Managing Problem Solving: A Case Study of Volkswagen

This report discusses the problems faced by Volkswagen in integrating its social responsibility effectively to its business and how it can be resolved. The three major problems identified were ethical culture and standards, lack of leadership quality, and lack of self-regulation of CSR. The report provides alternative solutions and recommendations to handle the issues and problems.

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MANANGING PROBLEM SOLVING
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1-11-2019

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Executive summary
For sustaining in the competitive world, it is important for an organisation to adopt
appropriate corporate social responsibility. For the report, an organisational case was taken,
where the organisation was unable to integrate its social responsibility effectively to its
business. Volkswagen is a German based automaker company founded in 1937. The
company is serving globally in various nations, with its best quality vehicles. There was a
situation where the company has failed to conduct the CSR activity.
The three major problems that were identified for the Volkswagen case, are ethical
culture and standards, lack of leadership quality, and lack of self-regulation of CSR.
Although, these issues can be resolved, for which some of the solution or alternative option
could be was restructuring of organisational culture, changing the leadership and
organisation culture and improve managerial transparency. Moreover, some of the
recommendations included implementation of regulatory measures, provide strict ethical
guidelines, implement a third bottom line, implement an external audit on a regular basis,
and develop a chain of the monitoring system.

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Contents
Executive summary................................................................................................................ 1
Introduction............................................................................................................................ 3
Problem identification.............................................................................................................4
• Ethical Standards and Culture..........................................................................................4
• Lack of Leadership quality................................................................................................4
• Lack of self-regulation of CSR..........................................................................................4
Alternatives and solutions.......................................................................................................5
• Changing the leadership and organisation culture............................................................5
• Restructuring of organisational culture.............................................................................5
• Improve managerial transparency....................................................................................6
Recommendations................................................................................................................. 6
Conclusion............................................................................................................................. 8
References............................................................................................................................. 9

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Introduction
Corporate social responsibility is either conducted willingly or enforced by law for the
betterment of all the stakeholders like employees of the company, shareholder, investors,
society, and nation as a whole. The problem occurs when the company is unable to conduct
their social responsibility appropriately, and this problem has to be fixed instantly for the
organisation to sustain in the market (firstcarbonsolutions, 2018). For studying this in detail,
an organisational case of Volkswagen will be considered (Wang, Zhang, Marita, & KotKov,
2016).
Volkswagen is a German based automaker company founded in 1937. The company
is serving globally in various nations, with its best quality vehicles. In 2018, a CEO of the
company appointed was Herbert Diess (volkswagenag, 2018). There was a situation where
the company has failed to conduct the CSR activity. Therefore, this report will consider the
problems that were observed while this case occurrence, and how that problem can be
resolved, by taking particular action by the company. (AFB, 2018)

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Problem identification
• Ethical Standards and Culture
From the case, it was observed that one of the issues of the company was not
applicability of appropriate ethical standards and organisational culture was not following the
values and ethics (Isen, 2014). Business ethics are the set of rules or standard that the
corporate will be following and it includes the way of behavior of each individual and
organisation as a whole. The company, for instance, create ethics to create environmental
friendly cars, nevertheless created the cars that were responsible for damage to the
environment by polluting the air (Choi, 2015). Ethics are important for the corporates to
follow in order to sustain, but the companies are more concentrating over the profit gaining
instead of their ethics and responsibility towards the society. The major reason for the issue
identified was the avoidance of ethical standards in the process of engineering of the
vehicles of the company (Basadur & Gelade, 2014).
• Lack of Leadership quality
Leadership plays an important role while establishing a culture, ethics, and quality of
production. In the case of Volkswagen, the leader who was responsible for the corporate
social responsibility was not claiming to be unaware of the problem, and the cars were
producing nitrogen oxide above the legal limit. This indicates the poor leadership applied to
the project poor management (Kim, 2015) (Kolk, 2016). The leader is someone who is
responsible for managing the activities, moreover controlling is part that the leader is
supposed to conduct. Either the leader was failed in following its responsibility or it was
conducted deliberately in order to gain competitive advantage while gaining high profits or
corporate social responsibility of environment-friendly cars was merely an act of attracting
customers and did not actually followed (Kaplan, 2015). The leaders tend to ignore the
ethical standard and compromised it for higher profits. Therefore the leadership quality
identified to be poor in this organisational case (Cromwell, 2018) (Leyden, 2016)
• Lack of self-regulation of CSR
Self-regulation is one of the most relevant things to do in order to have a smooth flow
of activities and tasks. The corporate social responsibility is regulated by the companies
themselves. Corporate social responsibility is view as self-regulation according to the
government norms, and the government does not pay great attention to this aspect (Seatter
& Lozano, 2015) (firstcarbonsolutions, 2018). This creates the problem, because when it
comes to given priority between corporate social responsibility and profitability of the firm.
The company is not willing to compromise its profitability against social responsibility. The

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companies tend to take social responsibility as superfluous, but they believe that these
activities must not hamper the profits of the firm. The head of the CSR are aware of these
facts, and since there is no regulation against this activity, they tend to ignore these activities
and only concentrate on the profits of their business. (Chung, Yu, Choi, & Shin, 2015)
Alternatives and solutions
There are various solutions to handle these issues and problems, some of them
which would be most suitable to the situation of Volkswagen are as follows:
• Changing the leadership and organisation culture
When the problem is being identified, another step is to bring the change in order to
resolve the problem. The problem was among the leadership quality, for which the best way
out is to change the leader and change the organisational structure of the organisation
(Seatter & Lozano, 2015). This may create a further problem, but with effective change
management, this can be resolved and the process of corporate social responsibility of the
organisation can be handled (Green & Cameron, 2015). For the better flow of work and
implementation of change in organisational structure, it must be conducted in an appropriate
process of change management. The major steps involved in this process are the
identification of the area that needs to be improved, in this case, the structure related to the
CSR department is important. The CSR head, who was not aware of the disaster happening
was not considered to be a good leader and need to be changed (Seatter & Lozano, 2015).
Present this situation to the stakeholder is the next step, then comes the planning of the
change, the change has to be planned in detailed and the expected result out of the change
has to be specific, for the planned activities, the resources have to be accumulated and
arranged accordingly (Steigenberger, 2015). Next step is communication, which means that
the information has to be provided to allow the stakeholders of the company and prepare
them for the change to implement. Another stage is monitoring and managing risks, and
lastly reviewing, this indicates to check if the change has been implemented and working as
per the planning and resulting in the improved condition of the organisation
(businessmapping, 2018)
• Restructuring of organisational culture
Organisational culture was another aspect that was detected as the cause of the
problem, which needs to be restructured for applicability of corporate social responsibility
(Cotton, 2016). This includes the ethical standards of the company, it the culture of the
organisation which must allow the individual to behave in a more ethical manner towards all
the stakeholder. This culture will support more environment-friendly production and viewing

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the importance of society and not just the business and its profit earnings (Green &
Cameron, 2015).
• Improve managerial transparency
The transparency must be maintained in the organisation to avoid the mistakes and
everything must be documented. This is to do in order to solve this problem because with
the help of transparency the chain of command is identified, and since everything is
documented, it can be easily controlled. This means that the mistakes are identified quickly
and the rectification can be done instantly (Basadur & Gelade, 2014). Moreover, through the
transparency the judgment regards the leadership applied to the business can also check
timely, to ensure that the claimed aspect is fulfilled or not. Management must be transparent
with all its stakeholder and clearly define the objectives and achievement of the company
(Cromwell, 2018).
Recommendations
• Implement regulatory measures – one of the recommendations to the company should
implement relevant regulatory measures. The reason is to avoid the mistakes conducted on
an operational or managerial level. Through this case, the major issue was the unrealistic
approach of the company to create environment-friendly cars, where the company was not
able to control the level of nitrogen oxide and was producing the vehicles that were
responsible for 40% exceeding the legal limit to the pollution (Seidman, 2016)
• Implement a third bottom line – in order to create value to their business, a greater
perspective of TBL can be considered by VW, which involves three sections of the
framework, that is environmental, social, and financial. This phrase was propounded in 1994
by John Elkington (Hutt & Ferrell, 2016). This is helpful in measuring sustainability, and it
widens the focus of the company bottom line of finance to indulge in the environment and
social considerations. The VW problem was the financial focus that is the focus was profit
earning and avoid considering society and its sustainability. For which, this recommendation
can work well (firstcarbonsolutions, 2018).
• Provide strict ethical guidelines – the ethical standards, as already discussed is very
relevant to solve this issue. The corporate ethics are essential and everyone must follow the
same. For this purpose, it is recommended to the company to provide strict guidelines of
ethics to every stakeholder and individual associated with the company (Cromwell, 2018)
• Develop a chain of the monitoring system – monitoring and regulating is very important
from time to time, to check if the work is continuing as per the standards, ethics, and
planning. For this, an appropriate monitoring system must be implemented, to identify the

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deviations in the actual performance and the planned performance of the organisation, and
immediate rectified action can be taken (Ottman, 2017). This chain will also be helpful in the
company to conduct self-regulation, as it is important to analyse oneself before others do.
Monitoring process includes setting the standards, measuring the actual performance,
observing the deviations, and filling the gaps and rectifying the negative aspects (AFB, 2018)
• Implement an external audit on a regular basis – external audit is recommended for such a
case, in case of self-regulation, the company can delay the process or ignore for the benefit
of self and organisation when the profits are attractive. For this purpose, the external audit
must be conducted so that the auditing is not biased, and this must be done on a regular
basis so as to keep the management in place (Cotton, 2016)

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Conclusion
From the report, it can be concluded that problem Management is a process to rectify
the situation which is going wrong within an organisation. The Volkswagen, an automobile
company has failed to accompany the corporate social responsibility effectively, indeed
resulted in the harmful activities for the environment for gaining higher profits. The major
problem identified, that was the cause for the failure in the organisation, was ethical
standards and culture, lack of leadership quality, and lack of self-regulation of CSR. For
these problems identified, the alternative solution was developed which will be helpful in
solving or managing the problem. The alternative solution was changing the leadership and
organisation culture, restructuring of organisational culture, and improve managerial
transparency.
Moreover, for the company to sustain and avoid this issue in future, some
recommendations were made, those implemented regulatory measures, implement a third
bottom line, provide strict ethical guidelines, develop a chain of the monitoring system, and
implement an external audit on a regular basis. Corporate social responsibility is a major
task of the company, as the organisation is sustaining in the environment, using resources
from the environment. Therefore, it is important for the organisation to give back the society
and apply the responsibility towards the society, this is generally self-regulated, but the
government is also involved in such a case. This will be helpful in sustaining the business in
the industry and create goodwill among the customers and other stakeholders. Moreover,
there will be a balance in the environment, social, and financial aspect of a company.

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