In the business world, change is the only constant thing. It is worth noting that in a business set up various aspects can trigger the change process. These aspects can be either positive or negative. However, regardless of the causal agent, organizations embrace change to keep in touch with the world around them, conform to the set of standards in their lines of operation or enact their corporate social responsibility (Cummings, Todd Bridgman & Kenneth 35). It is in this context that this paper examines the change process in Volkswagen after the Diesel gate incident. It provides an overview of the change itself, a review of the change, the success of the changes and the recommendations for the future leadership team for any organizational change process in the firm. Principally, the organizational change process at Volkswagen after the Diesel gate incident is halfway because most of the reforms have not been fully implemented.
The Diesel Gate Incident
The Volkswagen diesel gate incident was a nitrogen oxide emission scandal that began in 2015 over the Volkswagen’s cars (Fracarolli et al. 286). The United States environmental protection Agency (EPA) discovered that Volkswagen fitted their cars with “defeat devices.” Defeat device is software that could sense test situations and stop emissions to improve the test outcomes. The technology allowed the cars to emit nitrogen oxide up to 40 times above the accepted emission levels while driving (Fracarolli eta l 292). The company accepted the fact that approximately 11 million vehicles globally had the devices (Fracarolli eta l 292). These comprised of eight million cars in Europe and 0.6 million in the United States of America. Research done at the time pointed out to the idea that this emission of the nitrogen oxide caused about 38 000 premature deaths globally in 2015 (Fracarolli et al. 286). Remarkably, this scandal raised international concerns about corporate social and environmental responsibility, integrity, and accountability. Such magnitude of harm and other unquantifiable damages resulting from the firm’s actions impacted the corporation’s reputation and placed it in a legal quagmire.
The incident cost the firm about 30 million USA dollars as fines, settlement, and solution (Fracarolli et al. 286). The diesel gate was a major scandal in the history of the company. It led to the seven-year imprisonment of the chief executive director. Additionally, the court ordered him to pay a fine of 0.4 million USA dollars for breaching the USA clean air policy (Robertson 68). Moreover, the prosecutors from the United States of America charged the Volkswagen executives both current and former (Robertson 69). Other investigations are in progress in Germany and other parts of the globe.
Overview of the Organizational Change in Volkswagen after the Diesel Gate Incident
After the diesel gate incident, the Volkswagen went through a significant change process evident in their promised and enacted reforms. The first reform was the decentralization of power from Wolfsburg headquarters in Germany. For instance, Czech Brand Skoda started to produce low priced cars in India (Tovey, 3). The headquarters authorized the company to take incremental decisions and inform them of such steps. This approach empowered the international subsidiaries to autonomously make some changes in their operations. Besides, the management team began holding its regular meetings outside its headquarters. For instance, they held their first meeting in Shanghai (Tovey, 5). Other changes were symbolic. They include selling the Volkswagen’s corporate Airbus jet and launching the executive dining room to factory workers at Wolfsburg (Tovey, 5). Additionally, they empowered senior engineers to control the budget and deadlines. The company reduced the number of corporate committee members by a third. Further, the firm increased the remuneration of its managers globally. The aim of the pay rise was to encourage innovation and risk-taking within its human resource.
There was also culture change in the firm. The change in norms was through the elimination of the executive car park and replacing it with bicycle riding in the factory grounds (Tidwell 23). Besides, the company put on hold the launch and selling of all these cars that were affected by the diesel gate while others were recalled from the market. The vehicles included Volkswagen 2012-2015passat AUD Q5 (2014-2016) and Volkswagen Toureg 2009-2016 AUD Q7 (2009-2016) (Tidwell 24). As part of their vision 2025, the firm embraced digital and electric cars, where the company will produce one electric or hybrid vehicle in every ten vehicles. However, despite calls to include more managers from the outside world, the CEO rejected the call to change the supervisory and management board of the firm (Tidwell 29). The firm applied both episodic (major infrequent changes) and continuous (ongoing actions) transformation strategies to rise back to profitability and redeem its corporate image.
Analysis of the Change Process in Volkswagen after the Diesel Gate Using Kurt Lewin Organizational Change Model
The 1940s model by Kurt Lewin is commonly called unfreeze-change-refreeze model (Burnes 984). The model borrows from the entire process of changing the physical shape of a block of ice. Its proponent notes that if one has to change the appearance of an ice cube to that of a cone, one has to melt the ice cube first (unfreeze) to make malleable for the desired change (Burnes 997). Then one molds the iced water into a cone shape (change) and proceeds to solidify into the new shape (refreeze). This model shall analyze Volkswagen’ organizational change process.
Unfreeze stage
Unfreezing is the initial stage of the change process in any given organization. Here the management should generate or identify the need for change and communicate the benefits of this changes to the firm and the workers. For instance, following the diesel gate incident, change was inevitable in the company. In this stage, the Volkswagen firm prepared for the change by breaking away from the status quo and demonstrating the essence of the transformation (Casasola 17). Almost the entire senior management of the company faced charges.
The situation creates the need for change in the administration. Additionally, the stakeholders felt that the former administration was closed to the outside world causing dictatorship and authoritarianism from their centralized power (Casasola 17). As the way of identifying the need for change, the new CEO points out on the importance of delegation of power in the company (Casasola 17). Decentralization is the excellent way to challenge the culture and beliefs of the Volkswagen before the incident. It is vital for the company in identifying the negative ramifications of autocracy in company management. Additionally, the corporation recognized that its cars were not environmental friendly. It is through the identification of this driver for change that the CEO proposed recall of all the cars affected in the incident (Ater 18). Moreover, the firm stopped further launch and distribution of these cars. Although the CEO aimed at transforming the entity, there were many legal and public issues that posed challenges to the unfreezing process. For example, when the organization was under investigation by the law enforcers, any initiation of change or its implementation would raise eyebrows. The public and intelligence investigation of its operations limited the potential of the company to explore more areas for unfreezing until the completion of the investigations. Any changes may be subject to disclosure because it may tamper with evidence for the scandal.
However, while there was unfreezing of power and products, the company management failed to identify the necessity for change in the supervisory and management team. Notably, the CEO who took over the leadership mantle after the diesel gate stayed in the corporation for over two decades, causing some reservations of the entity’s management (Ater 14). Consequently, one can argue that the unfreezing stage of organizational change in Volkswagen was not complete because of these aspects that stayed constant.
Change Stage
Change is the second state of organizational change in Kurt Lewin’s model. The step involves a point where people start to solve the uncertainty from the unfreezing stage as they embark on new ways of operation (Burnes 1000). In this stage, people act and start believing in a way that supports the new organizational direction. This may involve introduction of new norms, practices, and systems that elevate an organization’s performance.
In the case of the Volkswagen, the firm began assigning the Czech Brand Skoda the duty to produce low priced cars in India (Abuhajaj 70). The executive team started holding their regular meetings outside the headquarters. Additionally, the firm introduced reforms to encourage employee involvement and participation in the firm’s strategy through the suggestion to open up the executive dining hall to the factory workers (Abuhajaj 74). This employee involvement process aimed at creating trust among the employees for feedback sharing and idea generation to support the entity’s growth. Moreover, there was the consideration to increase the salary of all the Volkswagen managers across the globe. The increase in compensation was among the strategies to increase employee morale, retain staff, and attract new talent. There was an objective to come up with electric or hybrid cars as a way of changing the initial car operations. With increasing innovation in the motor industry especially on hybrid vehicles, the company deemed it fit to invest in the eco-friendly cars
Noteworthy, Volkswagen Company focused on the formulation and execution of some rapid reforms that it regarded would elevate the company from collapsing (Ater 19). These organization anticipated that these changes would provide quick wins in saving the firm’s brand and revenue. However, the company required some days and years to undergo the change stage successfully. This explains why the company has a target of vision 2025 in almost all its reforms (Ater 12).
This step takes time because people need to have a deep comprehension on how the change is beneficial to them. The understanding requires proper communication of the transition to all stakeholders and workers of the firm. A section of employees and stakeholders may resist change even where it is essential or profitable for the firm (Burnes 985). Nevertheless, the change step in Volkswagen was a success as the company set a flexible and pragmatic period to achieve the reforms. This is because people require time and communication to understand the changes and connect to the entire transition process. The Volkswagen needs a lot of time, effort, and management support on this stage (Burnes 988).
Refreeze Stage
Refreeze is the final stage of the organizational change process. It is the implementation stage of all the reforms in the change stage. In this step, the people embrace the new ways of doing things (Burnes 997). For example, the implementation of the decentralization of power began by the management holding their first meeting outside Germany, in Shanghai. Additionally, there is decentralized decision making in the Volkswagen stations across the globe. The enactment of the salary increase for the managers globally is also part of refreezing (Zhang, Jari & Denis 165). It is significant to note that refreezing involves the establishment of a stable organizational chart and consistent job description among other elements. This stage is very pivotal for Volkswagen and its workers because it enables the internalization and implementation of the reforms after the diesel gate incident. The corporation must ensure the integration of the changes in its daily operations (Zhang, Jari & Denis 168). A new sense of stability resulting from the reforms is likely to motivate the workers to feel confident with the new ways of operation.
The refreezing stage enables workers evade a transition trap, where they are not sure of what should be done and how it ought to be done (Zhang, Jari & Denis 170). Such a dilemma may cause sub-optimality in the firm’s operations. In Volkswagen, one can argue that the refreezing process is not complete. This incompleteness is because of partial implementation of some reforms. The diversity in implementation is because different changes require different timeframes to execute because of the difference in the logistic and resource requirements to implement the various reform (Shirey 70). For instance, manufacturing an electric car or hybrid car in Volkswagen needs more time and resources as compared to opening up the executive dining hall for factory workers. The latter is a decision achievable within days while the former is a project that needs months to be fully implement.
The Success or Otherwise of the Change Programs in Volkswagen
The change program in Volkswagen has been a great success to the company. For example, after the reduction in the cost of the operation by reducing the corporate committees, there has been a notable rise in the profitability of the firm (Tidwell 65). Additionally, the firm is pushing to new technologies than any of its rival firms. Although the firm was at risk of collapse after the diesel gate scandal, Volkswagen managed to remain profitable. Through the reforms, the corporation has managed to pay two-thirds of its fines and compensations in connection to the diesel gate incident (Tovey 34). There is increase in efficiency within the firm, and their shares have shot by 38 % after the first launch of its electric car (Tovey 34). Contrary to the public expectation that the company would lose investors, it is attracting more investors and building brand confidence to the public. There is also success in decentralized decision making, which promoted fast resolutions and encouraged innovations across all the company’s offices. Delegation of functions also builds employee confidence and improve the diversity of the organization’s products. Individual subsidiaries in various geographical locations can develop their own vehicles to suit their specific market needs.
However, in spite of the successes above, they failed to change their management. The firm still makes use of the old people who have been in the company for a long time (Tovey 38). This is a problem because the firm misses out on the fresh talent and innovative ideas in the dynamic auto industry. Additionally, the organization portrays itself as one that disallows change and has little room for career growth to senior levels. Contrastingly, the constant management may also portray the firm as stable and a good employer that retains its employees.
Recommendations
Based on the success and failure of the change process in Volkswagen, the following recommendations will advise the future company leadership on organization change. There is a need to identify the key areas that require reforms to bring a visible difference (Cummings, Todd Bridgman & Kenneth 43). For example, the firm should overhaul the supervisory and management teams because they were part of the problem. Disbanding the administration will give trust to the Volkswagen clients. Additionally, proper communication is essential in the entire change process. Adequate communication involves the conveyance of the right information to the relevant people on time. Communication will help to eliminate a feeling of suspicion and rumors. Proper communication about the change and its benefits is fundamental in the refreezing stage of organization change (Cummings et al., 56).
Employee involvement in the entire change process is indispensable. The employees have motivation and show readiness to embrace any given change if they are part of the progression. Employee involvement is achievable through proper communication, a collection of their opinions, feelings, and attitudes concerning the change. Celebration of every success focuses and motivates everyone to proceed with change (Cummings, Todd Bridgman & Kenneth 48). Furthermore, the firm ought to establish a feedback system. Feedback is critical in evaluating the success level of a firm’s change process and its benefits. Leadership support and adaptation of organizational structures for change is also necessary for effective transformation. Finally, there is a need to provide support and training as a way of implementing and sustaining the change (Cummings et al., 35). Such support creates awareness and capacity among stakeholders to participate in the change process.
Conclusion
In conclusion, change is inevitable in any given business organization. However what matters is how successful the entire organizational change process is in a firm. The diesel gate incident prompted the firm to come up with several reforms that geared towards alleviating the company from the crisis. It was a crisis that involved the Volkswagen procuring cars that emitted nitrogen oxide above the standard levels, yet the cars were able to conceal this malfunction. Some of the reforms include the decentralization of power, raising managers’ remunerations, production of electric vehicles, recall and putting on hold the launch all of the defective cars. From the discussion above, it was apparent that the change process in Volkswagen after the Diesel gate incident is incomplete because some reforms are still undergoing implementation.
Works Cited
Abuhajaj, Ayham, and George Lampis. "Strategy Formulation Process in Crisis Management: Volkswagen Case Study." (2017).
Ater, Itai. "The Impact of Product Recalls on the Secondary Market: Evidence from Dieselgate." (2018).
Burnes, Bernard. "Kurt Lewin and the planned approach to change: a re‐appraisal." Journal of Management studies 41.6 (2014): 977-1002.
Casasola, Andrea. Dieselgate: Managerial insights into the Volkswagen scandal. BS thesis. Università Ca'Foscari Venezia, 2016.
Cummings, Stephen, Todd Bridgman, and Kenneth G. Brown. "Unfreezing change as three steps: Rethinking Kurt Lewin’s legacy for change management." human relations 69.1 (2016): 33-60.
Fracarolli Nunes, Mauro, and Camila Lee Park. "Caught red-handed: the cost of the Volkswagen Dieselgate." Journal of Global Responsibility 7.2 (2016): 288-302.
Robertson, James Andrew. "The danger of Dieselgate: how Volkswagen’s diesel scandal critically damaged the wider market." Annals in Social Responsibility 3.1 (2017): 68-69.
Shirey, Maria R. "Lewin’s theory of planned change as a strategic resource." Journal of Nursing Administration 43.2 (2013): 69-72.
Tidwell, Matthew. May I offer you a gift card? An analysis of Volkswagen's crisis response strategy in the wake of its Dieselgate scandal. Diss. University of Kansas, 2017.
Tovey, A. "Volkswagen bets on electric cars after ‘dieselgate’scandal’." The Telegraph 17 (2016).
Zhang, Boyang, Jari Veijalainen, and Denis Kotkov. "Volkswagen Emission Crisis: Managing Stakeholder Relations on the Web." WEBIST 2016: Proceedings of the 12th International conference on web information systems and technologies. Volume 1, ISBN 978-989-758- 186-1. SCITEPRESS, 2016.
