How a Toxic Culture Can Sink an Organization. Could You Be the Next VW?

Two men with differing placards loudly disagreeing with each other

What is it like at your organization? Do you feel you can ask questions of and raise issues with your boss without recrimination? Are you able to speak openly and make suggestions as ideas are presented in meetings? Is constructive debate encouraged and rewarded?

These are questions that highlight the openness of communication at a company. Where free and easy communication is the norm, ideas are exchanged and evaluated comfortably until the best one is agreed upon. Where communication is closed, decisions are made unilaterally and often arbitrarily. Where would you rather work?

In fact our recent Organizational Alignment Research of 410 companies across eight industriess identified the timely and open flow of communication as one of the top seven factors that creates organizational alignment, higher profits, faster growth, more satisfied customers and higher employee engagement. In highly aligned companies, 81% agreed or strongly agreed that information flow was timely. In lower performing companies, only 6% agreed.

Most of us would choose the open, collaborative culture. Culture is how things truly get done in an organization. It can be measured by understanding the way people think, behave and work. This includes the values and assumptions that enable key behaviors and practices.

What might be the consequences of a culture that is closed and toxic? We only need to look at a company that has recently been in the news for its illegal practices and see if we can find seeds of the problem in the culture that existed there.

Early in the fall of 2015, Volkswagen was the target of an emissions scandal in which the company admitted to cheating on U.S. air pollutions tests. The question now is who was responsible for the decisions that led to the cheating.

The CEO when the scandal hit the news, Martin Winterkorn, has since resigned but has not taken responsibility for the illegal actions. His resignation was made, he says, in the interests of the company “even though I am not aware of any wrongdoing on my part.”

Even if we give him the benefit of the doubt as to whether or not he was privy to the decisions made to fake emissions testing, we can hold him responsible for the culture he allowed to pervade the organization. The new CEO has stated that it is “very, very clear” that their 600,000 people worldwide have to be managed in a different way.

VW now talks about how they need to create a high performance organizational culture where problems are not hidden but can be openly discussed; where there is no fear in questioning superiors; and where there is far less pressure from an authoritarian leader to perform without appropriate inquiry.

There is no doubt that Winterkorn was a strong leader with great ambitions for his company. He wanted to make VW the world’s biggest carmaker. But his management style reportedly could be unforgiving, overly demanding and remote. Apparently, he could be disrespectful of other VW executives and would often lose his temper when bad news was reported. Reports are surfacing that there was a pervading sense of fear if called to his office. Overall it appears he was unapproachable and apparently closed to debate.

The VW culture was just the opposite of an open atmosphere and the consequences were earth shaking to a brand that had always commanded respect. With closed doors and closed minds, no one in the chain of command raised the questions that might have steered the emissions software in another, more legal direction. Time will tell if and whether VW can survive and create a high performance corporate culture that encourages the free and healthy exchange of ideas.

To learn more about defining an aligned and high performing culture, download How to Build a Purposeful and Aligned Corporate Culture.

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