MGC1010 Introduction to management

Student's name: Quynh Anh Phan

Student’s ID number: 30092264
Assessment 2: Case portfolio A
Tutor's name: Saba Nasir & Miria Lazaris
Workshop day/time: Wednesday 2pm

1. Problem identification and analysis

The key organisation problem associated with Volkswagen’s (VW) illegal practice is
its achievement culture where a common behaviour is stimulating, sustaining and
normalising illegal practice.

Williams, McWilliams, and Lawrence (2017) define organisational culture as the

system of shared values, beliefs and attitudes within an organisation. Because a
culture exists in both tangible and intangible levels, an analysis of a cultural problem
must take into account at both levels (Williams et al., 2017) particularly, the
observable structures (e.g. targets and incentives) (Rooij & Fine, 2018),
unobservable beliefs and values (Williams et al., 2017). At the tangible level, VW’s
problem occurred because leaders had set highly ambitious goals without assessing
the company’s achievability. This entails an achievement culture where the
emphasis is put on achieving ambitious goals (Samson, Donnet, & Daft, 2018).
Evidently, Volkswagen had developed a plan of becoming the world’s largest auto
manufacturer via capturing a larger share of the U.S. market (Schuetz & Woo, 2016).
However, when the company realised its current technology could not comply with
the U.S NOx emissions standards, engineers were forced to come up with
alternative options, and installing the software “defeat device” was the only way to
meet U.S. emissions standards within the given time and budget (Schuetz & Woo,
2016, p. 13). What can be said is VW was under pressure to bring growth and

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revenue (Rooij & Fine, 2018), which is a characteristic of an achievement culture
(Samson et al., 2018). In response, VW’s leaders engaged in risky business
behaviour that brought external pressures to employees and leave them with no
choice but to make illegal decisions. These risky targets and their consequences
were at the surface level of culture but soon transformed deeper into shared values
and common behaviours.

At the intangible level, a norm of avoiding dissent and normalising deviancy has
formed through intimidating management practices. Leaders’ demands and
expectations should be fulfilled regardless of how employees could perform the tasks
(Schuetz & Woo, 2016) and the inability to perform the task would result in a
replacement by other candidates, making many subordinates work in a climate of
fear (Mansouri 2016). Investigations show that many high-level executives and staff
members knew the existence of illegal activities but remained silent (Schuetz & Woo,
2016), which reinforce the practice of avoiding dissent and normalising rule-breaking
behaviours. Overall, VW’s chief officers might not have explicitly instructed engineers
to install defeat devices in engines but they were responsible for a corporate culture
where there was a limited possibility in voicing opinions and resisting top-down
targets. Both the tangible and intangible aspects of this achievement culture created,
sustained and encouraged fraud and cheating.

2. Generation and Evaluation of a Range of Alternative Solutions

2.1 Replacement of leaders

The most straightforward solution would be to replace VW leaders who developed

risky targets and forced their subordinates to not criticising these targets and to
follow them compliantly. Because these intimidating management practices are the
source of the cultural problem, the replacement would deter them from causing more
harm to the corporate culture and indicate to employees that the practice in the past
was wrong and should not happen again (Rooij & Fine, 2018).

However, the solution would only address the tangible components while ignoring
the fact that the structures have to transform into deeper values and practices of the
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corporation that sustained the wrongdoings. Replacing the current CEO and hiring a
new one, who enters an organisation with unsolved practice and values, may
backfire by inadvertently forcing the next leader to comply with the culture and
sustain the same issues (Rooij & Fine, 2018).

2.2 Targeted intervention

The corporate culture permeated by fraud can also be dealt with through targeted
interventions that seek to retrain managers and employees who turned a blind eye to
or stimulated the cheating. They will need retraining to adapt to the company’s new
values of honesty and transparency. Effective retraining would de-neutralise the
values that have come to legitimising rule-breaking, which decreases the occurrence
of fraud and cheating in the future (Rooij & Fine, 2018).

However, in some cases, retraining would not as effective as firing because where
employees are unwilling to acknowledge the gaps in knowledge or skills, refuse to
take responsibility for the cheating or need to be heavily pushed into making
changes. Therefore, employees need to be assessed in terms of their ability to
change before the retraining or firing decision, which would cost a certain amount of
time to do so. Furthermore, it requires the company to invest a noticeable amount of
money for online classes, or classes at vocational school, which could be ineffective
considering that the company have spent a lot on penalities and earned no profits
(Mansouri, 2016).

2.3 Employee empowerment

Volkswagen needs to allow employees to participate actively in the process of

cultural change by challenging and holding leaders accountable and that these
practices are rewarded and expected within the new culture. Staff are the mass
component in the organisation and would drive a successful cultural change when
they play a determinant role in the cultural overhaul (Parker, & Gilad, 2011 ).
Moreover, worker empowerment is vital to creating a new culture where problems
are not hidden but can be openly discussed, unrealistic targets can be questioned,
and wrongdoings can be freely reported (Parker, & Gilad, 2011).
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However, the solution would cost a significant amount of time for employees to get
used to the new practices. A culture change is hardly achieved in a few days
because behaviours and patterns are deeply engrained (Schuetz, & Woo, 2018).
Nevertheless, companies attempting to initiate employee empowerment may deal
with a lack of trust and inertia from subordinates after years of corporate cognitive
dissonance (Rooij & Fine, 2018).

3. Recommendations

The recommendation being put forth is empowering employees in the process of

cultural change. The theoretical drive for this solution is that it will create an
involvement culture that is characterised as a caring and family-like atmosphere
(Samson et al., 2018, p. 127). Volkswagen had only focused on revenue formation
without assessing the importance of employee involvement. Employees and their
behaviours on the job, including “productivity, efficiency, willingness to contribute
outside of their assigned tasks, and actions to support the organisation is an
important key to organisational success” (Parker, & Gilad, 2011, p. 152). When the
company put efforts into promoting coordination, employees are more likely to enjoy
the space they work in, which then increases productivity (Cohrs, Bormann, Diebig,
Millhoff, Pachocki, & Rowold, 2019).

Whilst a replacement of toxic leaders is essential, it only deals with the tangible
aspect of the culture. Employee empowerment directly deals with the existed
practices and values – the root cause of the scandal – that are buried deep below
the surface. At the initial stage, employee empowerment is recommended over
targeted intervention because a cultural overhaul requires the honesty and patience
of the whole organisation collectively rather than individually and is also more cost-
effective considering that the company is in a financial crisis.

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 References

Cohrs, C., Bormann, K. C., Diebig, M., Millhoff, C., Pachocki, K., & Rowold, J. (2019).
Transformational leadership and communication: Evaluation of a two-day leadership
development program. Leadership & Organization Development Journal, 41(1), 101-
117. doi: 10.1108/LODJ-02-2019-0097

Ewing, J. (2017). Faster, higher, farther: The Volkswagen scandal. New York: Norton.

Mansouri, N. (2016). A case study of Volkswagen unethical practice in diesel emission test.
International Journal of Science and Engineering Applications, 5(4), 211-216. doi:
10.7753/IJSEA0504.1004

Parker, C., & Gilad, S. (2011). Internal corporate compliance management systems:
Structures, culture and agency. In C. Parker, & V. Nielsen (Eds.), Explaining
compliance: Business responses to regulation. Cheltenham: Edward Elgar
Publishing.

Rooij, B. V., & Fine, A. (2018). Toxic corporate culture: Assessing organizational processes
of deviancy. Adminstrative Sciences, 23(8), 1-38. doi: 10.3390/admsci8030023

Samson, D., Donnet, T., & Daft, R. L. (2018). Management (6th ed.). Sydney: Cengage
Learning Australia.

Schuetz, M., & Woo, C. (2016). Dieselgate – Heavy fumes exhausting the Volkswagen
group. Hong Kong: The Asia Case Research Centre. Revisised 1 March, 2021.

Williams, C., McWilliams, A., & Lawrence, R. (2017). MGMT3 (3rd ed.). Sydney: Cengage
Learning Australia.

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