Article

An outside view on VW culture 

Did the once proud VW culture go sour?

by Jens Højgaard, CEO, Maestro Business 

The emission scandal began dragging down VW in September 2015. Not only did it put an irreparable mark on the credibility of the German national pride, it also began giving a rare insight into the culture of one of the biggest companies in the world a culture that might have gone sour.

 

An article from Reuters on November 8, 2015 shares some insight.

 

BERLIN (Reuters) – Several Volkswagen engineers have admitted manipulating carbon dioxide emissions data because goals set by former Chief Executive Martin Winterkorn were difficult to achieve, Bild am Sonntag reported.

The paper said VW engineers tampered with tire pressure and mixed diesel with their motor oil to make them use less fuel, a deception that began in 2013 and carried on until the spring of this year.

"Employees have indicated in an internal investigation that there were irregularities in ascertaining fuel consumption data. How this happened is subject to ongoing proceedings," a Volkswagen spokesman said, declining to comment on the Bild report.

Volkswagen on Tuesday said it had understated the fuel consumption and carbon dioxide emissions of about 800,000 vehicles sold in Europe and later said it would foot the bill for extra taxes incurred by drivers as a result.

The latest allegation has deepened a crisis which erupted in September when Volkswagen admitted it had rigged U.S. nitrogen oxides emissions tests. Auto analysts say the company could face a bill as high as 35 billion euros ($38 billion) for fines, lawsuits and vehicle refits.

Volkswagen is encouraging its rank and file staff to cooperate with its internal investigation by promising not to fire or sue them for any misconduct although high-level managers would still be held to account, a person familiar with the matter said.

According to Bild, Winterkorn declared at the Geneva auto show in March 2012 that VW wanted to reduce its CO2 emissions by 30 percent by 2015 and the engineers did not dare to tell him that this would be difficult to achieve.

Volkswagen has declined to comment on whether the firm's culture or the management style of Winterkorn, who resigned in September, had been a factor in the cheating. Lawyers for Winterkorn have not responded to a request for comment.

An engineer at VW's headquarters in Wolfsburg, who works in the Research & Development department, broke his silence at the end of October and told his superiors about the large-scale deception, Bild said citing only what it said was information it had received.

Bild said the engineers used several illegal measures to manipulate the emissions values, including through a higher tire pressure of 3.5 bar. They also mixed diesel in the motor oil so that the vehicle ran more smoothly and used less fuel.

 (Reporting by Jan Schwartz and Andreas Cremer; Writing by Caroline Copley and Ludwig Burger; Editing by Jon Boyle and Anna Willard)

As the story continue to unravel it is quite dangerous to begin speculating about who did what and how. However, there are a few questions that can already be answered. A few rhetorical questions are also to be asked to better comprehend what might have led to the massive tearing down of one of the Western world’s largest and proudest companies.

 

To cheat on the emission tests, a software manipulated device was required to cover up the fact that VW diesel engines were polluting at more than 40 times the accepted level in the US. It needed to be installed in all cars produced for the US market. Surely former CEO Mr. Martin Winterkorn did not install these devices himself – engineers did. Manipulating tire pressure and motor oil was surely the work of engineers not the Executive team of VW. The big questions to answer however, is why? Why did they do this? Did they blindly follow orders to do so, or did they invent and implement all the manipulations themselves?

 

If they where merely following orders, and knowing the purpose of those cheating tricks, why did they not refuse? Maybe even more importantly what would have happened if anyone had refused? 

 

If they initiated the fraud themselves, surely more than one engineer knew about it. Why didn’t someone tell upper management about it? How could it be kept a secret when more than 800,000 cars world-wide were manipulated?

 

While the emission scandal is biggest for VW, it is far from being the only one. In 2007 VW human resource executive Peter Hartz was convicted, given a two-year suspended sentence and a fine of approximately €300,000 for 44 criminal offences. Among these were bribery, undue influence and breach of fiduciary duty. One year later Volkswagen labour leader Klaus Volkert and manager Klaus-Joachim Gebauer, were convicted over their roles in a second bribery scandal. How come?

 

The answer to all of these questions says a lot about the culture that thrived and grew under the management of Mr. Martin Winterkorn. To try to understand this, let us look at the corporate cornerstones of VW: the - at least in public – four guiding values.

 

These are:

 

1.     Top performance

“to survive in the face of competition and to achieve top performance, the Volkswagen Group needs employees who enthusiastically give their best. A good balance between demands and ability (the so-called "flow channel") is the basic precondition for optimum performance and results.”

 

2.     Leading by example

“The management assumes a decisive role in this entire process. Our principle has to be "Lead, Demand and Promote."

 

3.     Active involvement

“A standard survey of employees across the Group was introduced in the form of the so-called "mood barometer". The "mood barometer" gives employees the opportunity to anonymously voice their opinion and so to become actively involved in the organization of the company.”

 

4.     Social responsibility.

 

 

We do not know precisely how these values where lived out in everyday life at VW. But assuming that “to survive, we need people who enthusiastically give their best” and a management team brought up to “lead, demand and promote” combined with a culture of anonymous voicing, but without an encouragement to speak freely, it becomes easier to comprehend why someone could be led into cheating.

 

Leaders go first (lead) they act from a strong base of authority (demand) and they promote people. Who gets promoted? Probably people “who enthusiastically give their best”. Refusing to follow orders or voicing your concerns to an authoritarian leader could very easily be seen as notenthusiastically giving your best”.

 

One former sales executive in VW said according to Reuters, the pressure soared if you performed under your performance target expectations. "If you didn't like it, you moved of your own accord or you were performance-managed out of the business,".

 

In a performance culture it becomes very easy to hold individuals accountable for meeting specific performance targets. A corporate culture that solely focuses on those metrics and - as in the case of VW – forces people to put performance metrics first, without letting them express basic human concerns, is an unsafe workplace to most people. As a simple means of self persevation employees will not be motivated to speak up or to refuse to follow orders that could result in greater harm. This is a toxic cultural recipe at high risk of promoting fraud and cheating. At VW it resulted in the opposite of performance as it has the potential to destroy the entire company.

 

There is real-life value in a corporate culture in which employees do not blindly follow orders. In fact, a culture of short term financial goals achieved through an autocratic management style based on fear or excessive respect, will always eventually become a disaster. However, an organization that develops a culture of constructive confrontations, in which employees are encouraged to actively confront managers and peers, is the antidote to what happened at VW. In such a culture of intelligent disobedience, the management team and overall driving performance metrics are challenged, and employees do not feel that they have to cheat to meet unrealistic performance criteria. Instead it becomes a sustainable culture with the ability to build a high level of collective intelligence and shared thinking.

 

Volkswagen needs a fundamental cultural change” Bernd Osterloh, Labour executive and member of the supervisory board at VW told Reuters. "We need in the future a climate in which problems aren't hidden but can be openly communicated to superiors. We need a culture in which it's possible and permissible to argue with your superior about the best way to go."

 

A culture built on constructive confrontations will not emerge automatically but must be deliberately cultivated. Everyone in the entire organisation must understand personal accountability, and how to make confrontations work as strong emotions - fear and uncertainty - overtake. This culture must be based on personal safety as this is the core foundation of constructive confrontations.

 

"This company has to bloody learn and use this opportunity in order to get their act together, and 600,000 people worldwide have to be managed in a different way," Volkswagen Group of America CEO Michael Horn told a U.S. congressional hearing according to Reuters. "This is very, very clear."

 

For newly appointed CEO of VW Matthias Mueller, this task is his main priority if anyone shall ever trust and respect VW again.