Over the last few weeks, news about Volkswagen’s deceptive emissions practices has sent shock waves around the world. Since the scandal broke last month, CEO Martin Winterkorn resigned, its stock price has plummeted, and the company is facing a tsunami of legal trouble. Das a culture problem?
It will take years to sort out the blame and economics of the case. Long before the dust settles though, we can be certain about three important lessons from this developing case study:
1. Culture rolls downhill. Volkswagen’s mistakes stem from toxicity in the culture, and culture always starts at the top. CEO’s cannot be expected to know everything, but they are ultimately responsible for the behaviors and practices of everyone on their watch. As leaders, we send loud and clear signals to the culture by what we measure, what we reward, and what we ignore.
2. Short-term focus skews judgment. VW’s focus was clearly on short-term profits. A maniacal, short-term focus is not a sustainable model. Sustainability requires resilience. Deceiving regulators and consumers may have served the company’s immediate needs, but it compromised the world’s trust in the company’s products. Trust that will take years to re-build.
3. A 1-degree error can put you miles off course. Leadership advisor and avid pilot Dieter F. Uchtdorf warns, “Suppose you were to take off from an airport at the equator, intending to circumnavigate the globe, but your course was off by just one degree. By the time you returned to the same longitude, how far off course would you be? The answer might surprise you. An error of only one degree would put you almost 500 miles off course.” Massive ethics violations can start with a one degree slip in judgment.
Just three months ago, Volkswagen made front page news by surpassing Toyota as the world’s largest auto maker. Today, the headlines warn of massive financial retrenchment and raids by prosecutors. Like Volkswagen, leaders in similar organizations were highly competent individuals who achieved unprecedented success. But a drive for growth at all costs is a certain path to a case study in leadership failure.
Question: What signals do you send to your culture by what you measure, what you reward, and what you ignore?