Behavioral Science Lessons from the Wells Fargo Scandal: Focusing on the “Regular Apples”

After examining the culture and structure of companies, it often becomes harder to make the case for a few bad apples ruining the bunch. Instead, it becomes apparent that the vast majority are regular apples whose honesty or dishonesty are flexible depending on the situation. These situations can be heavily influenced by aggressive sales incentives or a company's culture. In the final part of his series analyzing the complicated and numerous factors that fed into the Wells Fargo scandal, FRA Manager Matt Bedan provides practical advice to not only avoid the mistakes of Wells Fargo, but also to use behavioral science to your advantage.

The use of metrics to reinforce behavior by creating incentives or pressure to produce results are becoming increasingly popular in corporate culture. Overall, the use of metrics is often beneficial. However, when metrics are misaligned with a company's strategy and priorities, it can lead to unintended ethics and compliance problems. When looking at metrics, Matt suggests looking beyond the numbers to what they are encouraging. How are these objectives helping the company? In what ways could these metrics create negative pressure to produce results? Are those standards implying that meeting those metrics is of the utmost importance, creating a 'whatever it takes' mentality?

Peer pressure is another powerful force for corporate culture. When looking at compliance training, e-platforms and virtual training are rising in power. Virtual training provides an easy way to consistently train a global company, while also creating an audit trail. However, virtual training utilizes the part of the brain responsible for higher learning, rather than taking advantage of the power of social interaction and peer pressure. Humans are designed to mimic the behavior of those around us. When compliance and ethics training takes place in person it is often accompanied by role playing, which triggers the part of the brain responsible for social interaction. In return, an employee is more likely to remember the social interaction aspect of training rather than a wordy policy reviewed on a screen.

As discussed in parts one and two, the cases of fraud at Wells Fargo were the result of both company culture and structure. In part three, Matt takes a closer look at the effects of the above mentioned, as well as understanding and utilizing anchoring and framing. Understanding and applying these conditions and tactics prove to be incredibly important for creating and implementing an effective compliance program and preventing instances of dishonest activity.

Read the third instalment Behavioral Science Lessons from the Wells Fargo Scandal: Focusing on the "Regular Apples" in the latest The Anti-Corruption Report