What leaders can learn from the Volkswagen scandal
In September 2015 the Environmental Protection Agency made a discovery about VW cars being sold in the U.S. that was quickly dubbed the “diesel dupe”. It was a crisis that opened investigations worldwide into the legitimacy of its emissions testing. Furthermore, they recalled over 10 million cars, shares fell by about a third, many company leaders stepped down and they lost loyal customers.
The definition of a crisis is an “unstable situation of extreme danger”, “a crucial stage”, “a turning point”. Using a crisis as an opportunity is a very effective yet often underutilized tactic in crisis management.
This is the tactic that Volkswagen is utilizing to restore their business and earn back the trust of world leaders and customers. Much like a phoenix rising from the ashes, VW has turned this cheating scandal into a business opportunity to look toward the future and leave behind diesel for electric cars.
Matthias Erb, VW’s chief engineering officer in North America, told NPR that, while the scandal was terrible, it “supported and accelerated those conversion processes in the direction of electrification”.
Making a sharp pivot, like Volkswagen is doing, can be particularly helpful when dealing with a crisis of this magnitude; one where the company’s image is on the line, where deep trust has been broken, and continuing “business as usual” will be detrimental rather than helpful. This kind of re-branding may be what is necessary to keep a business afloat.
However, before changing the direction of your organization to deal with a crisis, consider these three important steps:
1. Conduct a post mortem
All crises, big and small, must be closely analyzed with a post mortem. Only then can you learn where the problem truly began, how the crisis manifested itself and how to move forward. A post mortem can help uncover decisions you may have to make, bringing us to step 2.
2. Decide and act
Leaders must have tremendous courage, particularly in a crisis. You will have to make some very difficult decisions such as having to let someone go or possibly step aside yourself. Martin Winterkorn, former executive for the Volkswagen Group, resigned as a direct result of the scandal. It is important to consider your “true north” when dealing with a crisis – what is the moral and right thing to do in this situation? Before making any decisions however, be sure to consider step 3.
3. Consider the consequences
You may have come up with the perfect pivot for your organization to come out of this crisis. But, have you considered the consequences of this plan? VW, for example, will not only be investing in the research and development of new technology for their electric cars. They will also have to spend millions of dollars to build out an underdeveloped charging infrastructure in the U.S. Think about the long-term effects this new direction may have before moving forward.
As a leader you WILL be involved in crises – large and small. Just remember, never waste a perfectly good crisis! Knowing how to turn a crisis into a business opportunity may be the only way to save your organization.