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The Volkswagen Misalignment: Four Leadership Practices to Steer You Away From Disaster

November 9, 2015
“At home in America and around the world, Volkswagen Group places environmental sustainability at the core of our operating philosophy.”
 
This is a direct quote from the Volkswagen website. Contrast that statement with reality: 
 
  • Volkswagen installed “defeat devices” on more than 11 million diesel cars since 2009 with the alleged intent to “cheat” emissions testing. 
  • These cars produced up to 40 times the acceptable limit when in actual use. 
How did they make sense of that contradiction? How does a corporate culture become so warped that it justifies promoting a core value or competency when they break from that value on a daily basis? There are two reasons: self-interest and fear. 
 
Self-Interest 
Volkswagen’s goal was to top General Motors and Toyota financially. The car company focused on getting to annual sales of 10 million vehicles and a pretax profit margin of 8 percent or higher. A major part of its vision was satisfying customers and employees. However, customers and employees were not consistently mentioned when Volkswagen shared its vision. In fact, employees and customers were mentioned last, usually preceded by an “also.” 
 
Customers cannot be a side note. Customers and our relationship with our customers must come first largely because they are based on trust. But Volkswagen’s goals were based on grandiosity. They were based on ego. They wanted to be the biggest! That is pure self-interest and self-interest destroys trust. 
 
Fear 
Fear is what allowed the loss of focus on the customer and environment. When a company starts to derail, it takes truth tellers to pull it back to safety. Managers and leaders will come forward if the environment is a safe place to air concerns. 
 
The culture must breed transparency. When the environment is opaque and political, we lose our truth tellers. This discomfort stops people from questioning, critically analyzing and from playing devil’s advocate. At some point the goal of growth and profitability became so important that the customer relationship and Volkswagen’s focus on the environment took a back seat. 
 
The only deterrent for cultural deterioration like this is transparency. Where were the open conversations? What happened to balancing different priorities? Fear. And fear limits success. 
 
So what can a company do to avoid this type of situation? What can a leader do to stop this from happening? 
 
1.) Regularly revisit your values and core operating principles. If these principle and values are truly who you are as an organization, they must come alive. Forget the placards and posters. Use them in decision making as criteria. Discuss them when problem solving and in performance management and succession planning. 
2.) Positively recognize those individuals that challenge our thinking. It is easy to recognize and reward those that support you. But it is difficult to do just that for those individuals that challenge us. Leaders are not afraid of being challenged. Leaders embrace it. 
3.) Focus on your customer daily. In stand up shift meetings or in management meetings, use messaging as often as you can to frame your business around your customer. Make the customer is front and center. 
4.) Make sure your organization has a true balanced scorecard. Measurements that balance priorities appropriately and demonstrate real connections between those priorities. Organizations that are able to balance safety and profitability are better than those that don’t. 
 
When we are interested in others, especially our customers, and we are comfortable speaking up for what is right, great things happen and success is sustainable. It is up to leaders to create that culture and sustain it over time. The good news is when leaders develop that type of culture and truly engage employees in that creation, employees will steer you back and help you realign.