Transparency as a Corporate Imperative
Unless you have been climbing Mount Everest or spending time in an isolation tank, you have been painfully and repeatedly made aware of current issues at Volkswagen. It is early in the feeding frenzy but as we step through the debris and past the first of what will likely become a steady stream of exiting Management, there is sobering fallout that should have us all paying attention.
The financial correspondent at CBS focused on the early impact and it is staggering:
- The CEO has resigned.
- An exodus of key talent and management is anticipated.
- There was a precipitous drop in the stock as the market reacted.
- Volkswagen tried to calm the concerns of product owners and dealerships by setting aside billions to address regulatory fines, class action judgments from impacted stakeholders and the immediate and certain need to retrofit existing vehicles. There will be particular emphasis on assuring existing owners that they do not possess an unmarketable and illegal paperweight.
Volkswagen will undoubtedly survive this crisis but how they handle it and how their behavior is viewed by the car buying public will determine much that is an unknown at the moment.
It could not have occurred at a worse time for the company. They were just celebrating that they had passed Toyota as the largest manufacturer of vehicles in the world.
This should have been a sweet time to savor the success by a very smart and well run corporation who achieved this extraordinary milestone three years earlier than originally projected. In place of a self-congratulatory victory lap, we see the CEO exiting the building while analysts spin conjecture about what went wrong.
There might be lessons to be learned from what we know about the culture within Volkswagen. The former CEO, Martin Winterkorn, was adamant about projecting a hands-on style of management. That left him in a very difficult position. If he was in fact, hands on and indeed insisted on transparency, how this could have happened without him being aware of at least the potential for a problem. If he were totally unaware of the serious and deliberate actions to manipulate the emissions test results and the sacrifice of impact on the environment at the expense of preserving performance metrics for the vehicles involved then there was a total failure in the management reporting chain and the culture of corporate integrity. This puts the former CEO in a lose, lose position.
I have hammered home the need for transparency as an imperative for a healthy and effective corporate culture. One of the most effective tools a company has to assure transparency is the presence of a well-conceived and effectively implemented Quality Management System.
If we distill the prime elements of an effective Quality Management System to its most basic terms it comes down to:
- Communication: Assuring that all involved know what they are supposed to do and their impact both upstream and downstream on the process, their colleagues and the business. The QMS tools for this would typically be Document Control and Training and Competency, supported by a robust Management Review process.
- Education: Taking care to assure that knowledge sharing is encouraged, cross functional and always coupled with conveying the responsibility for one’s actions and behavior on coworkers, the product, the end-user and the world in which the business operates. This would also include training and competency along with team approaches to developing bench marking and best practice. In many organizations this is built around “Lessons Learned” exercises.
- Correction: This is one of the most critical elements. Once that communication and education has taken place tools for assessment, correction and change are imperative. By its very nature this includes providing members of the organization the means to report and escalate concerns about anything that comes to their attention. It is then incumbent on all levels of Management to take appropriate action on further escalating information up the chain of command. This would involve interactions between Corrective and Preventive Action programs, strong internal assessment programs and an equally important emphasis on “Voice of the Customer” programs for dealing with complaints and issues.
It is very difficult to understand and rationalize how a coordinated and conscious intent to defeat and circumvent regulations and compliance, could have occurred undetected by compliance assessments and reviews of Nonconforming Material Reports concerning emission test failures, etc.
The story will unfold eventually in a very sad and public fashion. People who may or may not deserve it will be fired and rounds of internal integrity training will happen in tandem with aggressive marketing aimed at damage control and protecting the brand. In the end, I only have sympathy and empathy for the faceless legion of employees who labored at all levels of the corporation to do their very best in an honest and responsible manner every day. They deserved better and none of us are immune from a similar fate if we don’t learn from this misadventure.
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