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W4384197114 abstract "Abstract The Volkswagen (VW) emissions scandal was one of the largest examples of organizational wrongdoing in corporate history, costing the firm immense damage to its reputation and over $33 billion in fines, penalties, financial settlements, and buyback costs. In this paper, we draw on the concept of boundary work to provide insight into the causes of wrongdoing at VW. Supplementing other work on the scandal, we show how the ways in which boundaries became established in the organization resulted in an internal context that defined “in” and “out” groups, normalized certain behaviors, and limited communication across intraorganizational boundaries. This allowed wrongdoing to not only become established but also to go unchallenged. We provide contributions to broader understandings of organizational wrongdoing and to the temporal unfolding of boundary work by theorizing how a combination of cognitive, horizontal, and vertical boundaries can create an infrastructure of organizational design that permits organizational wrongdoing, prevents it being challenged, and ultimately normalizes it in everyday activities. Keywords Wrongdoing Boundary work Cognitive boundaries Organizational design Volkswagen scandal Dieselgate Citation Fey, L. and Amis, J. (2023), Organizational Wrongdoing, Boundary Work, and Systems of Exclusion: The Case of the Volkswagen Emissions Scandal, Gabbioneta, C., Clemente, M. and Greenwood, R. (Ed.) Organizational Wrongdoing as the “Foundational” Grand Challenge: Definitions and Antecedents (Research in the Sociology of Organizations, Vol. 84), Emerald Publishing Limited, Bingley, pp. 171-192. https://doi.org/10.1108/S0733-558X20230000084009 Publisher: Emerald Publishing Limited Copyright © 2023 Laura Fey and John Amis Organizational wrongdoing is the (co-) organized behavior engaged in by individuals, groups and organization that violates laws, transgresses industry or professional codes, and/or results in the breach or neglect of social norms or ethical rules (Palmer & Moore, 2016). Scholars, investigative journalists, and organizational whistle blowers have highlighted the consequences for individuals, businesses, and society of organizational wrongdoing across a range of empirical settings. Much of this work has positioned wrongdoing as an abnormal event attributable to either a single person or very small number of individuals working together (e.g., Clemente & Gabbioneta, 2017; Effron et al., 2015; Gabbioneta et al., 2013; Kish-Gephart et al., 2010; Lavena, 2016; Schnatterly et al., 2018; Starbuck & Milliken, 1988; Van Rooij & Fine, 2018). A second stream of research has viewed wrongdoing as a natural, even predictable, outcome of organizational arrangements (Balch & Armstrong, 2010; Dempsey, 2015; Fleming et al., 2020; Palmer & Moore, 2016; Rosa & Vaughan, 1997; Sims & Brinkmann, 2003). It is the latter perspective that we adopt here. In so doing, we align with Fleming et al. (2020) call for research into how wrongdoing becomes normalized and systematized in organizations. Taking a position that wrongdoing can emerge as a consequence of organizing forces us to move beyond individual motivations and uses of personal power bases to think more broadly about organization designs that allow such activities to emerge and, crucially, often go undetected for long periods. While work has pointed to the importance of organizational design for our understanding of wrongdoing (e.g., Clemente & Gabbioneta, 2017; Gabbioneta et al., 2013; Gaim et al., 2021; Kish-Gephart et al., 2010; Palmer & Moore, 2016), insight into how it emerges and can become established remains nascent. Our work furthers understanding in this area through an examination of the “Dieselgate” scandal at VW, the largest car manufacturer in the world (Statista, 2021; The Economist, 2021). The wrongdoing that emerged following VW’s admission in September 2015 to the use of software installed in cars – the so-called “defeat device” – to fake emission test results in over 11 million cars worldwide constituted one of the largest corporate scandals in history. The purpose of our paper is to assess how organizational design through the purposeful creation and maintenance of internal organizational boundaries contributed to the malfeasance that took place at VW. Our work is founded on data from a rich autoethnography supplemented by corporate documents and media coverage. In so doing, we seek to supplement other work on this scandal that has pointed to the ways in which organizational culture, power inequalities, and hierarchical arrangements influenced the emergence of corruption at VW (see, for example, Cavico & Mujtaba, 2016; Clemente & Gabbioneta, 2017; Ewing, 2017; Gaim et al., 2021; Rhodes, 2016). We show how boundary work contributed to an internal context that defined “in” and “out” groups, normalized certain behaviors, and limited communication across intraorganizational boundaries. This allowed wrongdoing to not only become established but also to go unchallenged. Theoretical Framework As our understanding of organizational wrongdoing has developed, so it has become understood that power structures, administrative systems, and culture can lead not just to effective ways of working but also to negative outcomes (Palmer, 2013). Understanding how organizational structures can lead to malfeasance, however, remains nascent (Palmer & Moore, 2016). Organizational Design and Wrongdoing Structures in organizations are intended to provide organizational actors with formal and informal guidance regarding how to act. They enable organizations to function and provide an orientation for decision-making. Intrinsic to such arrangements are distributions of authority and power that help determine how employees should act, particularly when they are confronted with problems that they cannot solve (Palmer, 2013). Formal authority structures ensconced in hierarchical arrangements establish a chain of command allowing subordinates to pass key decisions to a more senior official. So far there is limited work on how such hierarchical arrangements influence the emergence of wrongdoing (Brahm et al., 2021; Langley et al., 2019; Lavena, 2016). A further important feature of organizational designs is the ways in which work is divided among subunits. This necessitates the establishment of effective integrating and communication devices that allow information to flow effectively. The ways in which information is either shared or not shared will likely shape decision-making processes and subsequent courses of action (Palmer, 2013; see also Schnatterly et al., 2018). Furthermore, as individuals or groups accrue power, so they develop opportunities to contour organization designs and information flows to suit their own interests. This can lead to tensions over appropriate courses of action, which, as Gaim et al. (2021) showed in their study of the VW Dieselgate scandal, can create a situation in which subunit objectives are “achieved” through impression management rather than substantive performance outcomes. Work linking design arrangements to organizational wrongdoing has largely centered on two explanations. First, research that defines wrongdoing as an abnormal activity has largely built on rational choice theory with actors described as engaging in mindful and rational actions in the pursuit of some form of self-interest (e.g., Anand et al., 2004; den Nieuwenboer et al., 2017). The second perspective views wrongdoing as an inherently normalized phenomenon that emerges as an outcome of administrative systems, situational social influences, and power structures (e.g., Fleming et al., 2020; Palmer, 2012). Here, wrongdoers are not viewed as engaging in mindful and rational deliberation; rather, wrongdoing is linked to the social context in which they operate (Ashforth & Anand, 2003; Palmer, 2017; Palmer & Maher, 2006). We build on this emerging stream of work by drawing on the concept of boundary work to further understanding of how such organizational arrangements develop and their potential consequences. Boundary Work Boundary work constitutes “the purposeful, reflexive effort of individuals, collective actors, and networks of actors to shape a social boundary” (Lawrence & Phillips, 2019, p. 158). Boundary research has traditionally focused on studies of everyday work in order to reveal formally understood roles and jurisdictional boundaries that may be blurred or reinterpreted as they are enacted in situations where collaborators are dependent on each other to accomplish their task (e.g., Grieryn, 1983). Based on this understanding, boundary work has been seen as one of the key means to legitimize actions. As organizational boundaries become socially accepted, they can become institutionalized to the point that they are very difficult to change or erase (Zerubavel, 1993). As research into boundary work has evolved, so it has become understood that boundaries are often co-constructed outcomes of organizational insiders and outsiders (Bechky, 2012). Such work is intentional (Langley et al., 2019) and leads to the creation and/or legitimization of particular practices. Thus conceived, boundary work has material effects on the distribution of power and privilege (Zietsma & Lawrence, 2010). It also determines whose interests matter. Langley et al. (2019) described three categories of boundary work. Competitive boundary work involves mobilizing boundaries to establish advantage over others. In configurational boundary work, individuals manipulate patterns of differentiation and integration among groups in ways that bring some activities together and keep others apart. Finally, collaborative boundary work describes the alignment of boundaries to enable collaboration among subunits. In each case, boundary work involves ongoing, situated activities that require social interactions and practices among various actors over time (Gieryn, 1983, 1996). Thus, boundaries not only differentiate groups, but they also bring together individuals explicitly and implicitly (Berthod et al., 2021), often in the guise of organizing for effective and efficient operation. Building on the work outlined above, we consider boundary work as having the potential to offer novel insights into the ways in which organizational design can lead to ‘normalized’ wrongdoing. While we know that boundaries act to include and exclude particular actors, the links with organizational wrongdoing remain underexplored. Langley et al. (2019) and Berthod et al. (2021) are among those who have recently suggested that the boundary perspective constitutes a potentially useful lens for studying organizational wrongdoing by highlighting intangible elements of organizational design as well as emphasizing the roles of those in boundary construction. Such work can also allow us insight into who is involved in decision-making, who is excluded, what is prioritized, and how associated activities can emerge and become established. Methods Data Collection Data for this case study are drawn from three main sources (see Table 1). Following Hughes and Pennington (2017), the case principally rests on an autoethnography based on the first author’s experiences and personal diaries kept while she worked at VW’s headquarters between 2013 and 2018, a period that included the emissions scandal being exposed and VW’s subsequent response. The first author worked initially as an apprentice while completing her undergraduate degree, gaining experience across six departments at the company’s headquarters in Wolfsburg, Germany. From January 2017 until September 2018, she worked full-time as a manager in the Human Resource-Marketing Department. This resulted in her having regular interactions with people from across the entire headquarters. The autoethnography was constructed from personal diaries and calendars that documented the first author’s daily activities, observations, moods, and opinions. Table 1. Data Collection Sources. Data Source Time Period Use Autoethnography 2013–2018 Detailed insight into activities and behaviors at VW Company documents (e.g., Annual Reports, strategy documents) 2008–2020 Understanding of official strategic intent and what was emphasized by VW leadership Media Footage (newspaper articles and documentaries) 2015–2020 Analyses of VW, the car industry and the Dielselgate scandal Our second source of data comprised documents, including VW’s Annual Reports (ARs) from 2008 to 2020; press statements; electronic documents on the company’s website; and written accounts relating to the scandal. The year 2008 was chosen as the starting point as it marked the introduction of the VW “Mach 18” strategy, a 10-year strategy intended to make VW the world’s leading car manufacturer by 2018. Particularly useful were the ARs from 2015 and 2016 that described the impact of the scandal and the resulting planned changes, and the reports from 2017 to 2020 that documented the implementation of these processes. Third, we collected an extensive array of media data. To mitigate the ideological biases that characterize newspapers in particular, we drew on the four biggest German newspapers (Bild, Süddeutsche Zeitung, Frankfurter Allgemeine Zeitung and Handelsblatt) and the British newspapers The Guardian and The Times from September 2015 to September 2020. The six newspapers collectively allowed a relatively balanced approach to coverage of the scandal. Two TV documentaries, one from Netflix titled “Dirty Money” and the other from Arte called “Dieselgate – Die Machenschaften der Deutschen Automobilindustrie” were also analyzed to draw additional insights.1 Data Analysis In analyzing the data, we followed a theory building process moving between the data and the literature. Tables 2 and 3 provide an overview of how we moved from the raw data to our emergent theoretical themes. As autoethnography is both process and product, it is important to describe our data analysis in detail following a constructive (Feldman, 2003) and evaluative (Richardson, 2000) approach to develop confidence in the robustness of the data and the analysis. In the first phase, the autoethnography was read by the co-author and emergent themes that seemed empirically and/or theoretically important were highlighted and discussed. This allowed further elaboration of the themes to create plausible connections between the data, theory, and common sense (Langley, 1999). This process was repeated two further times, allowing us to challenge, refine and develop our understanding of what happened, and why. Table 2. Emergent Themes Pre-Scandal. Data Segments Emerging Themes Overarching Themes In the Company’s headquarters in Wolfsburg, Professor Dr Martin Winterkorn, Chairman of the Board, and Walter de Silva, Head of Group Design, discuss every single detail. Both are perfectionists. Sometimes they know what the other is thinking without speaking a single word…. The two men complement each other perfectly. [Winterkorn] is never satisfied: “There’s always room for improvement.” De Silva is of the same mold: “Many people equate creativity with complete freedom, but it is actually discipline that is the basic prerequisite for creativity.” (AR, 2009, pp. 16 & 19) Homogeneous Thinking Cognitive Boundaries I remember my first day. I went to work by foot and could not find the right entrance. The Volkswagen site in Wolfsburg is like a city within a city and all gates are protected by security guards. I finally made it to the right gate and the guard told me where I had to go. In my first week I met the other 24 new employees that made it into a programme for which more than 3,000 people applied. We knew that Volkswagen was a very good employer and that it had difficult entry requirements. We got congratulated for our achievement and learned about the organization, its strategy, the production of Volkswagen cars and the legacy that came with it. The group of applicants that got accepted was very homogeneous. The women that told us we should better not think about dying our hair, having tattoos or piercings. (Autoethnography) “Team work instead of silo thinking. Mr. Blessing, [the HR board member in 2017] stated that Volkswagen will renew its culture throughout the Group after the emission scandal. He sees Volkswagen in need of a profound transformation process.” (Menzel, 2017) “Our mission – the future. The route has been mapped out, the strategy finalized: Our aim is to make the Volkswagen Group the leading automaker by 2018.” Pursuit of Perfection Cognitive Boundaries “Prof. Dr. Martin Winterkorn, Volkswagen’s Chairman of the Board of Management, is a perfectionist who knows the value of technological excellence.” (AR, 2010, p. 28) A main interview in the 2010 AR with a senior manager has the title “precision and perfection.” The word “perfection” is used six times in the interview. (AR, 2010) If mistakes took place employees would not always talk about them. The fear of being reprimanded for a mistake or being looked down upon by colleagues was always high. Successful managers were viewed as not making mistakes. Everyone knew stories of how senior managers would castigate front-line workers and middle managers if the quality of a car or car part was deemed inadequate. (Autoethnography) Employees must believe in ambitious goals their company sets. (AR, 2010) Active Participation missing Vertical/Horizontal Boundaries Working in various departments was always based on the same pattern. Employees could be experts for their task but at the end the manager would decide what strategy to implement to recruit graduates, what color scheme to use or what to do in general. Hierarchy always outdid expertise. (Autoethnography) In the old Volkswagen world, nothing took place without pressure from the top. (Busse, Hägler, Hulverscheidt, Janisch & Ott, 2017). The emissions scandal has recently turned the Volkswagen Group upside down. The nervousness can be felt at all levels of the 600,000-employee group – not just on the assembly line, where temporary workers fear for jobs and permanent workers for the future. The diesel manipulation has also left its mark on the highest floors – the board of directors, the presidium, supervisory board. The power relations that had been established over the years have fallen apart. Because the goals of the most important actors are not the same everywhere: While some fear for their dividends, others fear for jobs and entire plant locations. (Dpa, 2016) Creation of Rigid Hierarchies Vertical Boundaries Müller, the new CEO had his first working day. He gave 1,200 managers the chance to talk to him and ask questions. Müller was purposeful, relaxed, and this openness transferred (after some initial hesitancy) to the other managers. Müller stated that the “we” would be important at VW now, not the voice of one individual. In comparison, when Winterkorn was in charge managers needed to draw cards for the right to ask questions during events with their CEO. This stopped managers from talking to one another. (Bay & Dowideit, 2015) The treatment of senior managers became seen as exemplary practice lower down in the hierarchy. I remember the introduction of our new HR area manager, a position one level below the board of management. Our head of department asked us to send questions we wanted to ask the new area manager so that she could approve them before we went to a formal introductory meeting with her. No ad hoc questions were permitted. (Autoethnography) The core elements of “Strategy 2018” included a targeted expansion of the brand and product portfolio and a further strengthening of the global presence. Translated into the daily work at VW this meant more brands, more models, more cars. The main thing was to gain more and more. (Fromm, 2016) Growth above Everything Vertical/Cognitive Boundaries Table 3. Emergent Themes Post-Scandal. Data Segments Emerging Themes Overarching Themes Realigning structures, mindsets, the way we approach things (Momentum magazine interview, 2015). Move from homogeneous thinking to heterogeneous thinking Cognitive Boundaries After the new strategy “Transform 2025+” was introduced to us everyone suddenly started to talk about the need to acknowledge failure. Some departments or data labs started to introduce so called “Fuck up nights” where prominent managers and board members would discuss their biggest failures. This was all motivated by encouraging employees to not be afraid to speak up if something went wrong (Autoethnography). The new CEO talked about the realignment of structures (Momentum magazine interview, 2015). Flatten Hierarchies Vertical Boundaries “The new human resources strategy is setting innovative trends. Hierarchies are being dismantled and modern forms of working such as agile working – an approach whereby most of the responsibility for the work organization is transferred to the teams – are set to be expanded” (AR 2019, p. 149). One of my main ideas was that I wanted to change the way VW appeared to potential applicants and the public. I suggested that we no longer wear suits at career fairs but jeans, sneakers, branded college varsity bomber jackets and white shirts. It took several presentations to convince my department head but I was allowed try it out at a small career fair. It became a big success. The branded college jacket got introduced for all main VW events. It was now apparent that senior managers were open to new ideas from lower level employees in a way that never happened before “Dieselgate.” I was also given much more responsibility for projects on my own (Autoethnography). Emphasis is put on managers and employees to “encourage, protect and value the reporting of concerns and suspected wrongdoings” (AR, 2019, p. 63). Organizational Culture Cognitive Boundaries Changing the VW culture was declared a priority. New values were introduced and promoted relentlessly. Being critical was supported. In the HR-Marketing department, I witnessed a big jump from a very conservative culture to one that was open and supportive (Autoethnography). Rather than an emphasis on secrecy, collaboration across VW sites was encouraged. “The design of the production network enables us to respond dynamically to changes in demand at the sites. [We can] even out capacity utilization between production facilities” (AR, 2019, p. 174). Horizontal Collaboration Horizontal Boundaries When I started to do career events it was very much about not sharing all of my information with other departments and other VW brands. By 2018 this was very different. I was asked to reach out to other brands within the Volkswagen Group and we even had a shared calendar with other brands to see who would be at what event. The same happened at the department level, “sharing is caring” started to become a regular refrain, at least among most of the younger colleagues (Autoethnography). To establish the main themes, we built on the events that emerged as significant to the development of Dieselgate that were associated with design elements of the organization. Following an interpretive research tradition, we went back and forth between the data, the literature and the emerging structure of theoretical themes and theoretical implications by reading and rereading the material (de Rond & Lok, 2016; Mantere & Ketokivi, 2013; Miles & Huberman, 1994). Findings Our findings below show the ways in which boundaries were actively created and reinforced resulting in vertical and horizontal divisions between groups across the organization. Moreover, boundaries conditioned how people thought and acted, allowing value-impregnated norms to emerge and become established, and actions going unchallenged. The first author’s observations and experiences, that were central to our emergent understanding of the antecedents of the scandal, are identified in the findings through the usage of examples described in the first person singular. We established the key themes that emerged in a chronological order looking at the organization in the lead up to Dieselgate before focusing on how the organization responded to the scandal. This post-scandal period was important as it revealed the conclusions of what VW’s leadership felt caused Dieselgate and what it needed to do to overcome what was an existential crisis at the firm. Pre-Scandal Growth From 2007, when Martin Winterkorn became CEO, the quest to become the world’s biggest automaker was overtly expressed internally, in public pronouncements, and in VW’s various strategy documents and annual reports. A letter to shareholders in 2011 started by declaring, “We clearly exceeded the ambitious goals that we had set ourselves for 2011.” It then went on to detail records that had been broken and how much closer the organization had come to attaining its goal: With vehicle deliveries of 8.3 million – over one million more than in the year before – we again substantially outperformed the overall market. Our sales revenue increased by 25.6 percent to €159.3 billion… a new record. (AR 2011, pp. 20–21) The desire for continual growth was placed at the center of the firm’s strategy resulting in an emphasis on recruiting only the best students and graduates and placing an expectation of high levels of employee performance in order to become the world’s biggest automaker. The question of how sustainable this growth was and how this overarching goal would be interpreted by managers and employees was not raised. On the contrary, the mantra of growth was explicitly communicated by leaders at all levels in the day-to-day running of the organization. In VW’s official communications, from 2008 onwards, the emphasis on growth was a persistent feature, exemplified by this quote from the Strategy 2018 document: “the goal is to increase unit sales to more than 10 million vehicles a year” (AR 2013, p. 49). In this environment, unsurprisingly, behaviors that led to growth were lauded. These were quickly internalized by new recruits, as the first author experienced. Importantly, with growth idealized and rewarded, competition between subunits rather than cooperation was normalized, something that served to harden internal boundaries. Thus, not only was their pressure to achieve high levels of growth within subunits, scrutiny across subunits was diminished, two conditions that raised the likelihood of wrongdoing taking place. Pursuit of Perfection Aligned with the constant striving for growth was a pronounced emphasis on the pursuit of perfection in all activities. Communication through the organization extolled the virtues – and importance – of achieving engineering mastery, not about how difficult something was to create or how many attempts were required. Incentives were tied to the achievement of high levels of performance; problems along the way were expected to be (re)solved. The way in which this striving for extremely high levels of performance became embedded in the culture at VW was demonstrated when Winterkorn was asked to explain what the term “dedication” meant to him: I discovered early on that it is only possible to achieve great things with genuine dedication and passion. Dedication is first and foremost an attitude: it means giving your all, whether you are an athlete, a scientist, or an engineer. I have the utmost respect for people who show such dedication…People whose heart is not truly in their work tend to settle for less. Dedication makes people go the extra mile, encourages them to consider how to make things even better. Dedication is a relentless driving force, it’s not an easy option–but it does leave you with a profound feeling of contentment. (AR 2012, p. 29) This quote is highly illustrative in that it aligns the pursuit of “great things” with a dedication to VW; by contrast, those who are not dedicated will “settle for less” and are clearly not valued. The emphasis on dedication underpinned the demands for extraordinarily high levels of performance that became normalized across VW. Managers across the organization frequently reiterated the importance of “perfection.” Looking at my own experience, for each semester I would hand in my marks achieved at the university to the Human Resource department so that my progress could be monitored. I, and my colleagues, felt pressure to perform at a very high level. It was also made clear to me that excellence was not considered to be a team characteristic but rather was developed through the creation of individual performance goals. This was also developed by creating competition among different individuals and groups. A consequence of this was that communication between managers of different groups was kept at a minimum to not share potential sources of subunit advantage that were perceived as being advantageous to a manager’s career prospects. The messages that I received, with the emphasis on individual performance, were aligned with this exhortation that appeared in the 2013 AR (p. 49): We will only successfully meet the challenges of today and tomorrow if all employees – from vocational trainees through to senior executives – consistently deliver excellence to ensure the quality of the Volkswagen Group’s innovations and products for the long term and at the highest level. Outstanding performance, the success that comes from it and participation in its rewards are at the heart of our human resources strategy. The pursuit of perfection put extreme pressure on employees at all levels, leading to rivalries and a deliberate avoidance of communication between members of different subunits. Again, this created a silo mentality in which solutions were individually derived and implemented. In addition to the lack of direct forms" @default.
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W4384197114 title "Organizational Wrongdoing, Boundary Work, and Systems of Exclusion: The Case of the Volkswagen Emissions Scandal" @default.
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