Every once in a while there seems to be a perfect storm within a company that causes a huge scandal and rocks the face of an industry. These scandals usually brew for years and when they eventually come to a head, boards and CEOs are left scrambling and panicked. This is certainly the case of Volkswagen. What is truly fascinating about the VW case is how many different ways the company made wrong decisions which led to the emissions cover-up that is having long term effects on the market.
Recently, it came to light that VW was using software that changed the results of emissions tests and allowed millions of cars to be unsafely put on the road. As this case is investigated we see that there were several issues with the board and the company culture that led to this massive break in trust.
VW has been struggling with poor governance for years. Their lack of addressing it has been glaringly obvious. The board has been criticized for not having relevant skills, not having enough knowledge, and not being independent. But most importantly, what they could not do was to figure out how to step out of their negative cycle of interactions.
Negative cycles are dangerous for boards and often start with one person complaining, criticizing and getting very angry with the others defending, creating distance, and stonewalling.
One starts to push and the other starts backing off. The more one pushes, the more the other backs off and they get into a negative cycle that gets its own momentum causing a disconnection between board members.
Disconnection is seen by our brain as a danger cue, particularly with people we depend on. With a family board, it is even more dangerous because we greatly depend on our family to accept, love, and care for us. This longing for connection is wired into our brain as part of a survival code. So, whenever this safety is compromised, we get panicked and our judgement can impact us to make decisions that are not in best interest of the company we serve.
The VW board has been run by a family which raises all kinds of attachment issues and impacts the board’s decisions. For example, when you are dealing with parents and adult children serving on a board together and they have an insecure attachment, the children will seek the approval of the parent and expressing their disagreement or standing up for what is right is much more difficult because the brain tries to preserve the connection with the parent. When you have a secure attachment, this problem is eliminated because there is no fear of losing the connection as the brain knows that parent accepts and loves you. The same occurs when you have siblings or other family members serving on a board together.
When you have independent board members, the attachment is more geared toward the company and the purpose of making the company successful binds board members together and becomes a priority rather than the relationships between board members.
You have more courage to stand and say, I don’t agree with your decision or I have a different opinion because your survival relies more on making the company successful.
With this in mind, we can confidently say that the VW board was unable to process their emotional needs which fed into the fear of losing connection. This is common problem in family boards because the emotional aspect touches your professional life as well as your personal life. Not only do board members need to be successful professionally, they also require acceptance and approval from their family and demand love (which is the strongest need).
An isolated board that lacks secure attachment is incredibly dangerous.
It is unlikely that the board was partaking in board assessments or even bringing in experts to help them to work better together as they’ve experienced challenges on the board which stagnated their company’s growth. This also make sense as it becomes too embarrassing for the family to call in for outside help, especially, when there are emotional injuries to deal with.
Another interesting aspect of VW is the way they distributed the control over their company. Because of the way it was founded, Volkswagen is run by family control, government ownership, and labor influence. These three groups not only have relationships within their organizations but also must work well together and communicate properly between organizations. Unfortunately, out of the three groups, only the family was represented on the board of directors which caused a lot of problems.
VW was known for being the number one job creator in Germany and that wasn’t by mistake. Over and over, Volkswagen made decisions to maximize employment over everything else. This often meant that some of the processes that should have been followed were pushed aside and although the VW group’s goal was “to offer attractive, safe and environmentally sound vehicles which can compete in an increasingly tough market and set world standards in their respective class,” often their decisions did not reflect their vision.
The company had clearly lost its way and was not making decisions based on the overarching values and goals of the company. The board was too stuck in negative cycles that stirred them away from addressing these types of problems. Because the board was disconnected, they could not make the right decisions to prevent an unfortunate result that not only put the customers at risk but also negatively impacted the company’s credibility even further.
This type of experiences adds continuous stress to board members which slows down cognitive abilities, creativity and pushes board members further away from each other, leading to feelings of isolation and distrust.
These aspects not only leave the board dysfunctional it impacts the management and employees by sending them a message that they should be afraid to speak up around the CEO and board. VW has been encouraged to rebuild a new culture of trust by investigators and shareholders. To start, they must create emotional safety.
Without the knowledge on how to approach emotions in the boardroom, VW will repeat its problems and fail again. As they move forward the board addressing emotional connection and creating safety it will provide them with a start of sharing relevant information and feel safe in being transparent.
Creating safety takes practice but it is not an impossible task.
I’ve worked with boards where board members have lost their trust with each other and were emotionally miles apart. Once they learned how to create safety for each other, they began to know how to support each other, understand and help each other in moments of disconnection. Board members have a huge impact on each other and family boards have an even bigger impact. Disconnections are inevitable, it is how you manage them is what will make your board effective.
These perfect storms are preventable. If you start with emotional safety and learn how to send clear emotional signals to each other, you will be able to stop a lot of problems before the problems take over. Research shows that when board members are emotionally connected, they are stronger, able to address challenges together, and explore the world. This is especially important in family boards where the stakes of keeping the connection are so high.
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