Data Management Under Pressure Is your Company Culture a Help or a Hindrance? While offering few specifics, the company’s chairman and chief executive acknowledged that engineers introduced software that would lower emissions of nitrogen oxides in many of its diesel engines after realizing there was no legal way for those engines to meet tight U.S. emissions standards within the required time frame and budget. Volkswagen Blames ‘Chain of Mistakes’ for Emissions Scandal (Wall Street Journal Sept 10, 2015) • Soon after becoming CEO in 2007, Winterkorn decided to make VW the world's biggest carmaker. That meant cracking what was then the world's biggest car market, the United States, where VW has underperformed for years and where it has now come unstuck. Fear and respect: VW's culture under Winterkorn (CNBC October 11, 2015) The group almost doubled global annual sales to 10 million cars and its revenue to 200 billion euros ($225 billion). In the first half of this year, VW finally sold marginally more vehicles than the world number one, Toyota of Japan. Fear and respect: VW's culture under Winterkorn (CNBC October 11, 2015) One former sales executive said the pressure soared under the target. "If you didn't like it, you moved of your own accord or you were performance-managed out of the business," he said. Fear and respect: VW's culture under Winterkorn (CNBC October 11, 2015) “Like many chief executives, Martin Winterkorn was a demanding boss who didn't like failure. But critics say the pressure on managers at Volkswagen was unusual, which may go some way to explaining the carmaker's crisis.” Fear and respect: VW's culture under Winterkorn (CNBC October 11, 2015) "There was always a distance, a fear and a respect... If he would come and visit or you had to go to him, your pulse would go up," the former VW executive told Reuters. "If you presented bad news, those were the moments that it could become quite unpleasant and loud and quite demeaning." Fear and respect: VW's culture under Winterkorn (CNBC October 11, 2015) "We need in the future a climate in which problems aren't hidden but can be openly communicated to superiors," said Osterloh, who as chief of the VW works council represents employees on the board. "We need a culture in which it's possible and permissible to argue with your superior about the best way to go.“ Fear and respect: VW's culture under Winterkorn (CNBC October 11, 2015) New CEO Matthias Müller “As serious as this crisis is, it is also offering us an opportunity to drive much-needed structural change and we will use that opportunity.” Volkswagen Blames ‘Chain of Mistakes’ for Emissions Scandal (Wall Street Journal Sept 10, 2015) Muller called for empowering Volkswagen’s workers, especially middle managers who were often silenced under Mr. Winterkorn and former Volkswagen chairman, Ferdinand Piech.“We don’t need any yes-men,” Mr. Müller said. “The future belongs to the courageous. “ Volkswagen Blames ‘Chain of Mistakes’ for Emissions Scandal (Wall Street Journal Sept 10, 2015) The company is empowering its brands and regional organizations to become more autonomous in decision-making in an effort to remove Wolfsburg as the bottleneck that it was under former Chief Executive Martin Winterkorn, who former associates say was known for his autocratic leadership style Volkswagen Blames ‘Chain of Mistakes’ for Emissions Scandal (Wall Street Journal Sept 10, 2015) • Values drive culture. • Leadership drives values. • Company culture is driving the business. “Performance more often comes down to a cultural challenge, rather than simply a technical one.” – Lara Hogan, Senior Engineering Manager of Performance, Etsy • Core Values should act as a safeguard against poor actions • Used as means to resolve conflict. • Effective changes in core values must result in behavioral changes. • Behavioral values will always take precedent over stated or written values. • Faulty Ignition Switch in the Cobalt • Went unresolved for over a decade Associated Costs • On September 17, 2015 General Motors agreed to pay $900 million to settle criminal charges related to its flawed ignition. • Tied to at least 124 deaths. • Millions of recalls • $4.1 billion in repairs • GM conducted their own internal investigation over the defect which produced a 325-page report that looked into the cause behind the failure to resolve the defect. • Lack of accountability. • Breakdown in communication. • Failure to identify the problem. • Conflicting values. • The tone set at the top is relevant background for assessing GM's approach to the issues discussed in this report. Repeated throughout the interview process we heard from GM personnel two somewhat different directives - "when safety is at issue, cost is irrelevant" and "cost is everything." It is worth examining how those two messages collided. • The 2000s was a time of extraordinary cost cutting at GM. • The messages from top leadership at GM - both to employees and to the outside world - as well as their actions were focused on the need to control costs. “We heard repeatedly from GM personnel about the focus on cost cutting and the problems it caused within the whole culture.” • Cost cutting impacted all aspects of the business. Keeping projects on time - because of the impact on cost - became a paramount concern. • Those responsible for a vehicle were responsible for its cost, but if they wanted to make a change that incurred cost and affected other vehicles, they also became responsible for the costs incurred in the other vehicles. • Delivery cannot meet demand because the pressure to keep cost low conflict with the demand. • Focus becomes on the failure to deliver rather than on the real issues related to demand. • Bad news (in terms of meeting demand) is met with an adverse reaction. • Failure to resolve the real problems. Project Demand what gets lost? Project Delivery Quality Communication Accountability Evaluation(analytics) Work/Life Balance Integrity • Transcends all organizational levels. • Conversations extent to all organizational levels. • Based in mutual trust and respect • Shared information. • Absence of fear-based pressure. • Platform for honest dialogue concerning disconnects i.e. what's not working and why. Eliminates Common Bottlenecks • Improved Communication • Better Connected • Quicker Consensus • Controlled Cost • More Productive Workforce Statement from the Internal Report A successful overhaul of processes begins with examination of the organizational structure, which influences the degree of coordination between groups with interrelated responsibilities and the extent of emphasis the Company places on key priorities, including safety. • Integrated • Relational • Communicates • Analytics/Accountability • Integrity • Integrated • Relational • Communication • Analytics/Accountability • Integrity • What we are seeing is long standing companies with the control and command “authoritarian” leadership styles imploding. • The crisis is forcing a change not one of “I prefer another model” but one of “We must make a change” if we are going to survive. • Whether your managing data or people you are identifying disconnects and determining how those disconnects impact the process. • Have consistent, honest and collaborative conversations about how to fix it and how we get better. General Motors chose to focus on structure when it made widespread organizational changes in 2012. A number of different departments—dubbed “fiefdoms” by GM—were hoarding information and processes, which made the automaker react slowly to industry changes since creating consensus among decision makers was nearly impossible. A Company In Crisis Is An Opportunity For Change (Fortune July 10, 2015) • To her credit, GM's CEO, Mary Barra, is using the debacle as a catalyst to bring about needed culture change to GM. She acknowledged that GM's culture was dysfunctional, but is committed to recreating a culture where problems are solved together through communication and accountability. .