Here’s what went wrong at Volkswagen

Nashville Business Journal

November 20, 2015

 

Volkswagen is in the midst of one of the largest business scandals of all time. Surely there’s something leaders can learn from the brand’s disastrous mistake of trying to cover up emissions fraud in their cars. Whether you’re an international car manufacturer, a politician or a mom-and-pop shop, experience has shown that deceit never works in business. Truth and transparency is the only response that can help you win in the end.     

The scandal
Recent investigations into diesel-powered Volkswagen models found that the vehicles tested for emissions each carried a “defeat device” that falsely showed emissions meeting standards. The testing covered 11 million cars manufactured and sold by Volkswagen worldwide, including 500,000 in the United States, over the last six years.

Unfortunately, rather than owning up to the error early on, the formerly trusted brand insisted that emissions results and subsequent investigations in more than two-dozen countries were only related to “technical issues” that Volkswagen could soon resolve.

The public saw through the ruse. In the last 10 days of September the company lost more than a third of the market value of its stock and continues to trade near its low point. Not long after the scandal came to light the CEO left the company. More recently, several engineers who supposedly did the dirty work of building the “defeat device” are being individually targeted and blamed for the gaffe. Sadly, one of the largest manufacturers in the world has been ripped part by an avoidable scandal. 

The issue
By allowing its engineers to systematically cheat the emissions industry, one can only conclude that Volkswagen must have suffered a massive cultural breakdown at the top. But why did they think they could get away with it? What voice told them that it was just fine to continue to cheat? The obvious conclusion is a gross lack of integrity, which as in most massive companies rests squarely on the shoulders of the CEO, board of directors and senior leadership. 

Integrity starts at the top where VW leaders have the responsibility to practice doing the right things in every circumstance—in other words modeling the right behavior. In addition to demonstrating integrity, it’s equally important for senior leaders throughout the organization to talk about and teach high standards at every opportunity. 

The lessons
The first lesson we already know and would be naïve to ignore in the future: In business the bad guys all get caught. The second lesson is that integrity always starts at the top. It is the responsibility of senior leadership to both exemplify the right behavior and teach ethical standards. This is the key to total understanding and commitment in corporate culture.

If you are in a leadership role managing just a few people or even thousands you have an obligation to do the right thing and to encourage your people to do the same. It is essential to talk about standards of acceptable conduct regularly no matter how many times your team may have heard it before. Your goal is to ensure that everyone understands that there is no tolerance for a lack of ethics—ever—in your organization.

Let the Volkswagen scandal be a lesson in how not to act in business. Walk the high road. 

 

Joe Scarlett is the retired CEO of Tractor Supply Company
For more on leadership see joescarlett.com
Or write Joe at Joe@joescarlett.com

Comments and Discussion:

Posted Nov 25, 2015 at 4:58 PM by Kay C
Bravo! I love this piece. You said everything that needed to be said.

Posted Nov 25, 2015 at 5:35 AM by Charlie
Well said. Thank you for this article, Joe.

Posted Nov 25, 2015 at 5:34 AM by Ellen
Joe, I enjoyed this. It is so true! It’s also the reason that the upcoming election is so important. We need the kind of leadership that you talk about in the Oval Office!

VW

Posted Nov 24, 2015 at 1:56 PM by Gary Martin
Great article. Surely the people that did this must have known this would have been found, clearly the top people allowed this practice to go on at any level. I have run this exact test years ago and find the concept was well thought out but just one delay while running this test would show an error that would be easy to find.

Posted Nov 24, 2015 at 11:53 AM by Margaret Reynolds
Joe, Clearly organizations can only be as strong as their weakest link; When that weak link is at the top, it is disastrous.

VW

Posted Nov 24, 2015 at 9:06 AM by Andrea Carlton
I totally agree...almost everything starts at the top. If you have great leadership, it is usually pervasive throughout the business/company. And, as is seen in politics and everything else, if the leadership is corrupt...that is also what you'll see throughout an organization.

Posted Nov 24, 2015 at 8:45 AM by Kim Holleman
Great article Joe. So true.




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