VW : Are we practicing what we preach? The difference Core Values make
Last September, Volkswagon, the venerable powerhouse known for being “solid, trustworthy, and reliable” shocked the world with the revelation that they had lied, cheated, and compromised on environmental laws. This is not the first corporate scam to leave us shaking our heads in disbelief, and although this is not an article about that scam I shall use it as an example of how today even the biggest giants can be brought to their knees through humble citizenry.
This is a story of the changing world. Access to information and digital platforms is beginning to empower consumers’ voices and corporations can no longer get away with manipulating communities, legal systems, and even governments with Machiavellian agenda. Customers are no longer fooled by the lip service of a published ‘customer satisfaction survey’ or ‘net promoter score’ results. Blind pursuit of expansion and growth without considering environmental impact will not be tolerated, and I’m not talking about CSR; some box to be checked on a department’s to-do list. I am talking about changing the dialogue in the boardroom; about ensuring that corporations stay true to their stated values and responsible towards the planet we share and its cohabitants.
“Das Liars” — Volkswagen’s dirty secret
In September, VW revealed that they had lied and cheated for eight years by installing “defeat devices” in millions of diesel engine cars in the form of a software programmed to manipulate data so that the cars could pass US emissions tests only to turn off during normal operations. The cars were actually emitting 40 times the levels of nitrogen oxide permissible in order to run with their much vaunted engine power.
Almost as surprising is the fact that this discovery was made by a group of mechanical engineering PhD students and their professors at the University of West Virginia, who stumbled upon the “defeat device” while researching exhaust systems and engine efficiencies.
So, 11 million of VW’s purported “clean diesel” engine cars were equipped with software to cheat pollution tests. Two months later, and still reeling from the big lie, Europe’s biggest carmaker revealed another dirty secret; that it had also been cheating on carbon dioxide emissions certifications. The truth is that its diesel engines could not deliver high performance and meet emission standards.
The cost consequences have been severe, wiping 30% from VW’s share price. The company is having to pay upwards of $ 15 billion worth of fines (numbers still under revision by the US federal government) plus € 6–7 billion in costs associated with the initial recall and repair of 11 million cars worldwide. Moreover, there is an estimated additional € 2 billion in costs resulting from the second revelation about faked CO2 emissions on 800,000 vehicles. This is notwithstanding billions in compensation, a broken brand image, and as yet unknown future revelations.
What’s the impact on the brand? Does it pay off to focus on growth and profits at any cost?
“We’ve totally screwed up,” said VW America boss Michael Horn, while the group’s chief executive at the time, Martin Winterkorn, said his company had “broken the trust of our customers and the public”. Mr. Winterkorn resigned as a direct result of the scandal and was replaced by Matthias Mueller, the former boss of Porsche.
“My most urgent task is to win back trust for the Volkswagen Group — by leaving no stone unturned,” Mr. Mueller said on taking up his new post. Mueller recognised that the current situation is an ‘existential threat’, in other words, a threat to Volkswagen’s existence. Brands cannot afford to ignore organization culture; the “how we do things around here” anymore. Focus on targets alone with no formal structure to guide and evaluate the ‘how’ (process, policy, procedures) will eventually foster an environment where employees will seek results ‘by any means’. Who can forget the highly controversial scandal related to Arthur Anderson, formerly one of the “Big Five” accounting firms, providing auditing, tax, and consulting services to large corporations . As an independent auditor, this company purported to be built on values of objectivity, transparency, and integrity. However in 2002, the firm voluntarily surrendered its CPA licenses in the US after being found guilty of criminal charges regarding handling of the auditing of Enron, which had filed for bankruptcy in 2001 and later failed. Neither Anderson nor Enron ever recovered from the reputational damage.
Organization culture is a fundamental part of a brand’s make-up. It defines the way that groups of people engage, communicate, behave, and make decisions.
Corporations as Communities — Rethinking the way we ‘Value’ organisations
According to Fortune, nearly 65 million people are employed in Fortune 500 companies as of 2015. That number is higher than the individual populations in 212 of the 232 recognized countries in the world! VW employed over 580,000 people. The impact of these organizations on livelihoods, communities, the economy, and the environment is vast. Therefore, should corporations not be held more accountable for their impact on all of the above? Traditionally, the stock market is driven by financial data and forecasts from company balance sheets as well as the opinions and predictions of analysts. It’s time for analysts to consider more than financial performance as an indicator for future sustained growth. It is time to consider how companies are achieving their results. How are policies made? What drives decision-making? Another example of poor decision-making that slipped through the system is the BP Oil spill of 2010. 11 lives were lost and horrific environmental damage sustained. A government investigation pointed to defective cement on the wall and blamed BP and its partners for a series of cost-cutting decisions and insufficient safety system amongst other reasons.
Values define cultures, and need to define corporations
Cultures have always been defined by a set of shared values. Confucius believed that a leader needed to exercise self-discipline in order to remain humble and compassionate. In doing so, he would lead by example. Most religions, tribes, and cultures have a set of positive values for human interaction, communication, and behavior towards one another. When a group of people agree to abide by guiding principles, it allows for peaceful coexistence, particularly when their leaders act as role-models. Organizations need to revert to these core models of leadership.
How values build organisation culture
In order for corporate culture to be entirely adopted, organizations need to regard shared values as an influence on identity and behaviour on a daily basis. To implement this, several organizations highlight their ‘corporate heroes’; individuals who impacted the company’s image and values. This is what can also be referred to as the ‘personification’ of a brand and its values- which makes it easier for both employees and customers to relate to. Think Steve Jobs and the domain left in his name at Apple.
In order to bring the culture to life and to create a modus operandi, the organizational values need to be translated into repeatable processes (which act as symbols of the values) and supported by rewards and recognition programmes that celebrate the right behaviours (rituals) .
Another perspective on values in organization culture that supports this approach is from John P. Kotter and James L. Heskett as expressed in their book Corporate Culture and Performance. They draw a link between the visibility of an organization’s culture and its ability to change. They describe organizational culture as having two layers — : shared values and behavioural norms. Shared values are invisible and live in the hearts and minds of most of the individuals. For example, mindsets and attitudes about customer service, risk appetite for profit etc.
Whereas behavioral norms are easy to identify because they are visible e.g. daily huddles or wearing a uniform.
It is logical then that behavioural norms are easier to implement because they are highly visible and tangible. Shared values on the other hand, would remain much harder to implement so long as they remain invisible. The idea is to make them visible and achieving this transparency is called “adaptive culture”.
Where do we go from here? How do we bring Values back?
A significant proportion of employees working in the same firm may not know how core values or a brand proposition relate to their day-to-day jobs. The result: a disjoint in what an organization requires from its staff and what actually happens. The consequence: nobody is paying attention to how things are getting done in a measureable, auditable way — until; of course, disaster strikes and the media finds out. Sound familiar?
We live among citizen whistleblowers — armed with video, audio, and text as media and a plethora of platforms on which to broadcast. For firms to survive entails proving their authenticity and integrity; not merely stating values.
Time to address the Imbalance in the Scorecard
Organizations invest millions in media advertising, sponsorship, and corporate events to promote their brands. In 2014 alone, Volkswagon Group spent over 400 million dollars on advertising the VW brand in just the USA- much of which was in positioning the ‘TBI really clean diesel and 58 miles per gallon’ in North America. But how much do corporations spend on educating their staff and building a culture of intangible values into tangible practice that can be monitored, reported, and improved?
It’s high time for the corporate world bring values back into the boardroom, onto the performance scorecard, into the budget, and implement systems to measure, report, and audit how well the products, services, and organizational culture are aligned with their stated values.
Time to Think, Talk and Behave™ organizational values and see them brought to life.
About Janine Bensouda : www.bensoudaconsulting.com/blog
Janine Bensouda is the owner and president of Bensouda Consulting; a management consultancy based in Dubai since 2008. Her firm specializes in assisting clients reflect their brand promise through motivating and engaging staff, improving customer experience processes and delivering innovative learning models. On this note, Bensouda Consulting has recently developed a unique proprietary tool to translate organisational values into tangible working practices. Originally starting her career at Citibank then Mashreq bank in Dubai, she went on to consult across the globe for Ogilvy and Mather and the LoBue Group. As a result of the significant breadth and depth of experience gained, Janine is well versed in business transformation, customer service, process improvement and brand representation. Ms. Bensouda is a certified assessor for EFQM the European foundation for quality management, a standard which underpins the Sheikh Khalifa Excellence Award and the Dubai Quality Award. More so, as an active contributor to the entrepreneur speaking circuit in the United Arab Emirates, she presents regularly to business communities and forums. As a mother, family life comes at the very heart of her purpose and ambitions and forms the inspiration to achieving ever greater things. On this note, she has recently joined the triathlete community in the United Arab Emirates, underlying a belief that strength is born and nurtured in the mind.