
Volkswagen — There’s Something Strange in the Neighborhood
What happened now
There is not one week going by without Volkswagen being in the headlines with yet another dimension of the ongoing scandal. The latest being Volkswagen (and Daimler for that matter) reporting itself to the German antitrust agency. Reason for that were, allegedly, regular meetings since the early nineties between Daimler, BMW, Volkswagen, Audi, and Porsche dealing with issues including but not limited to the diesel emission control and how to handle it.
If this results in being proved to be true, it will be one of the biggest (if not the single biggest case) cases of violating antitrust laws.
How is that possible
Who is to be held accountable for that? Ask that question and mostly everyone will quickly point towards the corporate culture. While that sounds about right it doesn’t really tell you anything specific.
~ Here’s an insight:
Many years ago when I started my career I was very naive and eager to work and contribute to the company. In those days I happened to be a controller. When I got that job I was told by a senior corporate controller (who had hired me) that doing the job right meant not having friends, but earning a lot of respect. Pretty soon I would find out what those words really meant.
First, I stumbled over smaller issues. People, more often than not in leadership positions, were bending the rules a bit. Small things I could easily catch. When I addressed these things with the culprits I usually got a “C’mon …” or a “so what?…” or a “You again …” and there was no sense of wrongdoing.
Then, the closer and deeper I looked, the more I came across slightly bigger issues. Issues like renting a Lambo or a Ferrari (seriously) and trying to get reimbursed. That of course triggered me investigating in detail what was going on. Which led me to even much more ‘interesting’ things.
Also I found out the hard way that agreements or commitments made were often worth nothing. Verbal agreements / commitments didn’t last a minute and were ‘forgotten’ right away when it was convenient.
Hence, I had to do agreements / commitments only in writing. And that meant writing it down in a way an experienced lawyer would do and having them sign it. Then, when needed, it could be enforced, which also proved usually to be difficult.
I’ll spare you the details. Just that: you indeed don’t make friends that way. And sometimes it can become dangerous.
That time, while in charge as a controller, proved to be a tough training. It sharpened my view, ridding me of my naive beliefs, and honed my ‘corporate survival skills’. Yet, you are at a lonely place.
~ End of that brief insight.
What does it tell you?
- It tells you about a culture where stealing from the company is seen as ok. In case you might think that ‘stealing’ is too harsh of a word for these actions: each and every cent that belongs to the company and is not yours is actually an act of stealing if you take it.
- Each and every agreement and commitment made but not honored by people tells you about a culture of not caring a bit about the company. Let alone the damage inflicted to the company, in reputation and financially.
These two points alone are telling the story of a culture where integrity, honesty, trustworthiness, reliability are foreign concepts deemed worthless.
And suddenly cheating becomes an accepted practice of dealing with and solving problems. It tells you about the lack of understanding that an act is unlawful. Now, the really important question is “why is that possible?”.
Why is that possible
Short answer: It’s leadership or the lack thereof. And it starts at the top. It always does.
Let me insert a quote about leaders that drives the point home:
“It’s not the words that you say. It’s not the emails that you send. It’s not your PowerPoint slides. It’s not what you preach. It’s what you tolerate.” ~ Leif Babin
That quote holds true for all leaders. Not just the top leaders but for all others as well. As a leader you cannot tolerate substandard. Even if that means to stand up to your top leaders and holding them accountable.
The moment you start looking for the ‘why’, it leads you directly to the root cause of matters. Leads you from the symptoms to the disease. The leaders. Comes down to the people in leadership positions.
And just as I said in my other article it’s happening everywhere and not just at Volkswagen.
Before I go on I want to make two personal observations regarding Volkswagen:
- Volkswagen employs on a worldwide scale about 600,000 people. The vast majority of these people are honest, hardworking, and loyal to their company. They do excellent work and deserve the best leadership.
- Dr. Piëch, the former CEO and later Chairman of Volkswagen until he stepped down, is without doubt a brilliant engineer. He is way too proud of his abilities to lower his standards and allow for cheating as means to meeting a goal. He must be so disgusted watching what his successors did to his lifework. And even more when he realizes that it happened during his watch, first as CEO and later as Chairman. The question is why he couldn’t see it coming?
Corporate culture and its leaders
A command and control model such as the one used at Volkswagen is fear driven and creates obedient workers. No one really dares to speak up and voice an opinion of his own. Paralysis by fear.
Well, almost no one. Even in such a toxic environment there are the few who do. True A-players who won’t tolerate such an environment and will only stay as long as they have to. And as long as they stay they fight. They are critical thinkers able to look through such a system and call it out loud. The opposite of obedient workers.
People don’t leave their companies, they leave their leaders.
Meanwhile, on the top leadership level a culture of ‘don’t tell me too much of how you are doing things’ is established. ‘Plausible deniability’ is of the essence and demanded.
Yet, goals are set combined with impossible to fulfill constraints and then enforced by instilling fear. Which leads to ‘the end always justifying the means’. Add hubris and greed to that and you end up with a toxic environment.
The leadership levels below adopt and play ‘willful ignorance’ and just pass the pressure on to their employees and workers. Also usually by instilling fear, you guessed it. The daily goal becomes not getting caught. and finding someone else to blame.
Such leadership of a corporation is spreading like a cancer creating its metastases. A real disease leading invariably to disaster, sooner or later.
How to cure the disease
The cure would be establishing integrity, honesty, trustworthiness, reliability, as the core values of the corporation. Hence, the only way to achieve that is to completely cut out the cancer. In other words, and beginning at the top, you must exchange the entire leadership team … top-down.
Once that is done it still takes time to build up trust again, mutual trust between the new leaders and the employees. Between the new leaders and the suppliers, Between the new leaders and the customers. Between the new leaders and the shareholders.
The new leaders must establish the highest ethical standards. Standards rooted in and driven by the above values. The standards that govern the conduct of a person, especially a member of a profession. In other words for themselves and for all others.
Here’s a quote summing it up:
“When setting expectations, no matter what has been said or written, if substandard performance is accepted and no one is held accountable — if there are no consequences — that poor performance becomes the new standard. Therefore, leaders must enforce standards.” ~ Jocko Willink
Who is accountable
After the diesel scandal, the fraud, at Volkswagen became known, after the magnitude of damage inflicted was clear, decisive and swift action was required. Yet, that didn’t take place. Instead, a strategy of smoke and mirrors was adopted. Typical for a leadership in place as described above.
Who failed:
- The Board of Directors of Volkswagen AG. They didn’t (want) to see the rotten culture created by the Leadership Team they put in place. Instead they opted for the ‘small solution’ and removed only those people in charge, they couldn’t keep anyway. And then they substituted those by other long term leaders highly likely to have known about the fraud … to say the least.They also tolerated the strategy of only admitting what could anyway no longer be denied.
- The Owners of Volkswagen AG: Mainly the Porsche and the Piëch families, the state of Niedersachsen, and some others. They failed in their supervisory duty on the Board.
- The Workers’ Council (Betriebsrat): They knew about the culture at Volkswagen. Most of the leaders in middle and higher management are union members. Besides that they are part of the Board of Directors.
- The Politicians / Goverment: instead of cleaning up the shit left behind by the scandal and holding the company accountable, they participated in the ‘appeasement’ and until now no serious action has been undertaken. I am looking at you, Mr. Dobrindt.
The Damage
Damage inflicted:
- Financial damage until now: >23 B $ and counting.
- Damage to the reputation of Volkswagen: immense
- Future of Volkswagen: doubtful
- Damage inflicted to the ‘Made in Germany’ label: serious
Who is going to believe a word this Volkswagen leadership team is saying?
Someone must pay the price for that, but I’m afraid it’s not the ones who should own their wrongdoing, who are responsible at the top making it possible. The dust settles eventually and most of these people will just move on.
Coda
This is a case study of bad leadership driving a corporation into the ground. It’s a case study that shows what happens to a company without ethical standards in place. High standards everyone must live by, own it and act upon. And it starts with the top leaders.
When selecting people for leadership positions just looking for functional skills is never good enough. You must look beyond that. You must look for integrity, honesty, trustworthiness, reliability. You must look for character.
Volkswagen ist just one case, albeit a significant one. Yet, nowadays it seems to me, it seems to me that qualities like the mentioned integrity, honesty, trustworthiness, reliability … character are in rare supply. The results of that lack we can observe around us on a daily basis.
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Walter H Groth is the founder of The Fload Inc., dedicated to leadership coaching and training.
