VW’s culture of blind obedience: What went wrong and how to fix it

The CEO of the Volkswagen holding company — now the former CEO having been appropriately forced to resign — did not install the “defeat devices” that hid the fact of emissions five- to 40-times higher than allowed by U.S. law.

The “company,” a legal construct, did not install those devices. Employees, software engineers and teams of engineers followed orders to install the devices. Surely those engineers knew the purpose of the device was to evade legal emissions standards. Did any of those engineers refuse to obey? If not, why not?

Is a culture of “just following orders” so ironclad in VW that in six years no one questioned those orders and no one refused to obey them? If so, until the culture is changed, the danger to customer and environmental safety will remain unacceptably high.

If employees did question the orders and refused to obey, what became of them? VW should be required to answer this question. A culture that punishes internal efforts to do the right thing will remain a culture prone to cheating and fraud.

VW is not alone. Its shameful scandal follows on the heels of the judgment against GM for faulty ignition switches, resulting in more than a hundred deaths. Both join the ranks of numerous corporations and government agencies that have cheated to hide egregious failures or to pursue short term gains: Think, for instance, of falsifying mortgage qualifications, robo-signing foreclosure letters, hiding backlogs of veterans seeking medical care and so on. The list is unconscionably long.

We now have a new dimension entering the landscape. The U.S. Justice Department has announced it will focus more on targeting individual executives for criminal wrong doing. The CEO of the now defunct Peanut Corporation of America just received a lengthy jail sentence for ordering contaminated product to be shipped, resulting in scores of deaths. His quality manager, who obeyed, is also in jail. Wall Street executives are nervously looking over their shoulders for who prosecutors may have in their sights.

If any good is to come out of this latest scandal at VW, it will be a clear lesson to the corporate world and to the public sector, that internal dissent must be valued and encouraged. Not hidden. Not punished. The short term financial rewards of silencing dissent will eventually become a corporate disaster. Eleven million cars to recall and $7.5 billion to remediate the damage just for starters. A 20% loss of share value overnight and dropping. A brand that will be tarnished for a decade. Criminal prosecutions of executives, managers and software engineers who colluded.

The time has come for boards, CEOs and executives throughout the corporate world to recognize the inestimable value of a culture in which employees will not follow orders if those orders will result in harm; that they will clearly and professionally help management understand the risks they may be underestimating, rationalizing or dismissing and they will take a stand if management tries to push them over a line that should not be crossed.

Once the value of such a culture is recognized, the challenge becomes how to create it. This is not as hopeless as one might think. There is a competency called “Intelligent Disobedience” that can be baked into the culture and duly rewarded. It is the antidote to, “I was just following orders.” Such a culture will not spontaneously emerge, but it can be seeded, nurtured and brought to life.

Everyone up and down the organizational chart must understand personal accountability and how to intelligently and safely exercise it. Needing to go outside the organization to blow the whistle in order to correct internal wrongs represents an utter failure of boards and leadership. Whistle-blower protections are necessary, but a culture that values constructive dissent and intelligent disobedience preempts the need for whistle-blowing.

At VW, the time to redesign the culture is now. Let’s see if that vaunted German engineering is up to this task.