The Need for Organisational Resilience - Chapter 4

lacquer and a metal end to hold an eraser – is actually the work of many specialists who do

not share each other’s expertise. There is no central coordinator who brings these into

existence. Reid’s insight was profound. The notion of ‘centralisation or not’ seems

inadequate, and we need to think a little deeper.

In September 2015, Volkswagen AG, by then the biggest car manufacturer in the world,

got embroiled in an emission scandal. Up to 11 million cars worldwide had been equipped

with an illegal software, a ‘defeat device’ that misrepresented lower nitrogen oxide (NOx)

emissions in order to satisfy testing agencies in the US and Europe. The hidden damage

from these VW vehicles could equate to all of the UK’s yearly NOx emissions from all power

stations, vehicles, industry and agriculture. The organisational damage was equally

astounding. The overall bill to Volkswagen to cover fixes to the affected cars, and to cover

penalties and potential customer compensation could amount to $25 billion.

In 1993, Ferdinand Piëch became the chairman of Volkswagen. At that time,

Volkswagen was close to bankruptcy, and Piëch was central to the turnaround. In the

following years, he up-marketed the Volkswagen and Audi brands with great success. By

acquiring such brands as Lamborghini, Rolls-Royce and Bentley, he turned Volkswagen into

a global player.

Despite these successes, Piëch was also known for his autocratic style of leadership

and his need to micro-manage the operations of Volkswagen. His centralized way of

decision-making, informed by a group of advisors, created a climate of ‘fear’. Those who did

not meet his aggressive sales targets would have to leave the organization. The supervisory

function in the organization, primarily through the supervisory board but also through

investors and shareholders, had no significant independent voice. In short, what Piëch said

was not to be questioned, or simply could not be questioned.

A centralised approach, although seemingly more straightforward faces two limitations

that could well lead to the demise of Volkswagen:

Limitations in Infallibility

In centralised decision-making, leadership takes place at the top of the hierarchy and lies

exclusively with senior managers. They need to establish a clear vision, and share that

vision with those who are supposed to follow through operating a form of compliance.

Strategizing and operationalising are centred around these individuals. Followers are to be

‘obedient’ to senior managers’ decisions, and little autonomy is provided to lower level

echelons to question rules, processes and procedures. Situated human cognition – in the

form of creativity − is discouraged as a source of error.

The demands on these senior managers, equipped with authority, are exceptional.

Senior Managers need to be close to infallible as their followers cannot critique their

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