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How Volkswagen Could Have Saved $40 Billion, MBA Profs Say Company failed at authentic leadership, which NLU's MBA emphasizes

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Volkwagen exhibit at the 2015 Detroit Auto Show. MBA professors and students at National Louis University said VW showed a failure of authentic leadership. Photo credit: Darren Brode / Shutterstock.com

The international Volkswagen scandal, which is generating daily headlines, was a failure on the part of the German automaker’s officials to practice integrity, transparency and similar values encapsulated in the concept of authentic leadership, according to a National Louis University MBA professor.

And far from just harming Germany, the scandal, nicknamed Dieselgate because the automaker installed devices on its diesel vehicles that would show emissions as lower than they actually were, is causing economic, social and environmental ills to people here in the Chicago area. Industry experts say the scandal may ultimately cost Volkswagen $40 billion.

Another MBA professor questioned whether regulators can keep up with the complex software algorithms which industries such as automakers and financial services are increasingly employing.

National Louis University’s MBA program focuses on the concept of authentic leadership, which emphasizes that leaders must practice ethical behavior, and bring their personal values of honesty and transparency to the workplace.

“Volkswagen’s outgoing CEO Martin Winterkorn took responsibility, and that was the right thing to do,” said Catherine Honig, Ph.D., National Louis University’s MBA program chair.

“But it begs the question of how all of this happened in the first place. To be sure, a very aggressive and very publicly communicated growth agenda—i.e., racing to be the number one automaker—set the stage. The leadership question, of course, is the degree to which you can drive aggressive growth while also building a culture that fosters authenticity and integrity.”

Robert Benway, Ed.D., MBA, an assistant professor who teaches business, sees Volkswagen’s stumble as a three-part failure. He explains that while success in business used to be defined as making a profit, the new goal is to practice sustainability management, which includes economic, environmental and social (justice) success.

“The Volkswagen scandal touches on all three areas of sustainability management, which dovetails with authentic leadership,” Benway said. “In Volkswagen’s case, when company leaders do not behave in an authentic manner, with integrity, the result is a loss of sustainability.”

Economically, Volkswagen’s decision to trick regulators into thinking its diesel vehicles were producing lower emissions has harmed not only Volkswagen’s balance sheet, but also hurt workers who might now be laid off, purchasers of their vehicles, suppliers, partners, dealerships, and the German nation, which relies on the company for employment, tax revenue, etc., Benway said.

“My family members own Volkswagens, and their resale value could drop,” Benway observed. “So something an idiot in Germany cooked up is hurting my family here in the western suburbs of Chicago.”

The obvious environmental damage comes in the form of higher levels of air pollutants than governments and citizens expected from the cars.

“They’re making the air dirtier,” Benway said. “Healthy people might not notice, but what if your child suffered from asthma and was adversely affected as a result?”

From a social or social justice viewpoint, Benway accused Volkswagen officials of deceiving the public in a deliberate way, which is again a failure of authentic leadership. Deceit on such a large scale seems to legitimize deception to turn a profit or realize a goal.

“I have a devil of a time with students plagiarizing work,” Benway said. “When we see such deception in world events, that seems to validate this approach to students.”

One other social blow Volkswagen dealt is to Germans themselves. Benway traveled to Germany last year and said Germans are still trying to overcome the baggage of World War II.

“This (Volkswagen scandal) is a new insult to their pride and integrity,” he said. “If I were a German, I’d be embarrassed and furious with Volkswagen.”

NLU student Jami MacCormack, who is studying authentic leadership in the MBA program, wondered whether departed Volkswagen CEO Martin Winterkorn is yet another example, among many, of an executive caught in a top-down organization who claims no knowledge of what middle managers are doing.

“Will we ever truly know if Winterkorn’s personal ethics matched the values of his organization?” she asked. “Or was he seduced away from his personal value system by the greed and hubris that seems to be so pervasive in the upper echelons of current global business?”

Honig, the MBA program chair, emphasized that leading authentically has a strong ethical component. “The question is whether an organizational leader can lead with purpose and passion while also engendering a culture where people “get” that True North has a clear moral component,” she said. “True North” is the title of the book in which Bill George, former Medtronic CEO, laid out the principles of authentic leadership.

Apart from Volkswagen’s failure of authentic leadership, National Louis University Assistant Professor James Nowotarski, Ph.D., who teaches in the MBA program, expressed concerns about nations’ challenges in monitoring corporations who engage in cheating.

“The Volkswagen situation reinforces concerns about regulators’ inability to keep up as industries become more dependent on complex software algorithms. We’ve seen this for years in financial services,” Nowotarski said.

“But many people don’t realize that automobiles today have millions of lines of software, and road tests are occurring right now for self-driving and autonomous vehicles. This has obvious implications for public safety, privacy, etc. This is only going to worsen as artificial intelligence, robots, and cognitive computing technologies continue to advance.”

For more information on National Louis University’s MBA program, please click here.