The result? Regulators worldwide began investigating Volkswagen, the company suffered immense reputational damage and received over $33 billion in fines, penalties, financial settlements, and buyback costs.
A new paper led by the University of Edinburgh Business School used this scandal as a case study to understand how and why wrongdoing took place and how the organisation learned from its mistakes.
Laura Fey, a PhD Candidate studying Organisational Structures and Boundary Work, said: ‘We focused specifically on the boundaries that the company had put in place, such as the physical distance between departments (that we found decreased communication capability), and the way in which departments were humiliated if internal goals were not reached (that we found decreased willingness to talk about mistakes). We studied these organisational boundaries before and after the news of the scandal broke.’
‘What we found is that after the scandal these organisational boundaries were changed. The culture of siloed thinking was challenged, through initiatives such as ‘fuck-up nights’ where employees and managers would talk about their mistakes, much like they were comedians on an open-mic evening.’
The research team discovered that Board level employees also joined these new initiatives to showcase and normalise the existence of mistakes. By encouraging a culture of raising mistakes and issues, to allow for support to help address and fix, Volkswagen oversaw a cultural shift that transformed how they were viewed as a brand and as an employer. The organisation encouraged an environment where challenges and conversations could happen more organically between management levels, and shifted gears between competition and collaboration across departments and individuals.
An organisation is designed around how activities and projects are pursued to ultimately achieve organisational goals – known as ‘organisational structures’. The hope is that this paper will enable companies to study the analyses of Volkswagen to understand what factors can lead to wrongdoing, and importantly how to design a company structure and culture to avoid this from happening.
Laura Fey is a doctoral researcher in the Strategy Group.