vwRECENTLY WE FOUND OUT that Volkswagen has been taking illegal steps to evade emissions regulations on their diesel vehicles.

That’s been publicized broadly, so I don’t need to talk about what they did.  Instead, I’d like to point out some cautions about WHY they did it.

Because it’s something which can affect each of us in our businesses.

There’s incredible pressure to be competitive in the marketplace.  In this case, we’re talking about a 9 trillion dollar industry, with companies fighting to shave pennies for an advantage.  The industry employs almost a million people in the US alone, so there are a lot of lives affected.

This creates an environment where people feel the pressure to perform, and to do anything to gain advantage.

So some engineers in VW found a way to gain advantage by optimizing performance in a certain way under testing conditions.  At this point we don’t know how many people were in on the decision, but it’s not the kind of thing that can be hidden off in a corner by one rogue person.

These guys are experts at what they do, and it’s going to be obvious when such a dramatic improvement is made.  Certainly there were plenty of people who had some awareness, either giving their support or perhaps not wanting to know the real story.

Plausible deniability and all that.

This is what happens when the pursuit of business goals takes over the foundation of values in a company.  And it’s a self-reinforcing system.  We might imagine a scenario like this:

  • You decide to push a limit too far – perhaps just to see if can be done.
  • I reward you for the results, but I don’t probe too deeply into how you achieved them – because I worry it might create an uncomfortable situation.
  • Our boss rewards the results, and reinforces that we need more of this.
  • You start thinking that perhaps what you did is actually inside the boundaries, because you’re getting support from everyone around you.
  • We go around this loop a few times, and – guess what?  Now we’re stuck doing something clearly illegal or immoral, but we know of no way to achieve those same results while staying inside the rules.
  • So we shift to covering this up under the banners of “trade secret” and “need to know” and so forth.

You see this pattern in sports all the time, especially where millions and billions of dollars are on the line.  But it certainly happens in business a LOT more than we know.

So where were the failures in the above scenario?

  • You might have had insight that you were pushing a boundary at the very start, but it’s also likely that it wasn’t apparent at that point.
  • People avoided uncomfortable discussions about illegal/immoral boundaries.
  • Especially when it comes to moral boundaries, it’s quite possible for people to have different standards that they don’t want to impose on others.
  • The larger the organization, the easier it is to place blame on someone else’s (assumed) approval and support.  When you don’t really want to know the true answer, it’s often easier to assume the answer you want to hear.

You might think that your business is small enough to be immune to this kind of thinking.  But I’ve seen it happen with just two people.  It can happen even with one, perhaps like Bernie Madoff.

How do you prevent this?

  • Try your best to state the moral and legal boundaries you will stay within.
  • Put a process in place to handle the uncomfortable conversations.  If you never have any, something’s wrong.
  • Be honest about the impact of transgressions: “If we violate our principles, we will do everything in our power to make it right.  And if we can’t, we’ll shut down the project or even the company to ensure it can never happen again.”

Does that last sentence make you sweat?  It should.  But it’s the real test of how serious you are about the values of your business.

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