Organizational Overview of Volkswagen - Case Study Example

VOLKSWAGEN CASE STUDY (Student Name) (Course No.) (Lecturer) (University) (Date) Introduction This particular case study focuses on the organizational overview of Volkswagen as it tries to highlight the structure, methodologies and the approach that are made in order to motivate and satisfy employees. The whole case study is about the internal organizational behavior of Volkswagen. Other factors being studied alongside the above mentioned are the management practices and the effective implementations that they introduce to the company, the study also tries to analyze the measures that could be taken to restore the company’s lost dignity (Burki, 2015). Volkswagen is said to be one of the organizations that have produced world class automobiles. Due to the changes in the environment competition the demands of the employees has made the company to face various challenges in meeting their target. The Volkswagen group is believed to be number four in the world of the companies that manufacture automobiles. There are many factors that affect objectives behaviors at work, just like any other organization that would wish to be on top Of their competitors, there are behavioral management theories that must be followed carefully. ( Koplin, et al, 2010). In the case of Volkswagen, there are cultural behaviors of a company that can lead to its failures and contribute to its ethical downfall. There are three main factors that can lead to this breakdown; they include internal and external pressure points, opportunities that allow cheating, and the last one is the capability of the employees to rationalize the violation of these ethics. Background Information When analyzing the external and internal forces, internal causes talks about how the organization relates with their employees. On the other hand external forces includes all the parties that are existing within the organizations environment and are either directly or indirectly involved in the activities of the organization. Pressure imposed on either of these forces could lead damages to the organization. In the case of Volkswagen, they had set their objectives of becoming the greatest automobile company in the twenty first century. In order to achieve this dream they first had to establish a strong market in the United States as they met the harsh emissions regulations that were set to conserve the environment (Burki, 2015).. Martin Winterkorn who was the then CEO who used to be an exacting boss decided to experiment on the reputation plus the pride that they had built just to achieve this goal. For them to taste if their idea was going to be successful, they tested their cars inside a library instead of the road. Because the employees were never given the chance to apply the right methods of carrying out this test they decide to write defeat device in their software codes (Rhodes, 2016). The reason why the employees decide to make such a terrible mistake was to the results that they got to look more accurate than the results that they could have gotten if the test was performed on the road. Only a few employees knew about this and made the cheat so hard to detect. Following the pressure that these employees were going through from their boss these factors offered them an opportunity to rationalize what they did (Burki, 2015). It is the responsibility of the top managers of every company to reduce pressure on their employees, they should also try to their level best to make sure that opportunities that the employees get to cheat are eliminated as this will that the reality of their culture is maintained and that it reflects the value statements, plus all the ethical behaviors found in every workplace. As it has been seen the test that Volkswagen did poisoned a lot of people after they emitted pollution which was above the safe limit. Even though everyone knew that the company’s vehicles were responsible for the release of the unsafe gas, Volkswagen insisted that the vehicles that they were building were reducing the pollution rate. This was unethical behavior; the company faked their results just to increase the earnings through manipulating the customers plus the entire stakeholders (Burki, 2015). Once the mistake was realized by the public the first thing that the company did was to suspend the managers who were involved in cheating. The boss of the company stated that the reason for the suspension was because of the managers’ failure to follow the ethical behaviors that were set by the company. Upon further investigation after the boss of the Volkswagen said that he had no idea of the exact number of employees who participated in the scandal it was revealed that there were around fifty members who were involved in the scandal. It was further revealed that the engineers informed the managers of the situation that was on the ground and the rigging that was taking place but they chose to the alert (Burki, 2015). The company admitted of rigging the diesel emission test in 2015, this made them to employ some workers in order to regain their position of being the second largest automobile company after Toyota. The unethical scandal brought a lot of issues and the main problems include, threatening people’s health (Hou, et al, 2016). Analysis of the behavior factors that led to the Volkswagen failure Volkswagen is not new to scandals; in the 70s the company was involved in their first scandal of manipulated engine emissions. In the year two thousand and five, the company’s top executives were involved in some series of sex scandal in Brazil and Germany. When talking about the ethical disclosure of this company, the application of CSR disclosure could be used in analyzing Volkswagen case. The emission scandal can be analyzed in terms of business ethics as it reveals the deception of the general public and the case of the company’s desire of sustainability. The scandal can be linked to leadership and corporate governance, and the corporate culture (Burki, 2015). It is true that the foundation of unethical scandal that faced Volkswagen is traced to the business’s culture and the company’s structure. The problems prove that the company failed to handle their employees ethically; this is shown as the employees show dilemma of losing their jobs or taking unethical actions that made the company to lose the desired results. Whatever actions that the employees take it usually have crucial role in the failures or the success of a company. It is, therefore, the responsibility of the top managers to make sure that the employees are valued so that their morale is boosted and to make them finish their duties ethically. According to the value-based business, ethics are applied to promote democracy in every company; this is to provide the executives with the courage of forwarding their complaints to the senior most officials are share the productive ideas they might have so as to assist the company in making good profit and building their brands (Burki, 2015). The company is said to have broken the trust between them, the customers and the public in terms of their social responsibility (Barrett, et al, 2015). When talking about social responsibility, it is the responsibility of every organization to balance between profit making and the good of the society. When breaking this definition down, it states that everybody and all the companies are obligated to act in the best interest of the environment of their operations and for the good of the entire society. Following the actions of Volkswagen, the managers were only concern with the profits they were going to make without considering the risks that were involved and how it was going to affect the public (Beauchamp, 2014). When it comes to their environmental responsibility, they polluted the air through disrespectful means of emission standards that interfered with the health of people. Companies are to monitor their activities and avoid the ones that can pollute environment. Volkswagen emission scandal led to a lot of suffering. There were ethical measures that were followed to make sure that the lives of the people and the customers were not at risks (Beauchamp, 2014). The last one is their failure in economic responsibility where their sales decrease and they experienced fall of stock price value. When talking about economic responsibility in regards to the issue of Volkswagen, it means putting a lot of effort in making sure that the company make profit so that create long term value for the stakeholders which will lead to worldwide sustainable economy. Volkswagen failed in this because of the low profits that they made after the scandal (Beauchamp, 2014). The utilitarianism of the CEO of Volkswagen, in normal circumstances utilitarianism is always about the actions that managers take and what the action accomplishes. It focuses on the pleasure that will benefit the majority, not the minority (Reidenbach, et al, 2013). The theory of utilitarianism is about the choices that people make in life and the choices that can be reduced to gain happiness whether there are lives at stake. This theory was seen in the case of Volkswagen as it involved a lot of parties including the employees, their customers the EPA and the people who are living in those countries where they decided to sell their diesel engines. According to this theory, their actions were not permissible because they did not focus on the greater good (Reidenbach, et al, 2013). When trying to analyze the social responsibility of a company, in this case, Volkswagen, the shareholder theory should be introduced. It helps in defining the social responsibility of a company (Kang, et al, 2010). This theory shows that the shareholders are the people responsible for the every company’s economic drive. The scandal made the company to make a lot of losses at the expense of the shareholders; the major social responsibility that the company broke was the rule of the game (Burki, 2015). The rule of the game states that companies should engage themselves in open and free market competition and should avoid deception and fraud. As for Volkswagen, they involved themselves fraud and deceived the agencies, the government, and their customers. This leads them to be termed failures in that they failed in their social responsibility and their actions were highly unethical (Burki, 2015). Deontology theory can be used in analyzing the case. According to the deontology theory, somebody can act ethically right if they follow the rules of the categorical imperative. This means that Volkswagen could have acted according to the principles that were set by the company (Koplin, et al, 2010). The company should have provided attractive, safe and environmentally friendly engines to the market which can meet the worldwide standards that were set. After the emission scandal, Volkswagen came up with a strategic plan that was supported by the United States government and the environmental protection agency. The first step towards regaining their reputation was to admit that out of the eleven million cars in the whole world, six hundred thousand of them were installed with deceptive software were operating on the American roads. They agreed on the principles that were presented to them by the U.S government (Rhodes, 2016). They agreed with the judge’s decision of allowing the owners of two-liter diesel cars to get their cars fixed or another option was to buy those cars and cancel the loans to those who bought the cars on loans. The next thing was to compensate the two liters cars owners, and at the same time, the company had to offer funds for appropriate remediation hardship that might have been caused by pollutions that were caused by the Volkswagen. The new Chief Executive admitted of all the scandals and apologized to the general public, he promised that the company was going to compensate all the damages that were caused by their actions, at the same time Volkswagen agreed to buy all the two liters cars and to cancel all the loans (Ndedi, et al, 2016). The company planned to come up with electronic cars to protect the environment Conclusion This study tried to analyze the Volkswagen case through ethical theories. It can be concluded that the actions that the company took were morally impermissible when analyzing both the utilitarianism and deontology theories; it would be recommended that the company deserved the punishment that the company got for their actions. It would be therefore appropriate for the new CEO to be ethical and make sure that all the theories are followed to bring the company back to its previous position before the scandals. Following the analysis of the emission scandal that Volkswagen faced, it is true that the case of the company’s deceptive scandal is an overwhelming and complicated. It caused a lot of damages to both the company and the stakeholders (Reidenbach, et al, 2013). The emission testing process that Volkswagen did is truly unethical action, and it led to a lot of disastrous results. Therefore the punishment that was proposed by the United States government known as the green punishment was the best solution for this case. The use of electronic cars would offer the best solution to the protection agencies that are responsible for protecting the environment through monitoring activities that might lead to environmental pollutions and to control emissions tests. The company did not only receive penalties, but they were forced to compensate for the damages that they caused (Rhodes, 2016). Another effect of this scandal to the Volkswagen is that it lost a lot of trust from the public leading to low reputations. Recommendations Following the bad reputation that the company has, it would be therefore appropriate to take measure that can help them in rebuilding their brand. It can either take months or a year to achieve this, but the big thing that matters is not the time it takes but the image. The first step should be to accept the mistake and examine what led to the actions that the employees took; the next thing is to communicate to the outside world and let them know the plans they have to restore their lost dignity (Ndedi, et al, 2016). Reaching the media for clarification would be the appropriate way of communicating with the stakeholders. Compensating the consumers will help Volkswagen in regaining the trust as it might help in healing the wounds. The company should use the opportunity of the increasing purchasing power (Ndedi, et al, 2016). Once the brand has been built, they will have a lot of people going for their brands since they have had a good reputation before. Due to the fact, the brand at some point had taken a big hit on the emissions scandal; it would be of great significance to come back equally strong and make some great and fuel efficient engines. On top of that, it is true that the EPA (Environmental Protection Agency) is very cautious about emissions that pollute the environment and they have imposed strict measure to be followed by the automobiles companies (Rhodes, 2016). They have the role of making sure that they offer technological research and development aids on the companies that deal with automotive. This case of Volkswagen showed that the standards of emissions had a negative effect on the outcome which led to devastating events. It would be therefore recommended that Volkswagen should plan for feasible emission standards and at the same time be able to provide technological support to automobile companies to stop such scandals to happen in future. Similarly, to avoid such scandals in future, it is recommended that companies should value their employees through the approach known as the value-based approach. Companies should follow the ethical business behaviors that would be beneficial to every stakeholder of every company. References Barrett, S.R., Speth, R.L., Eastham, S.D., Dedoussi, I.C., Ashok, A., Malina, R. and Keith, D.W., 2015. Impact of the Volkswagen emissions control defeat device on US public health. Environmental Research Letters, 10(11), p.114005. Beauchamp, T.L., Bowie, N.E. and Arnold, D.G. eds., 2014. Ethical theory and business. Burki, T.K., 2015. Diesel cars and health: the Volkswagen emissions scandal. The Lancet Respiratory Medicine, 3(11), pp.838-839. Clemente, M. and Gabbioneta, C., 2017. How Does the Media Frame Corporate Scandals? The Case of German Newspapers and the Volkswagen Diesel Scandal. Journal of Management Inquiry, p.1056492616689304. Hou, L., Zhang, K., Luthin, M.A. and Baccarelli, A.A., 2016. Public Health Impact and Economic Costs of Volkswagen’s Lack of Compliance with the United States’ Emission Standards. International Journal of Environmental Research and Public Health, 13(9), p.891. Kang, K.H., Lee, S. and Huh, C., 2010. Impacts of positive and negative corporate social responsibility activities on company performance in the hospitality industry. International Journal of Hospitality Management, 29(1), pp.72-82. Koplin, J., Seuring, S. and Mesterharm, M., 2007. Incorporating sustainability into supply management in the automotive industry–the case of the Volkswagen AG. Journal of Cleaner Production, 15(11), pp.1053-1062. Ndedi, A. and Feussi, P., 2015. How to Restore Your Tainted Reputation: The Case of Volkswagen. Reidenbach, R.E. and Robin, D.P., 2013. Some initial steps toward improving the measurement of ethical evaluations of marketing activities. Journal of Business Ethics, 7(11), pp.871-879. Rhodes, C., 2016. Democratic Business Ethics: Volkswagen’s emissions scandal and the disruption of corporate sovereignty. Organization Studies, 37(10), pp.1501-1518. Read More