Impacts of Bad Management and Leadership on Volkswagen

LEADERSHIP STYLES- VOLKSWAGEN GROUP SCANDAL
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Introduction
Leadership is defined as the capacity of a firm's management to develop and realise challenging organisational objectives, take decisive and fast actions when necessary, inspire employees to perform, and outperform the available competition. Leadership is critical for any company because it sets out the direction to be followed (Răducan and Răducan 2014). Employees must know the path and direction the company is taking and who and what to follow and accomplish the set goals. Leadership involves directing workers on how to effectively discharge their responsibilities and constantly supervising the completion of tasks. The above explanation indicates that good leadership and management are essential for an organisation to succeed (Sornum, 2010). This paper provides a detailed case study of the impacts of bad management and leadership on Volkswagen by critically discussing the issues against theoretical management and leadership concepts.
Case Overview
Volkswagen Group, commonly referred to as Volkswagen AG, is a Germany Automobile manufacturer founded in 1937 to produce large volumes of low-priced cars for local and the market abroad. The firm has a history of struggling to ascertain its position in global markets. To become the globe's largest automaker and outperform its competition, the company made a series of decisions that resulted in different outcomes than previously expected. Before the appointment of Martin Winterkorn as the firm's CEO in 2007, the entity was lagging in the automobile industry due to poor company-consumer relationships. Its goal under the new management was to challenge the U.S. automobile industry via mainstream mass production of affordable automobiles, increasing the product line by designing new brands, and pushing into the Southeast Asian and Indian markets (Mansouri, 2016). However, these plans failed as the firm still faced marketability issues, especially after the 2015 emission scandal.
The company failed to align shareholders and the top management's goals. It focused on its short-term goal orientation of boosting sales in the American Market at the expense of the long-term goals of developing and sustaining trust with consumers. To meet the sales goals, pressure mounted on the middle managers, who forced engineers to develop software that detects and subsequently reduces the amount of carbon and nitrogen emissions in the atmosphere. The software was faulty, thus providing falsified emission measures. This scandal is linked to the leadership styles and the organisational culture employed by the company in achieving its goals.
The theoretical perspectives used to analyse the scandal based on bad management and leadership comprise classical, behavioural, and modern management theories. These models are comprehensive because they entail all the organisational management issues essential for the success of any business. The chosen theories are also significant in identifying the underlying impacts of bad leadership models applied by Volkswagen AG and what the company would have done to escape the scandal.
Theoretical Perspective
Classical Management Theory
Classical management theory emphasises single leadership, clearly defined and established hierarchy, and specialisation and division of labour (Kitana, 2016). It argues that a business must have a centralised leadership structure to succeed. The structure comprises the executives (or owners) who make up the top management with the role of setting up the long-term orientation. The middle management oversees various departments, while the third-level management supervises the firm's daily operations. With the executive being the top management, efficiency in the organisation is optimised due to the single leadership. Decisions and procedures are determined at the highest level and communicated downwards. Additionally, the model focuses on labour specialisation. The production process is broken down into smaller projects (to avoid multitasking), which are then assigned to specifically skilled employees. Consequently, classical management is highly concerned with increasing output and meeting employees' physical needs via the rewarding of high-performing staff members.
There are three primary theories of classical management. They comprise Bureaucracy, Administrative, and Scientific management models (Mahmood et al., 2012). Fredrick Winslow Taylor (1911) developed the scientific management theory. He argued that the flaws in any production process could be solved using improved management models. This framework provides a way for firms to effectively improve operations by employing scientific approaches to simplify and optimise tasks. Henry Fayol (1841-1925) propounded the administrative management theory. He argued that a successful firm has a formalised organisational structure where power and authority are delegated to assigned administrators (Edwards, 2018)
Fayol also suggested that increased output is subject to a clear division of labour. In bureaucracy theory, Max Weber identified three primary characteristics of an ideal organisation. These attributes entail the division of labour and specialisation, a well-established hierarchy, and formalised written or oral codes and procedures that guide employees in their daily activities within the organisation.
However, despite having many advantages, the classical management model restricts change and the implementation of new ideas. Besides, it increases the levels of pressure mounted on employees. The leadership and management style and principles utilised by Volkswagen Group are similar to those of classical management. The company has a well-defined organisational structure. Its leadership is centralised, and the decisions are made by the highest level and trickle down the management ladder. Furthermore, the company is in the manufacturing industry, where the production process is broken down into various projects, which are then assigned to specialised and skilled employees. For instance, Volkswagen Group has designers, engineers, assembling experts, and marketing and sells experts responsible for various roles. In classical management, a business's primary function is to increase outputs by optimising tasks. Since the creation of the Volkswagen AG, the company's major focus was the mainstream mass production of affordable vehicles.
Regardless of the realisation of the goals put in place by the company, it experienced an underside of the classical management theory. Elson et al. (2015) explain that the centralised and single leadership structure employed by Volkswagen AG disoriented information sharing by various stakeholders. The company's primary aim was to increase automobile production in the American market. Therefore, a lot of pressure was placed on engineers to create software that would guarantee compliance with the Clean Air Act. This led to the introduction of faulty systems that falsified carbon and nitrogen emissions into the atmosphere. Nonetheless, with top-bottom communication, employees cannot present their suggestions or complaints to their supervisors. The engineers were afraid of voicing their concerns regarding the faulty software as it would jeopardise the top management's goal of increasing production.
Behavioural Management Theory
Classical management theories emerged during the industrialisation period. They were more concerned with mass production and market expansion and less with the social needs of employees (such as behaviour and motivation). However, the behavioural management theory emphasises the human dimension of work and that there exists a relationship between human behaviour and organisational output. In this theory, the organisational culture is the main point of analysis. It is defined as a collection of expectations, values, practices, and principles that guide the actions of all individuals within a firm. It is a powerful force that determines the management's decisions and employee responses to these decisions. The contributors to this theory explained that employees are critical resources and assets of an organisation and should not be treated as machines. The two major concepts of behavioural management theory (behavioural science and human relations) explain that money alone is not enough to motivate workers (Bruce and Nyland, 2011).
Employees also...