6 Actions to Prevent Your Company Becoming the Next Volkswagen

Have you ever cut corners? Maybe you used 1.2 line spacing in your college essays to better meet the “five-page minimum.” Perhaps you’ve parked in a no-parking zone. So, okay, you're "guilty and guilty." But you’d never go as far as Volkswagen -- true? You'd never cheat on emissions standards -- right?

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The German car company must have been unique; it must have had a monopoly on unethical people.

Unfortunately, that’s not quite true. Research and experience show that if employees are motivated by the wrong things, they are unlikely to perform their best. In the worst-case scenarios, even the best employees may cut corners in order to tick off boxes.

We should have learned this by now. A classic example: During the days of British colonial rule in India, the city of Delhi had a cobra infestation. To get rid of the snakes, the colonial government reportedly implemented a logical new policy: a bounty paid for every dead snake brought in.

Dead snakes piled up. But all was not as it seemed. A few clever entrepreneurs realized there was good money to be made from dead cobras, so they opened cobra farms. Once the government realized what had happened, it canceled the bounty. Once the value of cobras plummeted, the snakes were released from the farms. And, in the end, the city was plagued by more cobras than back before the initiative began.

Hence the name “cobra effect,” when individuals perform based on misaligned incentives that ultimately jeopardize their organization’s mission. 

Back to Volkswagen: How could an industry leader with supposedly high standards mess up so badly? What many people don’t understand about performance is that why we work determines how well we work -- which includes performing with integrity. Our research shows that the motives of play, purpose and potential improve performance, while emotional pressure, economic pressure and inertia diminish it.

Imagine what happens when individuals enjoy a scenario of high play, purpose, and potential, together with low levels of or no emotional pressure, economic pressure and inertia. 

We call this combination total motivation. The higher your total motivation (or “ToMo” for short), the better your performance.

While it’s true that environmental air quality is a good cause to work toward and could provide VW with a sense of purpose, the purpose motive is easily cancelled out when economic and emotional pressures are strong. Volkswagen is a classic example of the cobra effect.

Various reports about the company indicate that its employees endured emotional and economic pressures to meet often-unrealistic corporate sales goals. This likely led those employees to install emissions test-cheating software in vehicles, supposedly unbeknownst to senior management.

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We see these same pressures at what should be some of the most moral organizations: schools. In Atlanta, public school teachers were under serious emotional and economic pressure to produce improved student test scores. Teachers faced the threat of being fired, not receiving bonuses and even losing the federal financial aid that helped their students. This pressure manifested in a massive cobra effect, and by the time the dust settled, the state investigation had implicated 178 teachers and principals at 44 schools.

Big companies are no strangers to this kind of undermining behavior: Employees at big tech companies like Amazon and Microsoft have exhibited cutthroat behavior due to emotional and economic pressures. And now it appears that the car industry is no different -- companies across the board have been cutting corners for years.

In all likelihood the employees at Volkswagen -- just like the Atlanta teachers -- were under pressure from time or budgetary constraints. When they managed to get away with installing the deceptive software, they probably kept going, despite knowing that their actions would probably harm Volkswagen in the long run. When an employee’s ToMo is low, he or she will take the shortest path possible to alleviate the pressure.

The answer to getting Volkswagen back on its feet is not firing a few key people, nor imposing stricter checks and balances necessarily. These actions will not lead to higher integrity, either. They're measures akin to “whack-a-snake,” where the snakes are symptoms, rather than the root, of the problem.

Instead, what should have been done was improve the working experience for employees through building a culture that values things like enhanced communication and realistic goals. Transforming a complete culture requires work on many systems within an organization -- from how you lead, to to how you compensate, to how you design roles and responsibilities, as we describe in detail in our book Primed to Perform.

Here are six things you could doing now:

1. Assess risk. 

The first step to improving your culture is understanding where you have the biggest risk of cobra effects. Think about where emotional pressure, economic pressure or inertia may be high in your organization. If your company is larger than 50 people, you may have trouble assessing that by gut feel. Our free survey enables you to quickly measure the motives of your people and find out.

2. Refine your metrics.

Any time you set goals or metrics, explain how and why they connect to your mission and values, to emphasize that how you achieve goals matters. You may find you’re missing some. For example, a WalMart executive we interviewed typically kicked off management meetings by talking about “customer dollars saved,” rather than “revenue.” That terminology highlighted how the company was supposed to achieve its financial objectives.

3. Set learning goals.

A large body of research shows that people are higher-performing when they set learning instead of performance goals. MBAs given a goal of “learn six new strategies for increasing market share” had 42 percent higher market share than those given the goal of “increase market share to 21 percent.” This will encourage people to learn how to achieve their goals in the right way, rather than encourage gaming to hit a target.

4. Troubleshoot.

We set up weekly meetings for the call center agents of a consumer loan center to troubleshoot the truly tricky cases with their boss and their boss’s boss. This became the highlight of the week. Each rep brought cases for which he or she couldn’t come up with a solution, was falling short of a goal or was wrestling with an ethical dilemma. The ensuring discussion then set the tone that it’s okay not to know the answer -- as long as you both engage a group of stakeholders in coming up with an answer the organization can stand by, and learn from the experience.

5. Set the water line.

W L Gore & Associates likens its company to a ship, where associates are encouraged to take risks “that might punch a hole in the boat -- as long as the hole is above the waterline so that it won’t potentially sink the ship.” More consequential decisions “below the waterline” are made in collaboration with others. This gives employees ownership over projects by encouraging them to take the appropriate kinds of risk on their own, while seeking consensus for those that might bring the company down. Spend time explaining to your own company what types of decisions are above or below your own waterline.

6. Admit mistakes.

As a leader, share stories about your mistakes. Failure is okay as long as you learn from it. If there is precedent to talk about past errors, people will be more likely to admit what they don’t know, and raise problems before they bite.

Ironically, pressuring your organization to reach a lofty goal often leads to mediocre outcomes or worse. Instead, become a role model for learning how to achieve those goals, in the right way.

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