Kaplan Business School: Crisis Leadership and Organizational Impact

This report delves into the concept of organizational crisis, using the Volkswagen emissions scandal as a case study. It explores the potential consequences of such crises, including damage to reputation, financial repercussions, and impact on stakeholder relationships. The report examines the role of leadership in crisis management, highlighting the importance of transformational leadership and the actions of Volkswagen's CEO. It also discusses the disadvantages of certain leadership styles in crisis situations, such as employee burnout and unethical practices. The report concludes with recommendations for effective crisis management, emphasizing the importance of building strong teams, ethical work practices, and collaborative leadership styles to mitigate future crises. The analysis draws on various academic sources to support its findings, offering a comprehensive overview of crisis leadership and its implications for organizational performance and sustainability.

Running Head: MANAGEMENT
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People, culture and contemporary leadership
6/16/2019

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Contents
Organisational Crisis.............................................................................................................................2
Potential consequences of Crisis............................................................................................................2
Leadership in Crisis management..........................................................................................................3
Disadvantages of leadership..................................................................................................................4
Recommendations.................................................................................................................................5
References.............................................................................................................................................6

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Organisational Crisis
• The assignment will bring about the discussion on the concepts of organisational
crisis affecting the performance of the organisation.
• Crisis management is essential for every organisation to resolve issues and attain
efficiency of operations.
• Therefore, the first part of this assignment will assess Organisational crisis of “The
Volkswagen emissions scandal” and related outcomes (Volkswagen, 2018).
The concept of organisational crisis explains the negative impact or influence through any
situation on the major product line or the business unit, that could hamper the growth and
financial performance of the organisation in the long-term. The discussion will thus explain
the organisational crisis as a major discussion and will also describe the effective role of the
leadership in managing with the issue. A crisis may include the incidents related to extortion,
hostile takeovers, environmental spills, executive kidnapping, product boycotts, bribery,
product recalls, or any economic or financial crisis (Tse et al., 2017).
The organisational crisis has been selected in context to “The Volkswagen emissions
scandal which took place in the past in 2015, which relates to environmental issues. The
company was accused of showing non-compliance to the clean Air Act through selling the
vehicles, which does not follow the environmental rules. Therefore, it can be stated that this
is one of the major issue of crisis that impacted the growth and performance of the company
to a major extent. It impacted the productivity of the employees working in the organisation,
and further affected their sales, and profits in the longer period. Thus, the crisis management
is one of the major aspect that needs to be carried out to resolve issues (Siano et al., 2017).
Potential consequences of Crisis
• The organisational crisis of the company Volkswagen has been reported in the year
2015. The US environment protection agency (EPA) announced that the company has
been cheating diesel emission tests.
• The crisis situation led a major impact on the day-to-day operations and other
activities (Rhodes, 2016).

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• These aspects affected the performance and revenues of the firm (Petroff, 2013).
It has been found that company, Volkswagen has been indulged in the rigging of their
diesel engines to falsify the emission tests which was really shocking and damaged the
reputation of the company. This has been identified and attributed as corporate
misbehaviour from any perspective, i.e. from the aspect of finance, markets, corporate
social responsibility, and business leadership. The company in this way violated the
clean air act through the sale of the vehicles, which did not meet the requirements of
environment (An et al., 2018). Moreover, the company was engaged in selling their
vehicles, and charging different prices from their customers, and this led to high levels of
dissatisfaction. The crisis may also result into both positive and negative results, i.e. the
firm may gain benefits in the future. In context to this case, the emission crisis or scandal
led manager’s change their policies, related to their emission or goals, and it helped them
manage issues later on. Along with this, some of the negative aspects have been observed
such as a major impact has been observed on the company’s relation with their investors
and other stakeholders (Dünnweber and Păunescu, 2019).
Leadership in Crisis management
• An important role of leaders has been found in the cases of crisis situations in
organisations.
• Leaders through appropriate strategies attain effectiveness to resolve the crisis or
other conflicts in the organisation.
• Teamwork is promoted by the leaders in order to lead effective management of work
practices (Chaawa et al., 2017).
The key element of leadership has been considered vital for the management of work
practices and other changes in the organisation, leading to attainment of goals and objectives.
Leaders assume their role or responsibilities in the case of any crises, or conflicts that may
occur due to any ineffective work practice or failure in the system (Ammenwerth and Rigby,
2016). The CEO or leader of the automotive company, Volkswagen Herbert Diess has been
practising effective leadership in the organisation, and this enabled the firm to become a best
carmaker in the European Industry. Furthermore, he implemented transformational style of
leadership in the organisation. This led the company achieve high performance and huge

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success over a period, being one of the best automotive firm. Moreover, an organisation
attains efficient coordination and collaboration of the activities by uniting the efforts of the
individuals in the organisation. This accounts to be one major advantage of the firm using
transformational style of leadership. A transformational leader motivates people to show their
high commitment and this was observed in the organisation.
It stated that the CEO or leader of the company facilitated different people or stakeholders to
achieve their interests and various other goals by interacting with the organisation. The
company served their customers’ needs and expectations to the best, and this stands to be one
major factor or reason that the company is known for their effective brand recognition, and
has become the most fuel efficient car company (Snyder and Diesing, 2015).
Disadvantages of leadership
• The implementation of transformational leadership practice has been one of the most
effective style.
• Transformational leaders direct the efforts of individual members towards attainment
of common goals (Painter and Martins, 2017).
• However, this style of leadership also lead to negative outcomes, and other issues
amongst people.
In an organisation, effective leadership may lead to negative results and affect the
performance of employees, in the cases of crisis situations. The employees in the
organisation may resist to the changes introduced in the work practices, and other activities of
the organisation. From the earlier discussion, on the implementation of effective leadership
style or practices the company attained success and growth in the automotive industry with
high customer satisfaction (Booth, 2015).
Employee burnout has been one major disadvantage observed from the implementation of
transformational and transactional style of leadership, as the employee may feel burden to
perform at standard levels. This may further lead to their dissatisfaction from the work, and
cause a negative influence on the work outcomes or performance. Furthermore, a lack of
continuous and effective communication may also be required which is sometimes become a
major factor for ineffective performance. Moreover, it has been analysed that the risks taken
through the practice of transformational leadership and this has been demonstrated through

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the case of Volkswagen (Argyris, 2017). The company has been unethical and determined
lack of transparency in their strategies which became a major threat to their image or
reputation. Charging different charges from customers, has been one major unethical
practice which represents lack of effective communication, and integration of individual
efforts to work. Further the managers at the company along with the contribution of
employees decided to work upon their emission goals, and eliminate such issues in the future
years.
Recommendations
• One of the main recommendations to deal with the crisis situations is establishing an
effective team.
• Building team, and ensuring positive outcomes, requires practising effective
leadership (Claeys and Schwarz, 2016).
• Therefore, Volkswagen must focus upon bringing change in their work practices.
Volkswagen has been one of the efficient and successful automotive businesses, and should
aim to achieve best in the future years. One of vital suggestion is regarding the ethical work
practices, and ensuring equal treatment to their all customers around the world, is important
to gain effectiveness.
The automotive company must demonstrate their commitment towards bring a change in their
activities, and preserving the environment from any kind of harm. This can be done by
setting up new emission goals, checking their fuel efficiency, and partnering up with any
environmental organisation to reduce the issue of air pollution. This is an important aspect of
change that will facilitate effective change in their organisational culture, communication and
other related aspects (Cismas, Dona and Andreiasu, 2016). It will further help managers to
attain a positive response from the employees working in the organisation and lead growth in
the future. Besides, this the organisation must focus upon changing leadership style to
collaborative work practices, which will boost morale of the workers to attain effective
performance in the automotive industry. This style of leadership is used to deal with the
conflicts and such crisis situations that occur in the organisation. The advantage of

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collaborative style has been found leading employees work with their full potential to bring
change in the organisation.
References
Ammenwerth, E. and Rigby, M. (2016) Evidence-based health informatics: Promoting safety
and efficiency through scientific methods and ethical policy (Vol. 222). United States: Ios
Press.
An, Q., Christensen, M.G., Ramachandran, A., Mukkamala, R.R. and Vatrapu, R. (2018)
June. Volkswagen’s Diesel Emission Scandal: Analysis of Facebook Engagement and
Financial Outcomes. In International Conference on Big Data (pp. 260-276). Cham:
Springer.
Argyris, C. (2017) Some Causes of Organizational Ineffectiveness Within the Department of
State (Occasional Paper# 2). United States: Wildside Press LLC.
Booth, S.A. (2015) Crisis management strategy: Competition and change in modern
enterprises. United Kingdom: Routledge.
Chaawa, M., Thabet, I., Hanachi, C. and Ben Said, L. (2017) Modelling and simulating a
crisis management system: an organisational perspective. Enterprise Information
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Cismas, S.C., Dona, I. and Andreiasu, G.I. (2016) Responsible leadership. Procedia-Social
and Behavioral Sciences, 221, pp.111-118.
Claeys, A.S. and Schwarz, A. (2016) Domestic and International Audiences of
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Dünnweber, M. and Păunescu, C. (2019) Impact on Salespersons’ Success Through
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Springer.
Painter, C. and Martins, J.T. (2017) Organisational communication management during the
Volkswagen diesel emissions scandal: A hermeneutic study in attribution, crisis management,
and information orientation. Knowledge and Process Management, 24(3), pp. 204-218.

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Petroff, A. (2013). Volkswagen's new CEO is 'the cost killer'. [online] Available from:
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