The Executive Brief

Corporate Scandal is the Product of Corporate Culture

Mike Frommelt Core Values, Culture

The Volkswagen environmental cheating scandal that broke in September of 2015 threw Corporate Culture into the spotlight - and not in a positive way. Some wrote that Volkswagen's "culture of arrogance" was to blame, while others simply blame a lack of morals at the top of the company. Similar to the Enron and Tyco scandals, many outsiders have weighed in on where the fault lies and how things should be restructured to clean up the mess.

I am not going to try and analyze VW’s culture and make conjectures on exactly how such a monster was created. I do not know enough about VW’s leadership team or corporate structure to make these kinds of judgements.

All Business is a Product of Corporate Culture

What I can do with complete certainty is back up the assertions that the scandal is a product VW’s current corporate culture. I’m comfortable in doing this because I know from experience that Lou Gerstner, former CEO of IBM, was right when he wrote "it's all about culture" in his classic book Who Says Elephants Can't Dance? The good, the bad and the ugly of business, it’s all a product of culture.

In its simplest form, corporate culture is really nothing more than the combined behaviors of leadership and employees. These behaviors are driven by the combined core values of said individuals. Therefore, if you hire and promote arrogant and greedy people, you will have an arrogant and greedy culture. On the other hand, if you hire and promote competent, confident (but not cocky) and ethical individuals, your culture will be the echo these traits.

Likewise, your reputation as a business will follow these values. It is true that others can often see us more accurately than ourselves. For VW in particular, the reputation component will likely be the toughest part to fix. Long after the executives have been replaced and the structure changed, the sour taste will remain with VW owners and potential customers.

Of course, all of this is easier said than done. Mistakes can and will be made along the way (especially in regards to hiring). If you set your core values and principles with conviction, and use them as a guide for hiring, promotion, training, total rewards, etc., your culture, and your business, will stay on track.

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