Volkswagen has been undergoing a massive process of cultural change since the 2015 emissions cheating scandal that cost the German automaker billions of dollars and severely damaged its reputation. Changing the culture of a huge company is no small feat, of course, and CEO Matthias Müller has spoken candidly about the challenges the company has faced in that process. In a recent interview with the Wall Street Journal’s William Boston, Müller touches on how the change is going.
The company now holds its board responsible for legal compliance and integrity, he tells the Journal, and has changed many of its processes. New board members are subject to compliance checks to ensure they are above suspicion, and the leadership is to engage more people in dialogue to build trust throughout the organization. Some of the changes involved in Volkswagen’s transformation have included replacing German with English as the language of business at large-scale management conferences and increasing the number of women in leadership positions.
A key challenge is repairing Volkswagen’s reputation, Müller explains, as parts of the company did indeed engage in criminal behavior, which casts a pall over the entire organization. That kind of damage can’t be repaired overnight. Large enterprises like his also have a tendency to move slowly, he acknowledges, but he would like to accelerate the pace of change as much as possible.
Volkswagen’s experience at carrying out a major culture overhaul in response to a crisis carries some lessons for other organizations, which overlap with some of the insights we at CEB (now Gartner) have uncovered in our research into the multifaceted challenge of culture change.
For example, our compliance and ethics research shows that to create a culture of integrity, companies should to establish formal processes to assess integrity in terms of both behaviors and perceptions at both the employee and leadership level, bearing in mind that employees that perceive their organization as having a high-integrity culture are much more likely to report business misconduct when they witness it. (CEB Compliance and Ethics Leadership Council members can peruse that research here.)
While Volkswagen’s culture change is mainly focused on mitigating the risk of misconduct risk and rebuilding the trust of the public, in the long term, that transformation is bound to have an impact on the business’s performance, and that impact will likely depend on how successful VW leadership is at aligning employees with the desired change in terms of mindsets and behaviors.
To manage culture, you need to have a sense for what is working and what isn’t. To do so, it is vital to know what the actual culture of the organization is, not just what the desired culture is. To do this, organizations need to move beyond using engagement surveys to measure culture, and move to measure culture specifically. Creating a culture-specific survey and using employee focus groups allow organizations to leverage both quantitative and anecdotal information to uncover potential gaps in areas where how employees behave needs to be further developed to integrate with desired cultural norms.
Once there is a process of understanding the areas of strengths and weaknesses, HR needs to work with leaders to ensure their business processes are in accordance with the culture. Although Müller notes that VW has redesigned a significant number of organizational processes, there is always room for improvement in ensuring cultural conflicts are resolved. Oftentimes, leaders lack the visibility to have a clear sense for where these conflicts exist, so this process should be linked with how the organization is gathering information about areas of focus with regard to the culture.
Furthermore, HR needs to help provide guidance to help employees understand their role in engaging with the culture, instead of painting broad strokes of “don’t do anything illegal.” To create change, it is necessary to make it clear how these changes manifest in employees’ roles and what different decisions and trade-offs they will need to make to support these efforts.
To learn more about how to create an organizational culture that performs to drive business outcomes, CEB Corporate Leadership Councils can attend one of our upcoming Executive Briefings or Staff Briefings.