Evaluation of the Volkswagen 2011 Emissions Scandal - Case Study Example

Leadership Research Paper Name: Course: Institution: Date: Introduction Leadership plays a critical and vital role in the development and execution of an overall organizational development and wellbeing in the global market. In this case, through a number of evaluations, analyses argue that the ultimate success and failure of any venture originates from the type and nature of leadership approach and style applied (Trahms, Ndofor and Sirmon, 2013, p.1279). Thus, in the most dominant crisis and failures in the global market have been attributed to the leadership approach applied, However, this should be understood to imply that although this cannot be linked to the leadership approach alone, the leadership approach has an influence on all aspects that shapes such a challenge in the market. This analysis offers a critical evaluation of the Volkswagen 2011 emissions scandal as one such major crisis in the market. Context Analysis The Volkswagen Company has over the years been a rising market giant in the automobile industry. The automobile industry has faced a number of market competitions from other ventures such as Ford and the GM Corporations among others. This led the venture into declaring a vigorous expansion and growth strategy to expand and exceed its market competition. One such expansion strategy was the development of new Volkswagen vehicle models. The only barrier was that in order to acquire an inspection and authorization certificate in Germany, it was required to pass an emission test, where the vehicles were supposed to have an emission level in line with the overall market regulations, as a means of conserving the environment (Whiteman and Hoster, 2015, p.38). The challenge was that the developed design had been developed in a rush and thus had their emission levels higher than the allowed legal limits. This led the company to devising new software that could help cheat the test results. Through the use of the software that was allegedly installed in over 2 million vehicles the company successfully showcased that the vehicles had a lower emission rate. However, this was not the reality as it would later be established, and the company top executive would admit. As a means of demonstrating the leadership responsibility, the CEO resigned from his position to pave way for more investigations (Barrett et al, 2015, p.411) Further, the government through the prosecution agency launched an investigation into the conduct and behavior of the company leadership as a means of ensuring that those accountable and liable for the cheated tests were prosecuted and punished as per the legal provisions in the country. Discussion The Volkswagen case study on leadership failure could be explained through the servant leadership theory. The theory holds that leaders are expected to serve and operate as a representative and a servant to all the stakeholders involved. As such, the leaders are expected to represent and advocate for the interest of all the stakeholders including the customers, shareholders’, and the employees respectively. The servant leadership theory is hedged on the principles of the agency theory (Parris and Peachey, 2013, p.379). On its part, the theory holds that managers serve as organizational stakeholders’ representatives and as such as expected to serve and advocate for decisions and strategies that support and represent the overall interests of all the stakeholders (Tourish, 2014, p.85). However, an evaluation of the Volkswagen Company leadership process and practices indicates a violation and a mismatch to the above guidelines. This section explores on the causes of the tests cheating decision as well as its link and the contributions of the company leadership approach in the organization. Lack of Employee Involvement Culture The first key area of influence by an organizational leadership approach is the existing organizational culture. In theory, an organizational culture, as Huhtala, Feldt, Hyvönen and Mauno (2013, p.266) argued is described as the manner of doing things in a corporation. Different leadership approaches advocate for the development and growth of different cultures. The link between an organizational leadership approach and culture can be deduced form an argument developed by Bell, Chan and Nel (2014, p.1970). The authors asserted that the applied leadership approach influenced the allocation, availability and usage of organizational resources, thus shaping the developed manner of doing things, also referred to as the corporate culture. This analysis uses the servant leadership approach as a template for reducing leadership scandals in organizations and how its absence at Volkswagen led to the crisis emergence. The first main challenge in the tests scandal for the corporation was a lack of employee involvement and participation. In this regard, a critical evaluation of the Volkswagen culture indicated that the flow of information and decisions was up downwards, with minimal regard and concern for the down up information flow (Rhodes, 2016, p.17). As such, through the implementation of this culture, the executive and middle level management staff made the ultimate decisions in the designing and production of the vehicles. This limited the employees’ ability and opportunities to voice their concerns and issues in the design and development process. The resulting effect was the elimination of a key voice in the development of the Volkswagen new products. A critical evaluation of the existing culture indicates a violation of the servant leadership approach adoption. Under the servant leadership system, the leaders are expected to work with the stakeholders, such as the employees, rather than demand their actions. Thus, this means that the leaders are expected to listen to the employees as well as develop them into better and effective decision makers for long term market posterity. However, in the case of the Volkswagen Company, the employees were less involved in the decision making process. As Elson, Ferrere and Goossen (2015, p.38) argued, the use of the applied organizational leadership approach is an indication of an authoritarian leadership approach. The use of an authoritarian leadership approach has a number of limitations. First, it reduces the role of employee and their eventual participation in the organizational decision making process. As such, due to a low regard and concern for the upward communication system, the authoritarian leadership approach creates an organizational system of employee disregard and their eventual dissatisfaction. In order to establish the implications of using an authoritative leadership approach, Chen et al (2014, p.799) developed a study evaluating the overall implications of such a leadership approach on employee satisfaction and overall development. To this end, the study evidenced that organizations that applied the authoritarian leadership approach failed to align the employee needs with the organizational objectives. The resulting effect was a lack of employee talent and skills development. The above analysis can be used to illustrate that the low employee creativity levels and the failure to meet the expected emission regulatory standards emanated from the lack of the provision of a suitable employee engagement and development platform. This reduced their talents development ability leading to the production of sub-standard products. As an evidence of the role of a servant leadership, Panaccio et al, (2015, p.629) study can be used. The study evaluated the operational levels and efficiencies depicted by organizations that applied a servant leadership approach. In its analysis, the review evidenced that the use of the servant leadership approaches created and propelled the development of an employee engagement and empowerment culture. Thus, in such organizations, the ability and environment for the employees to offer their opinions and develop talents was facilitated. Through such developments, there was increased overall organizational creativity and the production of innovate products in the long run period. Organizational Strategic Goals Setting The second area of influence that an organizational leadership style has influence and control over is in the formulation of the overall organizational goals and objectives. Under the servant leadership theory, it is expected that the leaders and executive mangers in an organization only advocate and apply the strategic goals as advanced by the various stakeholders’ in an organizational operations. In the formulation of goals and objectives under these leadership theory principles, the managers use the stakeholders’ theory of management philosophy. This is a theory through which any strategic organizational decision is derived from an inclusion of all the stakeholders as well as a consideration of their interests. As such, decisions, such as investment decisions are not formulated based on the mere financial profitability and returns on investment parameter for the shareholders, instead, the overall impact of such an investment on the employee motivation and welfare, the society interests and the customers value and interests are considered. Therefore, this means that the ultimate decision and interest area pursued is one that meets and crates a utility balance for all the stakeholders, while earning such organization profitability. A number of empirical studies have been developed to evidence and indicate the rationale and value for using such a servant leadership approach in formulating strategic organizational decisions in the market, especially for the long term goals. Such evaluations include the review developed by Ding, Lu, Song and Lu (2012, p.208). The study evidenced that through the use of a servant leadership and a stakeholder’s focus and inclusion process, organizations creates a sustainable competitive edge by promoting their brand, a key component for success in the wake of rising global competition levels. A critical evaluation of the Volkswagen Company emissions’ tests cheating scandal indicates a variance for the servant leadership theory principles. In the formulation of the organizational strategic goals, there appears no evidence of external stakeholders participation and inclusion in the decision making process. Instead, the CEO formulated the unilateral decision to increase growth and productivity over the market competition. The formulation of this strategic decision as aimed at capturing a larger consumer base and increased earnings over its competition in the automobile industry. Therefore, this analysis indicates that the decision as purely financial gains driven. The lack of the other stakeholders’ involvement led to a number of loopholes in the strategic vision and goals developed. First, the developed goals were incognizant of the cost of acquiring the set goals. In this case, as Davenport (2013, p.83) noted, in the development of a new product project, there are three issues and approaches to balance in the market. They are the time, cost, and quality respectively. In this case, if an organization is more concerned of reducing the cost of production within a limited period of time, the risk of low quality products is exponentially increased. This was the scenario with the Volkswagen company growth strategy. In this regard, the venture executive management was concerned with reducing the cost of overall production, through easing the decisions making process by excluding employees participation in the decision making process. Moreover, the set period of time was essentially limited, creating a rush for the growth strategy attainment. In the process, the main focus was only value and shareholders’ gains accumulation, without due regard for the external stakeholder such as the consumers’ safety and environmental conservation requirements among others. This was the main and key driving factor for the development of sub-standard vehicles with regard to emissions standards requirements. The second aspect through which a shareholders’ only focus led to the crisis was at the realization stage. Prior to the launch of the vehicles, the executive management was aware of the defect in emissions, and would as such have corrected the defect prior to launching the product. However, the costs that would have been incurred in correcting such a defect would be higher. Therefore, the venture devised to use a software approach to disguise the defect from the public at the expense of the customers’ safety and the overall environmental pollution. Therefore, the analysis indicates that the applied leadership approach had the overall impact of influencing and supporting the use of self interest decisions at the expense of their stakeholders and the general public. This analysis asserts that of the venture had applied a servant leadership approach, the overall impact caused and the emergence of the crisis would have been eliminated. As a servant leader, the executive management would have acted as servants of the public and conservation of the environment. Consequently, the desire and need to ensure environmental conservation and the public wellbeing would have overridden the perceived costs to correct the defect. Consequently, the key decision under such a leadership approach would have been to correct the defect and align the product with market regulations, rather than developing software to disguise the defect at the inspection stages. Hence, this indicates that the use of a servant leadership approach is suitable in shaping an organizational goals setting and the decision making process. Reflection In developing the analysis, I have learnt a number of aspects and issues on the right leadership style and approach in an organization. One of the things I learnt is that a leadership approach applied has ripple effects that are far reaching into almost all the organizational operations. Although I understood that the applied leadership style has an impact on the applied organizational culture, the realization that it impacts on the quality of developed decision as a new learning phenomenon. I originally thought that in the formulation of an organizational decision, the presence of decision making support systems and accuracy of information was all that was required. However, the analyses changed my perceptive. In this context, I learnt that the applied leadership influenced the manner in which the managers and leader evaluated the existing alternatives. This is even clearer through the Volkswagen management decision not to repair the emission defect but rather to develop software to cheat on the emissions tests developed. This was an indication of how the applied leadership approach influences the ranking of alternatives in a decision making process. On my end, I believe I apply and follow the servant leadership theory approach. As such, I would have opted to increase the cost of production on the vehicles but have the defect repaired prior to launching and selling the vehicles to the global market. However, the applied leadership approach at Volkswagen was different as this was authoritarian, and was poised towards shareholders value maximization. Hence, to the management, this was not a viable or an option at all, as the profitability margins for the vehicles would have declined in the market, making it an almost unviable venture for the corporation. The second key lesson I learnt in the analysis process is the role of including and engaging the employees. Although I understood the need to empower employees in organizational operations, it had not occurred to me the implications of failing to empower them. I was always focused on the effects of empowering the employees. Thus, I would say that I perceived it as an optional strategy which managers can either apply or apply. However, through the analysis and evaluation of the Volkswagen Company emissions scandal, I have now realized that it is not an optional strategy, and for any organization to succeed it should have it as one of the leadership values adopted. This is likely to change my future orientation and perception on employee empowerment. Individually, I have less understanding and knowledge on the best practices through which to engage and include the employees in the decision making process as well as in other operations. Thus, as a personal development endeavor, I will seek to learn more on this. Of interest to my operations will be an evaluation of the best practices in employee engagement as well as the challenges that managers and business leaders face in developing such best practices. This will empower and equip me to ensure that I do not fall under the same risk that the Volkswagen leadership fell into. References Barrett, S. R., Speth, R. L., Eastham, S. D., Dedoussi, I. C., Ashok, A., Malina, R., & Keith, D. W. 2015, ‘Impact of the Volkswagen emissions control defeat device on US public health’, Environmental Research Letters, vol. 10, no. 1, p. 114005. 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