Volkswagen’s massive fraud, uncovered this week, is truly shocking. But what I find equally shocking is that nobody internally felt they could stop it. Either they were afraid to speak up, or they tried to and were squelched, threatened and/or fired. It took an outside agency, that was actually hoping to hold Volkswagen up as a shining example, to uncover the company’s cheating.
I find it hard to believe that everyone involved in this trickery, which must have involved many people internally given the complexity of the system required, agreed with what was being done. Every large organization, even an Enron (or now a Volkswagen), has many good and honest employees.
If you want to prevent this kind of thing from happening in your company, there are a few things you should do:
- Have a truly confidential “whistleblower” system. The challenge here is that if the person the whistleblower talks to — say, an ombudsman — reports to the senior executive, and the senior executive is part of the problem, there’s a conflict of interest. You want to get the problem stopped, but you don’t want to lose your job. So, ideally, the ombudsman should be someone whose livelihood does not depend on the company. Of course, this is an uncomfortable risk for the executive and Board to take. What happens if the ombudsman reports the findings to the Board and is ignored? Will s/he then feel obliged to go public? Nevertheless, this is something Volkswagen should put in place ASAP, if for no other reason than partial damage control.
- Publicly encourage and reward staff who challenge conventional wisdom. Innovation is key to long-term success, but innovation gets squelched in an environment where people are expected to toe the line. Ditto for questioning of authority. Saying you want people to speak up is one thing, but showing that there are no negative repercussions, and can be positive ones, makes it far more likely that they will.
- Break down barriers among departments and levels in the organization. Bank CEO, Peter Aceto, for example, does what I call “management by lunching around.” He eats with random staff members, at all levels in the organization, most days of the week. This gives him insight into how staff perceive things, and a close enough sense of connection with staff that they are more likely to feel comfortable coming to him if anything is going wrong.
It will be interesting to see how Volkswagen recovers from this self-inflicted blow. The resignation of the CEO is an important start, but I hope that part of the process will be a careful re-examination of its corporate culture.
UPDATE October 15, 2015: I was listening to a podcast yesterday with an engineer who works for Amazon. Whether or not you like the intense workload they dump on their employees, he noted that on his first day on the job they asked his opinion on an internal process. They actually have “questioning the way things are done” as a positive criterion in their performance evaluations.
His previous employer was Volkswagen. He said that on his first day there he was taken aside and told, “You may find some seemingly odd things in the way things are done around here. Just keep your mouth shut about it. We have our reasons.” (I believe this episode was recorded before he Volkswagen scandal broke.)