Running head: LEADERSHIP BEHAVIOR AND ORGANIZATIONAL CULTURE

Leadership Behavior Impact on Organizational Culture:

Volkswagen Group Deceiving Scheme

Deem N. Silva

South Texas College

Ruben G. Flores, Ph.D., MBA, MPA

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Abstract

This paper explores the critical changes the Volkswagen Group organization endured, after been

exposed worldwide for fabricating a deception scheme with the effort to be at the forefront of

innovation. As a consequence, leadership and organizational culture were affected by the

atrocious event. However, the events led to the enactment of a new trustworthy leader; the

outcome of the organizational capacity for change resulted in a favorable turnaround. This study

aims to use the Volkswagen case to examine the intricate relationship between leadership

behavior and organizational culture with peer-reviewed articles to support the proposition. The

employed articles come from different researchers and, therefore, connecting their research

findings to study the influences that leadership behavior has over organization culture.

Subsequently, this study provides the importance of leadership behavior as part of the findings

since the articles seem to express greater emphasis on this variable.

Keywords: leadership, behavior, culture, trustworthiness, capacity for change

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Leadership Behavior Impact on Organizational Culture:

Volkswagen Group Deceiving Scheme

This investigation intends to describe the cultural changes The Volkswagen Group or

VWG implemented before and after being uncovered for having introduced deceptive devices in

their diesel emission line vehicles (Patra, 2016). The VWG is a worldwide company that in the

last decade has been trying to lead to innovation market. One of their innovations was to create a

line of vehicles that will utilize diesel as the fuel source. The diesel vehicles had high acceptance

in the consumer market for the features it provided. To achieve innovation, the VW leadership

had to create a favorable organizational culture to device unethical practices that led to

worldwide indignity. Hence, there is a relationship between leadership behavior and the impact

on organizational culture. It is important to note that leadership behavior is a well-known force

that shapes cultural behavior, which is a vital component for organizational effectiveness.

Literature Review

Leadership and organization culture

The VWG case depicts the influence that leadership behaviors have over the

organizational culture. Leadership can be identified as a complex and multidimensional model;

which highly influential in shaping the corporate culture (Xie, 2019). Leadership behavior is

intrinsically connected to the organizational culture, and it is indivisible as they need each other

to exist. Literature reviews highlight their codependency, and in fact, researchers have attempted

to find any relevant meaning as separate entities, but they do not have much to offer on their own

(Nguyen & Mohamed, 2011; Chong, Shang, Richards, & Zhu, 2018). The intricate association

of these two entities is what gives identity to an organization. When an organization it is

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founded, also its culture, and at the same time, it will determine the organization’s capacity under

challenging circumstances the permeate in fast-changing markets (Chong et al., 2018).

It is essential to analyze relevant characteristics of how organizational culture is defined

and how it affects leadership behavior. According to Tsai (2011), organizational culture is a

system of beliefs and values possessed by individuals that are part of an organization. Since the

organizational culture characterizes the values, beliefs and behavioral norms practiced by

individuals to make sense of circumstances they experience in the work environment, it can

affect everyone’s attitudes and behaviors (Tsai, 2011). Is elemental to know the values of the

organization with the intent to discourage potential conflict amongst the individuals (Tsai, 2011).

To add, Tsai (2011) also noted that culture is a social concept that can be learned and

disseminated by every individual since it helps to establish behavioral rules within the

organization.

Nevertheless, organizational culture leads the way for individuals on how to approach

their daily activities. The outcome of the cultures is also affected by one more piece, leadership

behavior. Leaders have an impact on the cultural outcomes since they are responsible for

guiding the organizational culture and influence followers with their leadership style. Leaders

are agents of change; consequently, their behaviors come to shape those of their followers

(Chong et al., 2018) and, therefore. Research shows that leaders exert their influence with the

intentions to shape the organizational culture. There are some leadership styles such as the

transformational and transactional, that have the potential to lead to achievement, human well-

being, adaptiveness, hierarchy, mission, and vision (Nguyen & Mohamed, 2011; Chong et al.,

2018). In this last literature review, the importance of leadership behavior and the impact on
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organizational culture is defined by the influence of the leader and the perceived assumptions of

followers.

Organizational culture awareness

The above analysis details how effective leadership behavior affects organizational

culture. Research performed by Davis and Cates (2018) discovered that 35% of high-ranking

management comprehends the notion of organizational culture. There is considerable supporting

evidence that leaders should be held accountable for comprehending and employing

organizational culture in order to achieve the organizational objectives (Davis & Cates, 2018). A

leader that has the intention to change or it is trying to understand how the organization functions

it is necessary first to understand how the current culture of the organization is helping or

holding back its processes (Davis & Cates, 2018). Obtaining such knowledge will determine the

success of failure for the organization, and it cannot be stress enough that organizational culture

cannot be underestimated.

Volkswagen Group leadership and culture

To contextualize the VWG case and the relationship between leadership behavior and the

impact on organizational culture. To obtain a better view of these concepts is crucial to

determine what led VWG to incur in such a scandal. The VWG had been struggling to increase

sales to compete with other automaker industry giants. The goal was to create an emission

system that would keep diesel vehicles in compliance with environmental regulations, and

especially to meet the US standards (Elson, Ferrere, & Goossen, 2015). With the diesel emission

initiative, the objective according to Elson, Ferrere, and Goossen (2015) was not to accumulate

more wealth, but to spearhead the innovation culture for being the creators of an affordable,

commercially designed diesel vehicle. Throughout the development process the group of
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engineers who were leading this project started to feel the pressure from top managers due to

budget, time, and mainly the complexity for developing such system (Goodman, 2016;

Robinson, 2019).

The constraints described above were some of the factors that incite VWG decision-

makers to introduce a cheating device in the emission system. The deceiving device was

designed to provide a false reading for the highly toxic nitrogen oxide or NOx, emitted by the

diesel engine (Arbour, 2016), allowing the admission of the vehicles to be sold in US ground.

The cheating device became public in September 2015, when researchers were very interested in

how VWG was able to achieve such excellent efficiency in their diesel cars emission systems.

The discovery brought news that unleashed a wave demands that changed the course of what

VWG had in mind. The discovery showed that the diesel engines were polluting 40 times more

than what was allowed by the US Environmental Procreation Agency, or EPA. This finding was

a serious offense since high NOx fumes in the environment are harmful to the safety, health, and

well-being of people (Patra, 2016).

As a consequence, VWG had suffered the adverse effects for the decision they made to

allow the deceiving device considering they have lost billions in numerous lawsuits from many

entities, and to add their reputation was tainted after being a respectful brand for many years.

There is much research on what led the VWG to use deception to achieve their goals; however, it

is interesting to find that many coincide in the following factors. For instance, Parta (2016) hold

the company leadership accountable for these acts. Elson et al. (2015) estates in an article that

the stakeholders are accountable as well. Moreover, Crête (2016) holds accountable for the

ineffectiveness of corporate governance. These are some of the most relevant claims depicted by

peer-reviewed research. It is interesting to note that initially, the VWG leaders denied they had
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any knowledge about the scheme, they blamed the group of engineers, but eventually a few years

later the leaders admitted that they had intentionally added the deceiving device (Parta, 2016).

Leadership accountability

It is essential to note the way the leaders reacted when they were publicly exposed, and

the news about what they had done was disseminated. The leaders' first effort was to deny the

facts and blame the group of engineers that were tasked for developing a solution. When a

leader uses denial to justify events such as those of VWG and does not take responsibility for the

actions of their employees, it denotes an implausible leadership behavior. This accusation is

something critical since research shows that employees abide by their leaders' ethical principles

(Nei, Foster, Ness, & Nei, 2018). Admittedly, it is safe to say that if the engineering group

behaved unethically by introducing a deceiving device, is because they learn that behavior from

their leaders. In the same way, Nei, Foster, Ness, and Nei (2018) stated that the relationship

between leadership ethical conduct to employee perceptions of leadership efficiency affects

employee satisfaction, commitment, and readiness to report management issues. In the case of

VWG, a question that we can develop of future research is, why did the engineering group did

not report the implementation of a deceiving device? According to Elson et al. (2015), it is hard

to believe that leaders were not aware of the scheme since German organizations have a very

well organized two-tier, management, and supervisory boards.

Leadership approach during the recovery process

Since the day VWG was publicly exposed for their wrongdoings, they have been

undergoing various changes after facing the charge of the emission incident. The capacity for

change the organization implemented has been substantial working, although they are still

experiencing organizational changes, they made some drastic moves to keep the company alive.
LEADERSHIP BEHAVIOR AND ORGANIZATIONAL CULTURE 8

The CEO that was in operation when the deception of the emission system event came to light

had to resign due to the pressures of the demands (Welch, 2019). The organization promoted an

internal CEO which did not take long to initiate the change by restructuring the leadership

(Welch, 2019). This initial restructure of leadership was the first step in reacting to the crisis

VWG was experiencing, although making changes at that level of the corporation, according to

Welch (2019), they inflict many challenges and risks. The new CEO knew that time was a

crucial element for the change process. It is elemental for leaders in the 21st century to avoid

wasting time during challenging times, and this is the reason why many organizations fail, they

take too long to react to the drastic organizational changes (Focusing on Organizational Change,

n.d.).

Leadership Trustworthiness

One of the challenges many leaders face when they are relatively new to an organization,

and to get everyone on board with change is to behave trustworthily. Several studies attest that

trustworthiness is one of the sought after leadership traits in many organizations, and that is

elemental for an ethical leadership behavior (Nei et al., 2018). When the changing pressures,

leaders need to remain trustworthy and look for the best interest of the organization and the

employees to get them to buy into the sought after change. Especially when an organization is

experiencing turmoil for the lousy decision from previous leaders, in the case of the VWG, the

new CEO strategy for changing the culture entered strong and has proven efficiency. According

to Welch (2019), when the new CEO executed the strategy to rewire the airplane while in the air,

to stabilize the organization, there were tangible results. Parta (2016) remarked that the new

CEO is being noted for maintaining transparent and effective channels of communication across
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the entire organization, something that was also noted by Parta that the previous CEO failed to

transmit.

Findings

This study's overall objective was to validate to demonstrate the connection between

leadership behavior and the impact on organizational culture. The articles utilized to defend the

hypothesis for this research, all led to the intrinsical connectedness leaders have to the culture.

Nevertheless, throughout the study, there are other variables, such as individual behavior,

leadership trustworthiness, and decision-making paradigms. It can also be seen how all the

articles made a greater emphasis on leadership behaviors since basically, they set the tone. With

this comment, there is no implication that culture is less important; the findings mentioned that

they both need each other to exist. The emphasis placed in leadership is to convey its importance

in an organization setting and to bring awareness to the positive and negative consequences of

the leadership behaviors.

Positive Leadership behavior leads to a healthy organizational culture, and a healthy

organizational culture survives the inclemency of the turbulent times many organizations

inevitably experience. Under these circumstances, organizations hold a better capacity to adapt

and to execute the necessary changes to be able to stabilize in a new modality until the next

change. Conversely, in the VWG case, it can be seen how an unhealthy culture that was driven

by poor leadership behavior, can be adopted and rescued by positive leadership behavior, and

changing the mindset of the culture and conduct back to healthy. Moreover, it was mentioned in

an article that leaders are responsible for understanding how the culture of an organization helps

or affects their goals, and it cannot be stress enough that is not possible to undervalue

organizational culture.
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Conclusion

Throughout the study of the relationship between leadership behavior and organizational

culture, it was possible to observe the importance of leadership behavior and its ramifications to

follow practices that do not exhibit a character of trust. In the VWG case, the former CEO took

advantage of the unhealthy culture that was shaped by the imposed pressures to take a pragmatic

approach, risk vs. reward using deception. On the other hand, the new CEO took advantage of

the unhealthy culture to create a sense of urgency to change. The trustworthy leader embarked

on a mission to replace bad leadership behavior, restructuring, and introducing innovating

products that eventually allow the company to achieve positive results (Welch, 2019). To be

able to achieve the before, good leadership behavior leads organizational culture to build an

environment that tries and thrives regardless of the complications. Finally, leaders need to be

cognizant that organizational culture is an important aspect that prevents or improves an

organization from or changing. Also, to gain the most out of the relationship between leadership

behavior and organizational culture, the leader needs to continually assess the culture by

adequately measuring the capability for change to preserve a healthy culture that boosts success

(Davis & Cates, 2018).

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