What leaders can learn from Volkswagen’s €6.5bn screw up

In case you've been living under a rock, Volkswagen has had to recall 11 million vehicles worldwide this week, after admitting they test-rigged their US car emission tests.

Oops and Ouch.

Over the coming weeks, there will undoubtedly be endless discussion on the why's and wherefores of this cautionary tale. Along with thanking our lucky stars our name is not Martin Winterkorn, leaders can learn vicariously from VW's screw up.

Senior executives in many corporates today are faced with eye-watering pressure. They are expected to perform in the short-term. Often the annual financial target out-trumps more long-term, sustainable success measures.

The demands to deliver stellar profit numbers, year in and year out, despite increasing market volatility and uncertainty, can be breathtaking for me (as a leadership coach) to witness - let alone for leaders to experience.

It’s no wonder this pressure leads many overwhelmed executives to make unethical decisions.

But as VW has discovered, that's a slippery slope you don't want to follow brothers and sisters.

This article is not about making excuses for VW’s major stuff-up. Its also not about me getting all judgemental on your ass. What makes (normally) ethically-driven people to make stupid mistakes is a debate for another day.

I simply want to gently remind you why it’s not in your best interests to let go of honesty and ethics. Even when the immediate pressure to do so is more compelling than the popular kid at school inviting you to go joyriding in their stolen Ferrari with a random hottie.

Here are 4 leadership lessons we can learn from VW’s epic fail:

1.  That unethical choice will haunt you long after the short-term gain. Even (and especially) if your indiscretion never gets found out.

This week’s humiliating confession? When I was in Executive Search, I once lied to my client about the reason why their preferred candidate turned them down. It wasn't a biggie and I did it only once. That was over 8 years ago. It still haunts me to this day. Every time I think of that "little white lie" I get rocks in the pit of my stomach. Telling the truth (no matter how much it hurts) just feels better. Period.

2. One lie leads to another which leads to another. Before you know it, it’s snowballed into the mother of all avalanches. There would have been countless occasions during the VW rigging debacle when the opportunity to fess up was present. If just one of the executives behind this dirty little secret had the courage to admit the lapse in judgement, it might have prevented it from becoming the behemoth blunder which it has.

3. It can be counterproductive to ditch the ethics. It can cost you a tonne more in the long run. VW shares have fallen about 38% in two days. The gains they made in fiddling the figures is a drop in the ocean compared to the financial meltdown they are experiencing now. You are more successful in the long run simply by doing the right thing.

4. Trust and reputation (personal, brand and organisational) takes forever to build, a moment to lose and is virtually impossible to recoup once it’s gone. Admittedly, New Zealand is small, but one indiscretion by a certain senior executive in this country still haunts him at every job interview he attends. No one says anything but everybody knew what he did. Do you really want to risk that?

If you sit on the top table, you have a responsibility to model the behaviour you want others in your company to demonstrate. Culture starts with you and your peers. Yes, this does mean rocking up to the Board or CEO with the news they don't want to hear at times (read more here on how to tackle that little funfest).

But do it you must.

A breach in ethics is often a systemic issue, even an industry wide issue - there are fears that other diesel manufacturers may have been employing the same tactics as VW. If your organisational culture says (even indirectly) that it’s ok to cut corners when it comes to ethics and morals, then you can be darn sure that people will.

So whilst we leave Martin Winterhorn falling on his sword "endlessly sorry" for the firm "totally screwing up", we might want to heed the words of Epictetus, the Greek philosopher, whose wise musings are as relevant for leaders today as they were 500 years ago:

"Cultivate the habit of surveying and testing a prospective action before undertaking it. Before you proceed, step back and look at the big picture, lest you act rashly on raw impulse."