Strong head, weak spine - a cautionary tale
Are we investing in the right leaders?
Back in 2015, a scandal rocked the world of automobiles in such a way that it led to the firing of Martin Winterkorn (the then CEO of Volkwagen) and a raft of other top executives. Yes, I’m quite obviously talking about the emissions fixing scandal. But will firing the Chief Exec fix anything or make it any less likely that the same things could happen again? The answer is, probably not.
Regardless of whether Herr Winterkorn knew about the scandal or not, he was right to leave. For the good of the Volkswagen shareholders, someone has to be seen to take the blame and who better than the man in charge of the whole company. From a PR perspective, it was a net gain but from an organisational leadership perspective, it achieved very little and possibly even weakened the company.
In all but the smallest and most entrepreneurial businesses, organisational leadership requires balance and Volkswagen was a victim of its own imbalance. As with so many big businesses, Volkswagen invested heavily in strengthening the head of the company but not enough in developing the spine. Eventually, the spine just could not support the head anymore and it fell apart.
In reviewing the situation, we asked how such a practice (rigging emissions tests) was allowed to emerge, evolve and then continue for so long without being reported. The fact is, it was not specifically down to a lack of leadership from the top but more to a lack of depth of leadership.
So how did it happen? Essentially, Volkswagen got its investment wrong. It spent millions of Euros recruiting and retaining top executives who were all tasked with improving profitability but spent proportionately little in selecting and training its lower and middle tiers of leadership. The top tier leaders worked hard to drive key metrics (lower emissions to name but one) and the rest of the business followed suit in delivering them, without question and without questioning if it was the right thing to do. When it came to the crunch, no one in a position of knowledge about the emissions test rigging was empowered enough to fight it or report it in the right way and anyone who contemplated it would be faced with the prospect of questioning the direction and undermining a senior leader.
So what should big businesses do to learn from the mistakes at VW? Here’s a bit of Catseye wisdom:
- Promote values and ethics and find ways of measuring performance against them
- Invest more in developing leadership throughout the organisation
- Empower people to challenge the status quo through having safe and well-publicised channels for whistleblowing
- Ensure executive compensation is based on a balanced scorecard of factors (including value-based ones) and not simply financial performance against the market
So there you have it. Having a strong head is not enough. As the saying goes, “a healthy body breeds a healthy mind”. I know where I’m putting my investment.