Andrew Thornton on Lessons from Volkwagen

 There is a view shared by many business leaders and commentators that the way we are working in organisations today isn’t working. I believe the reason for this is that, in their endless pursuit of ever-higher levels of short-term profit, many business leaders have become disconnected from what is important to them, their personal values and their feelings. As this profit demand is insatiable (no matter how high a company’s profits are, there will always be demands for more), this puts more and more stress on business leaders.
When I first heard about the VW scandal, I wondered how much of this applied and how they had got away with it for so long without someone blowing the whistle. And how did such a ‘safe’ and ‘trusted’ organisation get themselves into such a mess?

As more and more gets revealed in the press, it seems as if in contrast to the Higher Purpose approach we espouse, VW developed a fear based greedy culture. A fascinating recent article in Fortune entitled “Hoaxwagen” illustrated how, over a number of decades under two powerful and unchecked CEOs, this culture developed.

Fortune summarised their assessment, “VW is driven by a ruthless, overweening culture. Under Ferdinand Piëch and his successors, the company was run like an empire, with overwhelming control vested in a few hands, marked by a high-octane mix of ambition and arrogance and micromanagement, all set against a volatile backdrop of epic family power plays, liaisons and blood feuds. It’s a culture that mandated success at all costs.”

Piëch, who was CEO and then Chairman for over two decades, is quoted as saying “I consciously allow those in whom I’ve lost trust to starve by the wayside,” and “The struggle for victory is fun, but I can’t celebrate something once it’s been won.” Strong stuff!

And when now ex-CEO Martin Winterkorn succeeded Piëch, one of his first acts was to unveil a plan to overtake both General Motors and Toyota by 2018 to become the world’s No. 1 automaker, “not just in units, but in profitability, innovation, customer satisfaction, everything,” as he put it.  He wanted everything.  According to a company whistleblower, it wasn’t “acceptable to admit anything is impossible”.

With this culture in place, it starts to become clear how they ended up on this path. And while this approach may have led to greater profits over a sustained period of time, it ultimately will lead to a massive loss of shareholder value – not unlike the recent experiences at BP and Tesco.

While these three organisations may be extreme cases, elements of what we see there are at play in many organisations, which, as I see it is a major contributor to the general loss of trust in business.

By contrast, all the published research I have seen shows that companies who have created a Higher Purpose and focus on people and the planet actually deliver better long-term financial results – see for example: From the Stockholder to the Stakeholder where 190 published studies in this area are analysed.

The opportunity for us as business leaders is to have the wisdom to recognise that there is a better way and the courage to do something about it.

With heart,

Andrew Thornton