“Let’s be clear about this, our company was dishonest with the [EPA] and the California Air Resources Board and all of you.” – Michael Horn, head of Volkswagen in the U.S
Volkswagen, the venerable automobile manufacturer emblematic of German engineering and technical know-how has been caught in a boldface lie. The lie was so outrageous that as I write this, the CEO of the company, Martin Winterkorn has just resigned.
Let me throw some German automobile numbers your way. Volkswagen initially admitted to intentionally programming the emissions sensors on 500,000 cars so that what was “officially” stated by the company showed a sharp discrepancy to what was found on the road. So that no one infers the discrepancy was slight, here is another number: 40. The actual emissions were 40 times higher than claimed.
As the scandal widened, these emissions misstatements were not just limited to the half-million cars we first believed, but 11 million. So far the company has set aside $7.3 billion in a fund to anticipate the lawsuits and claims that will come rolling in as a result of this unethical mess. We should add one additional fact: there are 775,000 people employed in the German automotive industry; this scandal will affect all of them.
How to melt down a company
Bad ethical practices and poor decision making do not just affect “Mary’s Flower Shop” or “Bill’s Auto Body & Cappuccino Bar.” More often than not, the consequences of unethical choices affect larger organizations where managers and middle managers are either pressured into bad decisions or make them of their own volition.
When I conduct ethical training sessions, my focus is often on executives at the middle to upper management areas. Often, those in lower technical positions and middle management are caught in the worst of the firestorms of corporate or association politics. They are buffeted on all sides.
The full truth about what has taken place at Volkswagen in Germany has not surfaced. At this point, all we can do is make a series of conjectures.
My guess is that there was a defect that was discovered by an ethical employee. Perhaps the defect was as a part of an engineering re-design or some cost saving strategy. The employee possibly worked in R&D or one of the many quality assurance functions found in a company the size of Volkswagen. Being an ethical, albeit lower level technician, she or he reported it to a middle manager. The manager said the equivalent of “Oh-no,” and had the technician go over their results, and then the testing equipment.
When the results were substantiated, the manager probably kicked it up to the next level and then the next. At each level upward, the pressure downward was increased as well. For a while, the organization’s top engineering executives as well as those in the sales and marketing end undoubtedly blamed the faulty results on incompetent employees rather than admitting to a problem.
As the pressurized clocked ticked away and new models had to be placed into production, I can well imagine a top level meeting, the most innermost of the inner circle admitting to one another that the technician was correct. The person in charge of the meeting, the CEO, had an ethical decision in front of him.
Instead of going the ethical route and halting the release of the product, they took a “bold” approach; they would lie. They would program the cars to show 40 times less emissions than were actually occurring. If they could do it with one vehicle, what was a mere 11 million?
As the cars went into production, up and down the corporate ladder, I can almost guarantee that many, many knew, starting with the person or sub-section of a larger department who initially discovered the flaw. They were afraid for their jobs. They were terrified to take an ethical stance. This scenario happens nearly every day, in thousands of companies around the world. In this instance, the company was caught. The flaw, once duly reported or noted, was intentionally allowed to turn into a catastrophe that transformed a great company into an embarrassment.
Mighty Volkswagen fell victim to bad ethics. My sincerest recommendation is that every employee in the organization, starting with the new CEO should undergo ethics training.
