collins (2001) namely what is the company good at, what drives the company, and what are employees passionate about? Wells Fargo managed to identify all these three things and discovered that in order for it to increase investor profits it needs to change its business strategy. Changing the business strategy did have the expected results, and the company experienced superior profits. However, all this was based on the performance of the company on the stock exchange. There was no tangible evidence that showed the company stock rose because of the changes implemented. In the book, there is no demonstration anywhere that the authors carried out any empirical research or capture any data directly related to the company's performance. All the information is based on published newspaper, and magazine articles and interviews conducted. This resulted in the bias of information collected since most of the interviews would paint the company is good light and the articles were all showing the improvements made at the company. Collins did the best he could to explain the situation at Wells Fargo and his findings at that time looked accurate. The measure employed by Collins to determine a company's greatness was stock market return. This measure could be influenced by numerous factors and assuming that the measure was because of the transition only was wrong.

Collins did misinterpret the performance of the company from 2001. Mainly because the book was written and focused on what the company had done in the past and not what it was going to do in the future. The future is not so easy to predict, and one can only base their analysis on how the company has performed previously. This is a good measure for predicting and positioning the company to continue succeeding. Understanding the past is valuable in order for one to predict the future (Ortmeier & Meese, 2010), but in the case of Collins he never fully understood what was going on at Wells Fargo. What Collins wrote about was based on the past performance of the company, and he had hoped that since the company was performing well and it had performed so well during the research phase, it would continue to perform well in the future. Like earlier pointed out the research carried out did not involve looking into the business practices, and they only collected data from articles and interviews. The data collection methodology was itself skewed in that all the information was going to point out how well the Hedgehog Concept had worked for Wells Fargo. Since its CEO had opted to transform the business from being a per loan profit to a per employee profit, it looked the company was going to continue its growth trajectory. The mantra embraced by the company was 'run it like you own it.' This mantra meant that each employee would do their work as though they owned the company or as though the company was their own. The mantra was good, but it seemed it could not run for long. This was something that Collins had not foreseen. However, had he conducted a much intensive research and collected data by observing what and how the employees went about performing their jobs. The lack of such insights could have led to the misinterpretation that the company would continue excelling in the coming years. The company also based on the mantra meant that it had to keep growing and the continued pressure was going to be applied to employees. Therefore, employees had to come up with ways of reaching their sales quotas.

The profit per employee went so wrong in that there was a high push for employees to cross-sell and meet their daily and weekly targets. The targets placed on the employees were so huge that it is said some employees were stressed beyond measure. The drive by the leadership, especially after Wells Fargo, merged with Norwest. The top management still kept the business mantra, and this gave the managers the latitude to run their individual business units as they saw fit and without any interference from senior managers. The main issue with the mantra was that the CEO of the company did not interfere with the way the community bank was being run and this created a lot of pressure on the employees. Though the merger might have placed undue pressure on the employees, there have also been cases of scandals happening as far back as 2002 (Staff Report, April 21, 2017). This means the employees were given the leeway from an early time to mess around and create fake accounts based on their customer information. Profit per employee is a great strategy, and if well implemented it is a great strategy for a company overcoming the challenges of running big companies with numerous employees. However, in the case of Wells Fargo, the upper management was completely uninterested in how the bottom employees were achieving their sales, and they mostly focused on shareholder value. It is clear that from the inception of the strategy by the then-CEO Carl Reichardt, the focus was primarily on shareholder returns or value. This strategy meant that the business had to return profits and how this was done was vague.