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Volkswagen
Case
Organisational Behaviour Lens
2
Executive Summary
Within this report is an evaluation of the Volkswagen organisational behaviour during the
emissions crisis. The conclusion of this report was that a failure of leadership and management
styles led to the complete lack of a guiding culture for the employees and the company at large
and subsequently internal behaviour of the company was found to be lacking. With this in mind
Volkswagen needed to significantly restructure their company if it were to recover from its
failures on a drastic level.
Several solutions and recommendations are provided to the company with support from
research essays and projects.
. Some of the recommendations included the creation of a more positive company culture that
encourages lower level employees to attempt to be more innovative as well as lowers feelings
of power distance and neglect. Granting more power to middle managers allows people that are
on the floor and able to respond to individual circumstance instead of granting this power to the
upper management who is uninvolved in the day to day operation. And lastly the
decentralisation of the Bureaucracy following in the steps of the rival company Toyota creates a
system that is proven to succeed in a modern setting whilst encouraging all the prior
recommendations
3
Contents
1.0 Introduction........................................................................................................................... 2
4.0 Recommendations................................................................................................................ 2
5.0 Conclusion............................................................................................................................ 3
References................................................................................................................................... i
Appendix 1.................................................................................................................................. A
TIPS
PLEASE SAVE AND USE THIS EXACT TEMPLATE – DON’T WASTE TIME TO
ARGUMENTS.
FOCUS ON THE LITERATURE BUILDING YOUR PAPER AND NOT ON THE CASE
ITSELF.
1
1.0 Introduction
Context
The modern global economy as it continues to develop has and continues to develop into a
permeative behemoth of cultural interconnection, intellectual discussion and ever increasing
exposure to competition fosters both internal and external forces (Flache, A., & Macy, M. W.
2011;). Which develops and formats “Callings” which various scholars (Dobrow & Tosti-Kharas,
2011; Weiss et al., 2003; Wrzesniewski et al., 2009) define as “A meaningful beckoning towards
activities that are morally, socially and personally significant” and make up the driving force for
individuals and consequentially the organisational behaviour of companies (Elangovan, A. R.,
Pinder, C. C., & McLean, M. 2010). It is supported by research that companies which
understand the need for an evolving organisational behaviour will utilise and encourage positive
“Callings” (Luthans, F. 2002) through employee interaction, corporate social responsibility and
the encouragement of companywide ethical values will find these processes create an innate
value in the organisational behaviour and character of the company as prestige, morale and
employee productivity would boon (Bakker et al., 2008; Conti, 2010; Johns, 2006; Luthans &
Avolio, 2009; Youssef et al., 2007).
The organisational behavior designers of Volkswagen were in clear disregard of the necessity
of these positive influences as demonstrated by its violation of industry and social norms and as
a result of this negligence was the severe drop in economic advantage and significant social
backlash. This disregard can be attributed to the systematic failure of the Volkswagen
organisational culture and as such within this report will be discussed a number of key issues
facing the Volkswagen organisation. The three issues discussed consist of the lack of an ethical
organisational culture, an authoritarian leadership style and lastly a centralized organisational
management system. Lastly this report will seek to recommend feasible alternate courses of
action that will confront these flaws within the organisational structure of the company.
Overall control of the day to day duties of companies is per the norm the role of middle
management. As the highest hierarchy member in this day to day middle management is
expected to enforce the desired “Calling” of the firm however as individuals they have their own
Callings (Duarte, 2010; Way, et al,. 2018;) which can both severely limit or benefit a company’s
attempts at implementing positive Calling (Birkinshaw & Suzanne, 2010; Dervitsiotis, 2003;
Dervitsiotis, 2012) As management is the primary gateway and acts and acts as the initial
catalyst for change and guidance it will be discussed how a lack of organisational ethical
standards stems from a failure in organisational directors to create a companywide calling that
2
properly encouraged moral practice (MOORE, C., et al., 2012) and how the organisational and
authoritarian leadership style both contributed to and are a symptom of managements failure.
The calling of a company is the overarching cultural norm which is expected of all employees
and provides the basis from which every employee interprets their own actions and draws
inspiration from. The research undertaken by Weiss et al. (2003) highlights the positives of
companies that have a clear outline of goals and values on the interpretation and actions of
employees as common views establish a sense of common purpose “While the term callings
has been used in different ways over time, three fundamental features have stayed constant
across these interpretations. First, all interpretations suggest an orientation toward action.
Second, they feature a sense of clarity of purpose and personal mission. Third, all imply Pro-
social intentions as perceived by the individual” (Flache, A., & Macy, M. W. 2011). A poorly
defined or complete lack of established organisational Calling causes more employees to look
to their own or contextual moral views (Duarte, 2010; Way, et al, 2018;) which is likely to conflict
with the desired Calling of a firm (Moore et al., 2012; Umphress & Bingham, 2011). In
consideration of the Volkswagen emissions scandal it is beyond doubt that a significant failure
in guiding the company towards common sense of ethics led to a widespread disregard of
morals amongst all levels of the company. From this lack of guidance employees on all levels
were placed in a situation where they acted without any company backed Calling and instead
sought increased profit at the expense of CSR which resulted in the emissions scandal and the
subsequent ramifications of which are ultimately the result of Volkswagens failure to guide its
employees.
The leadership of a corporation holds significant sway over the implementation of policies,
trends and values within a corporation and the normative standard of operation is a centralized
power structure clear steep slope hierarchy with one leader managing all directive power.
However as corporations and their policies have evolved in recent years the belief that clear
hierarchies empower organisations to operate more efficiently has been challenged by the
consideration of a more open leadership process (Anderson et al,. 2010; Treviño et al,. 2008;
Yukl, 2008;) that creates a fluid style of leadership as roles and tasks change so too does the
level of leadership necessary. Through a fluid leadership style the sense of power distance
between employees and upper management decreases drastically (Agarwal, U. 2014) which
can lead to a greater sense of understanding of issues facing the corporation (Treviño, L. K.,
Weaver, G. R., & Brown, M. E. 2008) as well as a sense of association amongst employees of
3
the organisation and a subsequent increase in morale (Ambrose et al., 2008; Ou, A. Y., et al,
2014)
With regards to the emissions scandal it is clearly evident how an authoritarian leadership style
was a key contributor to the overall failure of the firm. Lower level members felt obligated to
follow the orders of higher level management whereas under a more fluid system the lower
level employees would be in a position to better understand and be less threatened by the
power distance of the leadership through their own contribution to the leadership and
management of any tasks in which they would be involved and as such it is far less likely that
any unethical decisions would be forced upon individuals within the corporation.
A centralised management system is a structure that grants decision making authority to upper
management. Much like the authoritarian leadership style in recent years as companies and
organisations expand it is becoming more and more desirable to decentralize and the power
structure as necessary in order to better be able to accommodate (Anderson et al,. 2010;
Treviño et al,. 2008; Yukl, 2008;) the unique circumstances and large bureaucracy of a large
corporation as necessary. Utilisation of a more pragmatic approach to management styles has
demonstrated success at multinational company car company Toyota has enabled it to find a
dynamically innovative and sustainable development cycle (Cavaleri, Steven 2011). The
Volkswagen structure currently consists of a small group of leaders with a single CEO. Whilst
this power structure enables fast decision making it neglects the innovative capacity and
abilities of people who could be in a leadership position under a less rigid style of bureaucracy.
This centralised structure also suffers from the burden of being so far apart from the actual
processes of the firm that they can be unable to detect issues that are hindering the floor staff
or leading to inefficiency (Brown, M. E., Treviño, L. K., & Weaver, G. R., 2008) As a result of
this a lack of communication and a failed bureaucratic model is ultimately what led to the failure
of the upper management to develop a system that created a positive organisational Calling for
the employees to identify with and refer to and therefore ultimately the Volkswagen emissions
scandal.
4
3.0 Analysis of Alternatives and Options
A number of solutions can be trialled and tested with the goal of creating a more ethical viable
organisational Calling with which the employees can base and associate their own actions and
reactions to both internal and external factors upon. As evidenced by the success of the Toyota
initiative outlined by Cavaleri, Steven (2011) it is clearly demonstrated the success of a firm that
is willing to part with traditional methods of operating and instead invest in a far more fluid
structure that fully utilises the innovative capital that is currently underutilised and Dobni, (2008)
further supports this transition as it discusses the potential for success of engaging with both
innovative thinking as well as stripping authority from the upper management.
With all these goals in mind a culture must be created that acknowledges the potential for
success that a positive and culture can establish. A positive Calling that employees will create a
positive workplace attitude and will further encourage the efforts towards a fully utilised and as
such far more efficient innovative system (Bakker et al., 2008; Conti, 2010; Johns, 2006;
Luthans & Avolio, 2009; Youssef et al., 2007).
5
3.2 Alternative / Solution –modify the leadership/management
The current leadership style of a largely authoritarian upper management maintains a small
circle of people whom have authority of the decision and policy making processes and this does
not allow for an innovative circle of ideas to be properly collaborated upon. The paper by
(Dobni, 2008) declares that for the establishment of an innovative organisation requires the
decentralization and stripping of powers from upper management and (Anderson et al., 2010;
Treviño et al., 2008; Yukl, 2008;) discusses the necessity of a hierarchal system when potential
for alternate systems in which leadership may vary depending on varying factors such as tasks
and roles. Furthermore resulting from the integration of a fluid and dynamic leadership style will
create employee engagement and interaction (Thompson et al., 2010; Treviño, et al., 2008)
leading to an improved understanding of the role of the individual as well as the Calling of the
company as a whole as it spread through interaction. Lastly as a result of the decentralization
and therefore improved employee sense of culture that would result due to the lowered power
distance with decision makers (Agarwal, 2014; Ambrose et al., 2008; Ou, A. Y., et al, 2014)
there would be a far greater sense of employee value.
With consideration for Volkswagen it would be of great benefit to seek out potential ways in
which the upper management can lose authority and instead hand it down to people who are
more involved with the detail. By engaging in the creation of a more fluid leadership system they
are accomplishing the decentralization and are taking the steps outlined within the essay by
Dobni, (2008) in order to proactively encourage an innovative corporation. Secondly through the
creation of more of as well as the empowerment of middle managers they can promote the
face-face interaction that creates employee fulfilment (Beck, T. E., & Plowman, D. A. (2009)
that is a necessity in order to once more create a Calling that both establishes a clear moral
heading for the firm as well as develop and utilise the innovative capital of the workers who are
deemed worthy for promotions.
6
3.3. Alternative / Solution – Decentralised Management System
Much like stripping the upper management of their power decentralizing the management
system itself creates a far more localised area of influence where the authority figure for any
employee is in a position to actually understand the situation through their own knowledge or
interacting with somebody who has such knowledge. By removing the existing power distance
that is currently prevalent within Volkswagen would be able to avoid issues with leadership roles
being completely uninvolved to the point where they are completely unaware of existing issues
(Brown, M. E., Treviño, L. K., & Weaver, G. R., 2008) which is one of the primary factors that
created the emissions scandal. Secondly it would create innovative culture as leaders and
groups can put their focus entirely onto the task at hand and therefore a greater potential for
dialogue will be enabled. Lastly by following the successful designs of rival car company Toyota
(Cavaleri, Steven 2011) the firm would be ensuring that they are taking management path that
is modernised for the rapidly evolving global economy.
4.0 Recommendations
(DON’T NEED TO NUMBER AND LIST OUT CAN JUST BE ONE PARAGRAPH)
The emissions scandal whilst the result of insufficient organisational planning was ultimately a
failure of ethical standards across all portions of the company. Take steps to move the company
away from the failed bureaucracy that allowed for all the issues and develop a brand to move
Volkswagen into a climate and CSR friendly organisation. Accomplish this publically
restructuring as well as making strong CSR efforts in regards to the environment such
developing electric cards and punishing severely any employee that conflicts with the new
ethical standards. Furthermore ensure that employees understand the importance of the
Volkswagen culture and create a system that encourages and ensures that workers refer to the
culture when representing the company. This can be accomplished in both the long term by
following the steps outlined in this paper but furthermore by creating ethical training targets this
ensures the firm is constantly moving towards a more ethical state of being in both the short
and long term..
7
4.2 Recommendation 2 – Create a positive Calling
Volkswagen must develop a positive calling (Dobrow & Tosti-Kharas, 2011; Weiss et al., 2003;
Wrzesniewski et al., 2009) which involves making the process of working for Volkswagen
meaningful and fulfilling and by doing so they will enable a greater return on employee
investment (Bakker et al., 2008; Conti, 2010; Johns, 2006; Luthans & Avolio, 2009; Youssef et
al., 2007) as feel a need to fulfil the goal of the company that they themselves have adopted as
their own
By shifting the leadership focus away from the upper management levels of the organisation the
firm is creating a system that develops a number of advantages such as taking the first steps
towards creating an innovative culture (Dobni, 2008) as more people are empowered to have
their say and can better negotiate with their superior due to a far smaller power distance
(Agarwal, 2014; Ambrose et al., 2008; Ou, A. Y., et al, 2014). Lastly it will also improve
employee feedback and involvement as they are now directly involved with the management
process (Thompson et al., 2010; Treviño, et al., 2008) and further create a sense of association
with the company Calling.
By utilising the currently under acknowledged capital that is possessed by the lower level
employees who rarely manage to get a chance to discuss or mention their ideas it should be
made an effort to create a system where every person has the option and chance to progress
and contribute towards the success of the company. Not just the upper management.
It should be a clear priority of the brand to make an effort to emulate the success of the Toyota
transition towards a dynamically innovative and decentralised system as outlined by Cavaleri,
Steven (2011) in which he discusses the success of the firm as a result of the innovation. As
Volkswagen has suffered a setback already as a result of its own bureaucratic failure and
furthermore seeks to develop an innovative system it would be suitable to seek to emulate the
ideas of an already successful competitor who has achieved goals similar to those neccesary to
the future success of Volkswagen
8
5.0 Conclusion
In conclusion it is clear that the Volkswagen emissions crisis was the result of a number of flaws
within the organisational culture of the company. it lacked any really guiding ethos for the
employees to follow and refer upon when making decisions and created a system where the
upper management had far too much power over the decision making of the organisation.
Lastly the steep slope hierarchal system of management meant that no low level employee
could contribute significantly and that they were unable to deny the request of the higher ups to
follow through with putting out the flawed vehicle and therefore leading to the scandal.
This paper utilising a number of essays research notes and papers believes that in order to
ensure that Volkswagen does not make similar mistakes again it should take a number of steps
in order to prevent this.
The creation of a clear plan of ethics to which all employees should be held responsible as well
as detailing to the public that the firm is holding itself responsible. The creation of a more
positive company culture that encourages lower level employees to attempt to be more
innovative as well as lowers feelings of power distance and neglect. Granting more power to
middle managers allows people that are on the floor and able to respond to individual
circumstance instead of granting this power to the upper management who is uninvolved in the
day to day operation. And lastly the decentralisation of the Bureaucracy following in the steps of
the rival company Toyota creates a system that is proven to succeed in a modern setting whilst
encouraging all the prior recommendations. If Volkswagen were to follow these steps it is likely
that they would find themselves in a much stronger position to be competitive in the rapidly
changing global market.
9
References
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Flache, A., & Macy, M. W. (2011;2008;). Local convergence and global diversity: From
interpersonal to social influence. Journal of Conflict Resolution, 55(6), 970-995.
doi:10.1177/0022002711414371
Birkinshaw, J., & Suzanne, H. (2010, May). Putting organizational complexity in its
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Umphress, E. E., & Bingham, J. B. (2011). When employees do bad things for good
reasons: Examining unethical pro-organizational behaviors. Organization Science, 22(3), 621-
640. doi:10.1287/orsc.1100.0559
Yammarino, F. J., Dionne, S. D., Schriesheim, C. A., & Dansereau, F. (2008). Authentic
leadership and positive organizational behavior: A meso, multi-level
perspective. The Leadership Quarterly, 19(6), 693-707.
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Anderson, Cameron & Brown, Courtney. (2010). The Functions and Dysfunctions of
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10.1016/j.riob.2010.08.002.
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Hierarchical levels, identities, and perceptions of organizational ethics. Business
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Way, S. A., Way, S. A., Simons, T., Simons, T., Leroy, H., Leroy, H., . . . Tuleja, E. A.
(2018). What is in it for me? middle manager behavioral integrity and
performance. Journal of Business Ethics, 150(3), 765-777. doi:10.1007/s10551-016-
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MOORE, C., DETERT, J.R., KLEBE TREVIÑO, L., BAKER, V.L. and MAYER, D.M. (2012), WHY
EMPLOYEES DO BAD THINGS: MORAL DISENGAGEMENT AND UNETHICAL
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Ambrose, M.L., Arnaud, A. & Schminke, M. Individual Moral Development and Ethical Climate: The
Influence of Person–Organization Fit on Job Attitudes. J Bus Ethics 77, 323–333 (2008)
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Beck, T. E., & Plowman, D. A. (2009). Experiencing rare and unusual events richly:
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Taylor, A., & Helfat, C. E. (2009). Organizational linkages for surviving technological
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Dobni, C.. (2008). Dobni, C.B.: Measuring Innovation Culture in Organizations: The
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iv
Appendix 1 – NOT NEEDED BUT CAN USE SOME TOOLS TO HELP
Strategy
Strengths/
Positives
Opportunities
Threats
Problems/
Challenges/
Weaknesses
A
Table 1 - A SWOT+ Data Gathering Table (FINANCIAL MANAGEMENT)
Finance
Strengths/ Positives
Opportunities
Threats
Problems/
Challenges/
Weaknesses
B
Table 1 - A SWOT+ Data Gathering Table (HUMAN RESOURCES MANAGEMENT)
Human Resources
Strengths/ Positives
Opportunities
Threats
Problems/
Challenges/
Weaknesses
C
Table 1 - A SWOT+ Data Gathering Table (IT/MIS)
Information Technology
Strengths/ Positives
Opportunities
Threats
Problems/
Challenges/
Weaknesses
D
Table 1 - A SWOT+ Data Gathering Table (PRODUCTION OPERATIONS MANAGEMENT)
Operations
Strengths/ Positives
Opportunities
Threats
.
Problems/
Challenges/
Weaknesses
E
Table 1 - A SWOT+ Data Gathering Table (MARKETING MANAGEMENT)
Marketing
Strengths/ Positives
Opportunities
Threats
Problems/
Challenges/
Weaknesses
F
Table 2 – Analysis of the Strategic Options
Option 1 –
Taking a more open approach to critical issues, defining/explaining
Briefly Identify &
numerous objectives and formulating clearer objectives.
Describe the Option
Benefits/
Advantages
Critical
Success
Factors
Threats/
Risks
Why is this your
recommended
Strategic Option?
G
Table 2 – Analysis of the Strategic Options
Option 2 –
Benefits/
Advantages
Critical
Success
Factors
Threats/
Risks
Why is this your
recommended
Strategic Option?
H
Table 2 – Analysis of the Strategic Options
Option 3 –
Benefits/
Advantages
Critical
Success
Factors
Threats/
Risks
Why is this your
recommended
Strategic Option?
I
Table 3 - Critical Issues in the Context of Recommended Strategic Option - FINANCE
. . .
Finance
F1
. .
F2
F3
F4
F5
J
Table 3 - Critical Issues in the Context of Recommended Strategic Option – HUMAN RESOURCES
CRITICAL
How is it manifested? Why is it happening? Why Important?
ISSUES
Cause(s)? Implications if not
dealt with?
. .
Human
Resources
HR1
. . .
HR2
. .
HR3
HR4
HR5
K
Table 3 - Critical Issues in the Context of Recommended Strategic Option – IT/MIS
Management
Information
Systems
IT1
Communications
IT2
. .
Reporting
IT3
IT4
IT5
L
Table 3 - Critical Issues in the Context of Recommended Strategic Option - POM
Operations
OP1
OP2
OP3
OP 4
.
. . .
OP5
M
Table 3 - Critical Issues in the Context of Recommended Strategic Option - MARKETING
M2
. .
. . .
M3
M4
M5
N
Table 4 – Development of What Needs to Be Addressed Statements
Brand image
Implications if not Addressed Opportunities if Addressed
.
Transparency
Implications if not Addressed Opportunities if Addressed
.
Marketing strategy
Audit control
O
What Needs to Be Addressed
Risk Management
Customer behaviour/perception
P
Address:
Q
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