Culture and Values don’t matter – Until you get it spectacularly wrong!
Volkswagen build great cars. I’ve owned two Volkswagen Golfs and I think it’s fair to say I worked them pretty hard. Nothing went wrong with them. I left my Mark III VW Golf GTi in an outdoor car park for four winter months whilst I went overseas once. When I came back, it started with only the slightest encouragement. Everything in it still worked perfectly.
I took this reliability for granted when I bought my next car, which happened to be a TVR. My assumption that all cars must have a reasonable level of reliability was deeply flawed and I paid for it. I got rid of the TVR within four months.
I was therefore disappointed to find out about the VW Emissions scandal in the news this week. It turns out that VW have been using software that can tell when the car is being tested for its emissions. This software alters the emissions to bring them within an acceptable level during the test phase. I have to admit that there is a part of me that’s impressed with this ingenuity but ultimately I know that it is wrong.
I am used to people using their ingenuity and creativity to improve a situation. I’ve seen a Marine build an armchair out of some wire and old sandbags – it was surprisingly comfortable! Occasionally, this innovation was used to do something that didn’t pass ‘The Service Test’ though. For those that are unfamiliar, the Service Test is as follows…
‘Have the actions or behaviour of an individual adversely impacted or are they likely to impact on the efficiency or operational effectiveness of the Royal Marines?’
Put simply…
‘What is this going to look like on the front cover of the Sun?’
If the leadership at Volkswagen had asked the same question, it’s fair to say that they probably would have prevented the emissions software from being put into production. They knew this was wrong yet they did it anyway because it was culturally acceptable.
Unlike many other scandals, this cannot be blamed on the actions of a few rogue engineers. The CEO, Martin Winterkorn, has resigned and I suspect that he’ll be the first of many. Many people will have known about this and not stopped it – there will be others who will share the blame.
The damage has been done. $7.3bn has been put aside for fines, although this seems rather small given that the US Environmental Protection Agency could fine them up to $18bn in the US alone. 35pc of the value of VW shares has been wiped off the stock market. Warren Buffet was talking about Tesco when he said that,
‘In the world of business, bad news often surfaces serially: you see a cockroach in your kitchen; as the days go by, you meet his relatives.’
The sentiment for VW is the same – people will have known about this, which makes them compliant. If they didn’t know, it makes them incompetent. I am not sure which is worse.
Values and culture don’t appear in the balance sheet or the profit and loss account. Therefore, it can be difficult to justify spending time developing them and making sure that they inform the decision-making of the leaders within the organisation. But they are important.
I’ve been fortunate enough to work in the nuclear industry. Safety is critical in everything they do and the drive to continuously improve the safety culture is unrelenting. They know the cost of getting it wrong. It is measured in the billions and the impact is felt globally across the entire industry. BP has learnt this the hard way with Deepwater Horizon.
VW are now learning this lesson. The company has a basic principle of ‘leading by example’. It has failed to live up to that. VW have uncovered a cultural problem, its leadership have failed the service test and have not been living in accordance with the company values.
This is not something that they can fix overnight. It will take time, and investment in their people. I hope that they succeed because I don’t want to see VW become mired in further scandals. They make great products and people depend on the company for their livelihoods. Their leadership cannot afford to fail again.
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