02:20 - Source: CNN
3 things you need to know about the Volkswagen scandal

Story highlights

Andre Spicer: There is a basic culture in companies that lets scandals such as VW fiasco happen

He says middle managers spare higher-ups of details as they try to meet impossible demands

Spicer: Ignorance is bliss for senior managers -- until it blows up in their faces

Editor’s Note: Andre Spicer is a professor of organizational behavior at Cass Business School, City University London. The opinions expressed in this commentary are solely those of the author.

CNN —  

Volkswagen is one of the smartest automakers in the world.

Andre Spicer
Andre Spicer

It employs tens of thousands of highly qualified engineers. Its products are seen as leading examples of intelligent green technology. Its CEO has a Ph.D. in metal physics.

This week, we found out how smart and innovative VW is.

And how insanely stupid.

The company’s engineers developed a special technology that enabled 11 million cars to cheat on emissions tests. This breakthrough meant VW could sell its vehicles as being clean and green while also cutting corners on costs.

The secret innovation worked for a while. But late last week, the Environment Protection Agency exposed the use of this secret piece of software in some models. VW admitted that 11 million of its cars were designed to cheat the tests. Shares in the company have plunged by a third. The CEO could be gone within a few days. Some are talking about the beginning of the end for this mighty German automaker.

02:43 - Source: CNN
Volkswagen CEO apologizes for cheating emissions test

We don’t know all the details of how Volkswagen got itself into this, but we do know that any big firm like VW is under pressure from all directions. Regulators want reduced carbon emissions, customers want cheap but powerful cars, investors want healthy profit, and employees want good wages. Doing all these things at once is hard.

But senior managers of a big firm such as VW often make impossible promises. They learn quickly this is how to keep their jobs as well as their big paychecks. If they don’t make impossible promises, there is always someone else who can.

The only catch is that senior executives don’t like being stuck with the tricky task of actually delivering on their own impossible promises. So they push them on down the line. At VW, they asked the engineers to develop environmentally friendly diesel engines. Only a few years ago this would have seemed like a contradiction: Diesel was a dirty technology. Luckily there is not a short supply of ambitious middle managers who are eager to take on such challenges.

Middle managers usually try their best to deliver. But inevitably they find it tough. Why shouldn’t they? Most goals set by their superiors are impossible in the first place. When results are not forthcoming, senior executives start to get angry. Understandably, middle managers are afraid they might end up being seen as a weak link in the chain. So they quickly learn to pass only positive stories up the line. Problems are often covered up. When the results look good and the top boss is happy, who cares?

06:53 - Source: CNN
Volkswagen using defeat device 'for at least six years'

Although senior executives might be pleased, problems don’t go away on their own. People further down the corporate pecking order often work furiously to find ingenious solutions that allow the company to deliver on many conflicting demands at the same time. At VW this came in the form of an impressive system that turned on pollution reduction when a car was being inspected and turned it off again during normal driving conditions.

Usually top executives have no ideas about these little innovations that let them deliver on their impossible promises. The CEO of VW currently claims he did not know about the suspect technology installed into all cars. Some might think this is hard to believe, as he is a detailed-oriented engineer. But all too often top managers remain blissfully ignorant of the dirty little secrets that make things work. Often it is in their best interests not to know what is actually going on.

Now all this has changed at VW. The technology that switches on and off pollution controls doesn’t look so smart anymore.

People are asking why such an intelligent company could do something so stupid. The real reason is that sometimes a bit of stupidity pays off for everyone – at least in the short term. But in the longer term, things can go wrong. Sometimes mistakes such as this come with a small price tag. But at VW, it will cost the company dearly.

Ignorance, it seems, is no longer bliss.

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