Scandal. Fraud. Scam.
These are words that cause shivers in the corridors of corporations, and rightly so. Particularly, if the events and inevitable consequences are self-induced.
The Volkswagen diesel engine emissions imbroglio, in which on-board computer monitoring was deliberately set to under-report emission levels, is a striking example of appalling leadership and a poor, if not toxic, corporate culture.
It seems inconceivable that anyone could believe that a deliberate lie involving some 11.8 million motor vehicles and hundreds of thousands of Volkswagen employees around the world could remain hidden.
Once recognised and revered, the consequences for Volkswagen of the scandal have been immediate, widespread and cascading. The “fall-out” will doubtless continue well into the future. Reputational damage extends beyond single brands. Individuals, nations and sectors will suffer the odium of reputational stains.
UNINTENDED CONSEQUENCES
This case study highlights the complexity of the principle of “unintended consequences”.
Volkswagen is the largest automotive manufacturer in the world, employing over 300,000 people, generating 206 billion Euro in revenue each year, and being owner of the Audi, Skoda, Bentley, Bugatti, and Lamborghini and Porsche brands.
Germany, its people and economy will be profoundly and directly impacted. One in seven of the workforce contribute to the production and export of motor vehicles. The Lower Saxony municipality owns 20% of the shares in Volkswagen and seeks regular and consistent dividends. They too will doubtless take a hit.
Questions will be put about the integrity of all things German, with probable detrimental influences on revenues.
Within two weeks of disclosure of the scandal, the resale value of all Volkswagen diesel vehicles in the United States of America had reportedly fallen by around 20%. That represents a large pool of disenchanted financially disadvantaged customers. It will probably get worse.
Satisfaction, loyalty, respect and referral business are concepts that will carry little currency into the immediate future for the Volkswagen group of companies.
CULTURAL ROOTS
The Chief Executive of Volkswagen has resigned with possible legal action pending. Two other senior executives have been dismissed, and a further trimming of the ranks is probable.
Search for a replacement leader has begun. Any trepidation about a poor record of external appointments of leaders for Volkswagen will be tempered by recognition that the current crisis is presumably a by-product of a negative, corporate culture.
Internal promotions and appointments would seem inappropriate to government, regulatory authorities, shareholders and customers.
VALUE JUDGMENT
The inept actions of many Volkswagen decision-makers beggar belief. What were the real long-term advantages and benefits? Any short-term beneficial outcomes were, in reality, false economies.
Greater respect was needed for the long-earned and justifiably commendable reputation for engineering excellence, reliability and value which had long been associated with the brand. A heavy price has already been paid, and will be paid well into the future.
7-ELEVEN ... ZERO
In Australia, the image and standing of the 7-Eleven convenience stores franchise network have been figuratively trashed.
Seemingly widespread, if not systematic underpayment of employees is inexcusable and unjustifiable. The image of poor treatment of “back-packers”, “short term tourists”, casuals, Indian nationals in particular, will have fall-out in the international standing of Australia, the local franchise sector, convenience store operators at large, corporate Australia and many business operators.
We deserve better than that, and should not suffer from the actions of so few.
In recent times the 7-Eleven Chairman, Chief Executive and Chief Operating Officer have each stood down or resigned.
The Deputy Chairman on the Board of Directors has been promoted to Chairman. However, he has reportedly been on the board for some 16 years. Therefore, he was present when the inappropriate actions took place. It is not a good look!
The same individual was the National President of the Australian Institute of Company Directors, whose charter is to promote ethical corporate behaviour and good governance. He either “stood aside” or was asked to “stand aside”. Rightly so.
What measure of confidence will 7-Eleven franchisees and the disaffected, reportedly underpaid employees feel?
He was also Deputy Chairman of a publicly –listed national network of motor vehicle dealerships. He recently made public he is standing down from that position. What has not been publicly addressed is his chairmanship of a transport company. Actions do have consequences.
Consideration must be given to the interests and concerns of shareholders, staff members, suppliers, associates and clients of that and other entities. The lessons apply to all.
In the current global digital and open marketplace there is, seemingly, no place to hide.
BUILDING INTEGRITY
There are four prevailing dominant forces in the marketplace. Each must be addressed, positively and proactively, being:
• Fear
• Risk
• Trust
• Integrity
The innate fears and risks associated with big lies will mitigate against ever attaining the exalted status of being trusted and accepted for one's integrity.
Today, as forever, there are no “white” lies or little fibs. Lies, and their consequences, are big.
There is much to commend the virtues of walking the straight and narrow line.