The Implosion of An Iconic Brand: Lessons from Volkswagen

Business.com / Entrepreneurship / Last Modified: February 22, 2017

Volkswagen's latest scandal could have been avoided if they were practicing the same lessons you learn in kindergarten.

In case you ignore the news entirely, Volkswagen is experiencing some very bad publicity.

In mid-September, the Environmental Protection Agency (EPA) revealed that the German car manufacturer sold (and were still selling) diesel engine cars with installed software that could detect when they were being tested for emissions and change the results to show that the car was performing adequately. When in reality, these engines were actually emitting nitrogen oxide pollutants up to 40 times above what’s allowed. Big no-no.

After coming clean, VW admitted to installing this cheating “defeat device” in about 11 million cars worldwide, ironically while running a marketing campaign that boasted the clean emissions.

As you can imagine, VW’s CEO, Martin Winterkorn, was incredibly upset after this knowledge was announced publicly. And subsequently “resigned” while claiming he’s “shocked” and “stunned” that such conduct would occur under his nose. We’re equally as shocked, but maybe there was one, teeny-tiny thing Mr. Winterkorn should’ve done to prevent such a collapse.

Maybe he should’ve read and studied the rules he learned in Kindergarten. As you should too.

Related Article: 6 Lessons in Corporate Ethics from the GM Recall

Share Everything

Don’t hoard knowledge; don’t hoard information (and you should probably share toys too). Being transparent about information can boost your business and keep you out of trouble. Share information with everyone: your employees, your customers and especially the EPA.

Martin Winterkorn claimed he was not informed of the program that allowed the cars to cheat emission tests, however, if all knowledge was shared within the company this would not be an issue. As CEO, and the figurehead of the company, you should be aware of the inner-workings of your organization. Keep knowledge transparent, to both the public, and internally.

Play Fair

Playing fair equates to winning in the long run. You might think you’re cheating excess costs or taxes by cutting corners, but the consequences of not creating products to code can suck. VW answered to a consequential $1.84 billion net loss in the third quarter

The company has set aside a large sum to help pay for the fines from the scandal. If the company had played fair, VW would not have had to sacrifice their reputation and sales to beat its competitors. 

Don’t Hit People

Going beyond the obvious here, as a business owner, every decision you make must not harm others. VW’s decision hurt everyone at each level of the corporation—there’s talk of job cuts and decreased resale value for the customer. Not only do these actions harm VW's consumers but it harms their reputation after the blow is struck. By deceiving their consumer, VW will lose the positive relationships it worked to maintain throughout the years.

According to a new MIT environmental study, pollutions from this scandal also may have contributed to 60 premature deaths and will “directly contribute to 31 cases of chronic bronchitis and 34 hospital admissions for respiratory and cardiac conditions.”

Say Sorry When You Hurt Someone

Five-year-olds need to be reminded apologize for wrongdoings and apparently so do middle-aged men. Not every CEO apologizes for scandalous behavior, but the now ex-CEO of VW took full responsibility for the misconduct.

However, he still insisted that he personally did not know of the software nor the manipulation of emissions data. It does beg the question why Mr. Winterkorn and VW board felt the need for him to step down if he truly was unaware of the situation. But at least the company owned up to the deed immediately.

This was a responsible first step for the company to take. By taking full responsibility for their misconduct, trust can begin to build between VW and the consumer (and hopefully with the EPA).

Related Article: PR Nightmares: How Businesses & Public Figures Respond After Scandals

Clean Up Your Mess

Businesses, just like tiny children, are bound to make mistakes. The key to acting like a responsible adult is cleaning up after oneself. The amount of excess pollution VW created won’t evaporate with an apology. They must try to undo the damage as much as they can.

The MIT study referenced above also suggested that, if they continue to recall all the affected vehicles by the end of 2016, the company could prevent another 130 early deaths and could help save roughly $840 million in health care costs. Luckily, VW is aiming to fix the affected vehicles and bring them up to code.   `

Take a Nap Every Afternoon

Slow down and take time to analyze the various rungs of your company. As a business owner, you should regularly check-in with managers and employees to make sure everything is running smoothly- and legally. Schedule regular company self-audits and make sure people are taking responsibility for their actions at every level of the company—from the entry-level temps to the C-suite execs.  

Volkswagen is not the first car company to experience a large, public scandal and it won't be the last. However, by applying the lessons learned in kindergarten to companies, these PR nightmares can be avoided. 

Login to Business.com

Login with Your Account
Forgot Password?
New to Business.com? Join for Free

Join Business.com

Sign Up with Your Social Account
Create an Account
Sign In

Use of this website constitutes acceptance of the Terms of Use, Community Guidelines, and Privacy Policy.

Reset Your Password

Enter your email address and we'll send you an email with a link to reset your password.

Cancel