In the book “Safety from Within” I wrote about the enormously significant impact of psychological safety. From the book "The Fearless Organization" by Amy C. Edmondson, I would like to quote an example that supports why psychological safety is so important. This example is not - primarily - a safety story. But when you read this, you sometimes think what it is like to raise safety issues in such a psychologically unsafe organisation!
Pride comes before a fall
In May 2015, the #Volkswagen Group had every reason to be proud. The company had sold more than ten million cars in the previous year, making it the largest automaker in the world. And as one of Germany's largest employers, the company has been acclaimed for helping the country overcome the 2008 global financial crisis.
Ironically, as it turned out, Volkswagens Jetta TDI Clean Diesel had won the Green Car of the Year award at the 2008 Los Angeles Auto Show.
Volkswagen was a seventy-eight-year-old company in Germany, which had become famous in the 1960s for its iconic Beetle, and which enjoyed an impeccable reputation and was known for outstanding technical prowess. The Volkswagen star shone dazzlingly bright. But as the saying goes, pride comes before a trap. Just a few months later, Volkswagen, the world's largest car manufacturer, was faced with an unimaginable scandal. It had been discovered that the clean diesel engines that underpinned the impressive US sales figures were, in fact, a fraud. German officials raided the company's Wolfsburg headquarters to search for incriminating evidence. Criminal investigations were opened in the US and the EU to find out who knew what. The company suspended sales, reported its first quarterly loss in 15 years, and saw a third of its market value evaporate.
CEO Martin Winterkorn stepped down in September 2015. He assumed "full responsibility" but at the same time denied that "violations" had been committed.
At least nine top managers were suspended or sent on leave. In the years since, prosecutors in the US and Germany designated more than 40 people, "located in at least four major cities and working for three VW types," who were involved in a comprehensive plan to defraud government regulators. "#Dieselgate," as the scandal was called, referred to the fraud Volkswagen committed to complying with the US Environmental Protection Agency's (EPA) regulations for the sale of cars in the US.
How could this happen?
When Winterkorn took over in 2007, he announced a goal that was both narrowly defined and ambitious: to triple sales in the US within ten years. In doing so, VW would bypass competitors Toyota and General Motors and become the largest car manufacturer in the world. The company's so-called clean diesel cars, touted for their excellent performance and extremely economical fuel consumption, were central to this strategy. There was only one problem: the diesels produced more nitrogen oxide than gasoline engines and could not comply with US environmental laws. As VW manager engineer Wolfgang Hatz admitted in 2007 when he spoke of how challenging it was to design a clean diesel for the US market:
"The CARB [California Air Resources Board] is not realistic. We can do a lot, and we will do a lot. But we can't do the impossible."
Hatz and his fellow engineers then went to work. Somewhere in the millions of lines of software code, they wrote for what became the "clean diesel" vehicles, and they hid instructions that would allow the cars to pass rigorous US emissions tests. Conceptually, the trick was quite simple. The engineers designed and installed software that could determine when a vehicle underwent a standard emissions test in a lab; in that case, only two wheels turned instead of four. When the diesel engines were tested in a lab, they met acceptable NOx levels. But if the cars met those on the road, it was at the expense of performance and energy consumption, making the vehicles unattractive to customers. Therefore, the software told the exhaust control equipment to stop working as soon as the car drove off the inspectors' test bench. On the road, so-called clean diesel spewed up to 40 times the permitted amount of NOx into the atmosphere.
For almost a decade, everything seemed to be going well. The 'cheating software', as the software was later called, enabled VW to meet its ambitious sales target four years ahead of schedule. In 2013, an international nonprofit, working with engineers from West Virginia University's Center for Alternative Fuels Engines and Emissions and with California environmental regulators, took an interest in the operation of diesel engines. They decided to compare the emissions and fuel consumption in the lab and on the road for various types of diesel cars, including Volkswagen's. Soon 'cheating software' was discovered. Over the next two years, US environmental agencies presented their findings. Initially, VW denied and covered up the truth, but eventually confessed. Then Winterkorn resigned, saying:
"I am not aware that I have done anything wrong."
Across all VW models, about eleven million diesel cars around the world would be discovered to have tampering software installed.
How could this fiasco have been prevented?
It is a natural reaction to point the finger of #blame at someone, or a small group, to hold them responsible for at least fifty-nine unnecessary deaths and thirty cases of chronic bronchitis, which researchers estimate were the result of the fraudulent emissions practice of VW. Martin Winterkorn is certainly fit to be portrayed as the greatest villain. He was known as an arrogant, perfectionist bully with an obsessive attention to detail. A VW Manager told journalists:
"There was always distance, #fear and respect [...] If he came by or if you had to go to him, your blood pressure would skyrocket. If you brought bad news, it could become very unpleasant, with screams and humiliations."
Other executives recalled times when Winterkorn became angry with engineers for using paint that deviated less than a millimetre from the rules or for not offering a particular shade of red that sold well on competitor models. A video shot at the Frankfurt Motor Show in 2011 and widely viewed on YouTube shows an exasperated Winterkorn. He just discovered that Hyundai, a supposedly "less" car brand, had succeeded in designing a steering wheel that could be adjusted silently from the driver's seat - something VW hadn't yet achieved. "Bischoff!" Winterkorn barks as if blaming Klaus Bischoff, his head of the design department, and expresses his displeasure that a competitor got rid of the loud clicking noise.
There cannot be one to blame
Still, there are reasons to question the seductively simple statement that there is one villain. First, many executives of organisations sincerely believe that "no news" means business is going well. They assume that when people have difficulty implementing some guideline, they will open their mouth and resist. They take it for granted that what they say is always welcome and do not recognise that others may find it difficult to pass on bad news to someone above them in the hierarchy. This kind of blindness does not contribute to effective Leadership, but it cannot be called malicious either.
Second, and more pertinent to this case, Winterkorn's Leadership did not emerge in a vacuum. He was the protégé of the extremely powerful Ferdinand Piëch, VW's previous general manager and CEO and a significant shareholder. Piëch was a brilliant and visionary automotive engineer, convinced that bullying subordinates were the best way to achieve a profitable design. Chrysler director Bob Lutz recalled a conversation he had with Piëch in the 1990s during an industrial sector dinner. When Lutz expressed his admiration for the appearance design of the new Volkswagen Golf model and wished Chrysler to achieve similar success, Piëch provided a textbook example of how to create a psychologically #unsafeenvironment while motivating people:
"I'll give you the recipe. I called all the body engineers, people who pressed the body panels, people from further manufacturing and managers to my conference room. And I said I'm tired of all those lousy customisation options. You have six weeks to create world-class customisation options. If we don't have good customisation options in six weeks, I'll replace you all. Thank you for your time today."
Shortly after the fall of Volkswagen, Lutz speculated that Piëch was "more than likely the primary cause of VW's diesel emissions scandal" as he instigated a "reign of terror and a culture of performance-driven by fear and intimidation."
#Motivation through fear
While this may be an extreme case, the fact is that many managers tend to use power to engage employees to meet specific goals - with precise schedules and deadlines. The idea that employees may not be challenging enough if they don't have a clear idea of what will happen if they fail is widespread, and many managers even take it for granted that this idea is right. Also, there are at least as many outsiders who think the same way about the motivation of people at work. Many people fail to realise that while motivation through fear is hugely significant, it is only useful when it comes to creating the illusion that the goals are being achieved. Motivation through fear is not sufficient if the goal is for people to use the necessary creativity, apply fair processing and passion that are necessary to achieve challenging goals in a knowledge-intensive #workplace.
But even Piëch was not, as Lutz said, the "primary cause" of Dieselgate. The best way to motivate employees CEO Martin Winterkorn had learned from his mentor Ferdinand Piëch. Piëch had learned all about management from his mentor, his grandfather Ferdinand Porsche, who had been the Beetle's brilliant chief engineer. But Mr Porsche was not the primary cause either. Porsche was again strongly inspired by Henry Ford for his efforts; In the mid-1930s, he had travelled to Detroit to run Ford's River Rouge factory complex. Ultimately, Porsche used what he had learned to set up the first assembly line in a car factory in Germany. This period was still the golden age for the manufacturing industry when fear and intimidation were seen as a proven management technique to motivate factory workers to speed and accuracy. When strict demands coupled with process improvements reduced a car's production time from twelve to three hours, as happened at Ford's factory, the company made real profits.
The primary cause of VW's 2015 Dieselgate scandal cannot be traced back to the personality or Leadership of a single person or small group. Perhaps you could say that an outdated belief caused the fiasco about what motivates employees.
A scene in Charlie Chaplin's classic Modern Times is a parody of what that old-fashioned motivation through fear can look like.
Chaplin plays an assembly line worker who has to turn nuts when they appear in front of him but can't keep up with the pace, after which he is kicked by a colleague, reprimanded and beaten by a manager, and instructed by a director to increase his speed.
Today, the execution of simple tasks is more and more automated. Knowledge workers don't tighten up, but work together, merge, make decisions and learn continuously. The authoritarian methods now mainly make a comical impression.
Interestingly, Bischoff, the designer scolded by Winterkorn for the noise in the steering column, stood up for this style of management. He told a journalist, "Of course, Winterkorn went crazy when something went wrong," and defended his #behaviour by pointing out that his boss could also be "extremely human with a weakness for people's destinies." However, this is not about whether a CEO is incredibly human or not. Winterkorn's friendliness and weaknesses were probably within the normal range when compared to other people. The point is that he felt that was the best way to motivate employees and the relevance of this belief to today's work.
Based on what we now know about the relationships between #psychologicalsafety and learning, a director who threatens to fire managers and engineers if they don't come up with world-class personalisation capabilities within six weeks seems the best fit in a silent movie.
Like the noxious fumes emitted from faulty VW diesel engines, low psychological safety affects anyone who inhales. Ferdinand Dudenhöffer, a car expert and professor at the Universität Duisberg-Essen, said about this: "There is a special pressure on VW." The company's governance dynamics contributed to that particular pressure. According to Dudenhöffer, the management at VW, unlike at other German car manufacturers where the supervisory board ultimately controls the CEO, 'did not have such authority'. This lack of authority may be because the relatives of the Porsche founding family occupy a quarter of the twenty management seats. Two seats were occupied by regional politicians, eager to do whatever it takes to preserve jobs in the region. And two were occupied by representatives of Qatar's capital fund. Given the insidious #cultureoffear, it's no surprise what happened when engineers and supervisors at VW were faced with a seemingly impossible technical hurdle. The production of a diesel engine that could pass US environmental testing - and were under pressure to find a solution that could meet the company's goals. They decided to look for an ad hoc solution. However, smart and lucrative, the idea may once have seemed, and as much as VW's sales and reputation soared, history has shown that it was not a sustainable solution in the long run.
Central features of psychological safety
At least one member of the Board of Supervisors was not afraid to speak up. Bernd Osterloh, one of the ten elected members representing the employees, sent a telling letter to VW staff on September 24, 2014, shortly after US regulators revealed the fraud. As if quoting the central features of psychological safety, Osterloh wrote:
"We must have a climate in the future where problems are not hidden but can be openly discussed with the superiors. We need a culture in which it is necessary and permissible to argue with your superior about the best course of action."
After the emissions scandal broke out, Winterkorn claimed that the company needed stricter #regulations to stop this kind of fraud from happening again. But it is unclear how more stringent regulations would have ensured that an environmentally friendly diesel engine was created or how they enabled the company to achieve its goals (becoming the world's largest automaker). In retrospect, the target itself seems suspicious. Could the fiasco have been avoided if the engineers, working in a psychologically safe environment, could have reported the "bad news" that making a clean diesel engine was simply not feasible under required conditions?
Perhaps the most fantastic thing about Volkswagen's emissions debacle is that it was by no means a one-off event. The same scenario - unattainable goals, commanding and controlling executives motivated by fear, people afraid of losing their jobs if they fail - has happened over and over again. This culture existed partly because it was a scenario that was useful in the past when goals were attainable, progress was immediately visible, and tasks were performed mainly individually. Under those circumstances, fear and intimidation could encourage people to achieve #goals. The problem is that in the current VUCA world (note: see Risk leadership of Martin van Staveren) full of volatility, uncertainty, complexity and ambiguity, this is no longer a good scenario for the company. Rather than working towards #success, this scenario is a playbook that allows for avoidable and often painfully highlighted fiascoes in the media.
No passion robs the mind of its thinking and acting capacities as effectively as fear.
~ Edmund Burke, 1756