What VW’s €31 billion lesson in listening can teach you

Listening is too often dismissed as a fluffy, nice-to-have soft skill, when in fact it can be the make-or-break of a successful organisation. In this article we share a case study of how a failure to listen at Volkswagen resulted in a scandal that reverberated around the world and did huge reputational and financial damage to the company. 

The Volkswagen (VW) diesel emissions scandal, often referred to as "Dieselgate," erupted in 2015 and shocked the automotive world. The scandal revealed that VW had installed software in millions of diesel vehicles that was designed to cheat emissions tests. While cars were marketed as environmentally friendly and fuel-efficient, they emitted nitrogen oxides up to 40 times the legal limit in real-world driving conditions, a failure that Reuters estimates cost the organisation over €30 billion.

At its core, the scandal was not just a technical or regulatory failure but a breakdown in corporate culture—specifically, a failure to listen. Internal reports and investigations revealed that VW’s culture at the time was top-down and authoritarian, with little tolerance for dissent or bad news. This toxic environment discouraged engineers and other employees from raising concerns about the illegal software or questioning the unethical decisions that led to its creation. Fear of retribution silenced many, allowing the deception to continue unchecked.

Failure to Listen: The Core Problem

At the heart of the issue was a corporate culture that stifled feedback, ignored warnings, and avoided open communication. Here are some key factors that contributed to VW’s inability to listen:

1. Pressure for Perfection
   VW’s leadership had set ambitious goals to surpass Toyota as the world's largest automaker. In this high-pressure environment, the focus was on achieving results at any cost, and failure was not an option. This created a culture where employees were hesitant to raise concerns or challenge decisions, fearing they might lose their jobs or face backlash.

2. Authoritarian Leadership Style
   VW’s leadership, especially under former CEO Martin Winterkorn, was known for its centralised and rigid control. Decision-making was heavily concentrated at the top, and lower-level employees felt they had little input. This authoritarian culture discouraged innovation, transparency, and communication, all of which are critical to catching and preventing such ethical breaches.

3. Ignored Whistleblowers and Internal Warnings
   It was later revealed that VW had received warnings from internal engineers as early as 2011 about the illegal devices. However, these warnings were ignored or dismissed, as the company prioritised meeting emissions targets without considering alternative solutions or the consequences of their actions. 

How Listening Helped Turn VW Around

In the wake of the scandal, VW faced billions in fines, lawsuits, and a massive loss of public trust. The company had to act quickly to restore its reputation and fix its broken culture. This process began by fundamentally changing how VW listened to its employees, stakeholders, and customers. Here's how listening became part of the solution:

1. New Leadership and a Commitment to Transparency
   After the scandal, Martin Winterkorn resigned, and Matthias Müller was appointed as the new CEO. Müller emphasised the need for cultural change, committing to greater transparency and fostering an environment where employees felt safe speaking up. Under his leadership, the company implemented measures to create a more open and inclusive culture, with an emphasis on ethical behaviour and compliance.

2. Creating a Speak-Up Culture
   VW implemented programs to encourage whistleblowing and reporting of ethical concerns. These programs were designed to give employees the confidence to raise issues without fear of retaliation. For example, the company introduced an anonymous whistleblower platform, which allowed employees to report misconduct securely.
   Additionally, VW promoted leadership training and development to foster more collaborative and open communication styles, encouraging leaders to actively listen to their teams.

3. Engaging with External Stakeholders
   Listening extended beyond the internal workforce. VW realised the importance of rebuilding trust with external stakeholders, including regulators, customers, and environmental organisations. The company cooperated with government agencies worldwide, agreeing to pay fines and compensate customers. VW also made public commitments to focus on sustainable practices, such as transitioning to electric vehicles (EVs), showing they had learned from their mistakes.

4. Shift Toward Sustainability and Innovation
   Listening to the global conversation around climate change and environmental sustainability, VW made a bold shift in strategy. In 2018, the company announced a major pivot toward electric mobility, with plans to invest €70 billion in electric vehicles by 2030. This shift not only aligned with regulatory demands but also responded to consumers' growing demand for eco-friendly transportation options.

5. Engaging with Employees Through Cultural Transformation
   VW's leadership also recognized the need to repair internal trust and align the company with ethical standards. They began efforts to involve employees in decision-making processes, providing forums for dialogue and feedback. This cultural shift from authoritarianism to a more open, listening-based environment was critical to restoring morale and fostering innovation.

Lessons from VW: The Power of Listening

The VW emissions scandal serves as a stark reminder that failure to listen—both to employees and external stakeholders—can lead to catastrophic consequences. However, it also highlights the power of listening in driving positive change:

• Listening creates accountability: Encouraging employees to speak up and be heard can prevent small issues from escalating into major crises.

• Listening creates cultural transformation: A shift from a top-down, authoritarian culture to one that encourages feedback and openness can transform an organisation.

• Listening drives innovation: By listening to market trends and consumer demand, VW pivoted toward electric vehicles, turning a massive failure into an opportunity for innovation and sustainability.

Today, VW is on the road to recovery, having regained much of its lost market share and credibility. This turnaround wouldn’t have been possible without the company’s newfound commitment to listening—both to its employees and to the broader world.

The takeaway? Listening is not just a soft skill. It’s a strategic imperative for leadership and a crucial foundation for building a resilient and responsible organisation.

To hone your listening and leadership skills, join us at our free Culture Clinic. One leader will bring a cultural challenge they are facing in their organisation and the rest of the group will use transformative listening to offer support, insight and a fresh perspective on their situation. Previous participants have called the sessions “a gift for leaders” and “a powerful way to put things into perspective.”

Find out more and sign up here.