Discuss how human resource management practices can be a source of competitive advantage for a company.

Task

Defeating the System: Ethics at Volkswagen

In one of the worst business ethics scandals in history, the world learned in $2015$ that Volkswagen intentionally circumvented government exhaust emission tests for years by installing so called $$defeat devices$$ on their clean diesel vehicles. This revelation was a shock to many given the company$$s long$-$standing success in the auto industry. Volkswagen, one of the world$$s most recognized brands, was founded in $1937.$ The company is headquartered in Germany but employs more than half a million people around the world.

Researchers at West Virginia University $($WVU$)$ first discovered the violation when they started studying clean diesel engines. When they tested the performance of Volkswagen vehicles, they were surprised to find that on$-$the$-$road emissions exceeded government allowances by almost $40$ times. Further investigation by the U$.$S$.$ Environmental Protection Agency $($EPA$)$ found that the vehicles were actually equipped with software that could essentially trick emission testing systems. The diesel engines could detect when they were being tested for emissions and changed the vehicle$$s performance to improve testing results. Once on the road, the vehicle would switch out of the test mode, emitting excessive nitrogen oxide pollutants, as the WVU researchers found.

The EPA$$s finding covered about $500000$ cars sold in the United States only. But Volkswagen later admitted that about $11$ million cars worldwide were fitted with this software. In Canada $128000$ vehicles were part of the scheme, which resulted in a $$290$ million settlement. It will be a long time before Volkswagen realizes all of the damage of this ethical blunder. There will be legal sanctions from governments, private lawsuits, and consumer bans that will impact the company for a long time to come.

How could such a blatant ethical violation occur? It may take years to sort out who is to blame. CEO Martin Winterkorn, who resigned in response to the scandal, initially claimed not to know about the devices. While many high$-$ranking executives were suspended, no one is sure who knew about or authorized the software. In fact, some believe that the driven, performance$-$based culture may be more to blame than any individual.

Winterkorn, who reinforced the unique culture, has been described as a hard$-$driving perfectionist who was committed to securing the top spot among global car manufacturers. He was known to criticize employees publicly, and this generated both fear among employees and the commitment to do whatever necessary to ensure the company$$s success. The company$$s culture has been described as $$confident$,$ cutthroat, and insular.$$ It is possible that arrogance led Volkswagen managers to assume that U$.$S$.$ government or other officials wouldn$$t discover the misleading emissions tests.

What$$s more problematic is Volkswagen$$s response to the scandal. The company first suggested a technical problem with the cars, but finally admitted the software devices were designed to cheat the system. Initially, the company reported only a limited number of cars were affected; however, as more details were uncovered, the company admitted more cars were fitted with the device and that these actions occurred over a longer period of time than originally reported. The company$$s faulty initial response to the scandal has clearly made the road ahead a bigger challenge for them. In fact, a recent poll of Americans$$ attitude toward $100$ large companies put Volkswagen in last place.

DISCUSSION QUESTIONS

$$ Are you surprised that an organization as large as Volkswagen was caught engaging in such unethical behaviour? Do you agree that the organization$$s culture could have encouraged this behaviour?

$$ Are there structural variables that may have influenced the unethical behaviour at Volkswagen?

$$ Evaluate Volkswagen$$s actions based on the factors $?$How would you describe the issue intensity of Volkswagen$$s actions?

$$ Moving forward, what do you think Volkswagen needs to do to avoid such an ethical lapse in the future?