Volkswagen Diesel Scandal: Organizational Behavior Analysis
This paper examines the Volkswagen diesel emissions scandal, in which approximately 11 million vehicles were fitted with software designed to cheat emissions tests. It identifies the core problems—including financial losses, criminal charges, and reputational damage—and traces their origins to on-road testing conducted in 2014 and a corporate culture built around fear of failure. Using organizational behavior frameworks, the paper discusses how authoritarian leadership, a rigid top-down structure, and a win-at-all-costs culture collectively enabled unethical conduct. It concludes by recommending more transactional leadership, open communication channels, and an organizational culture that treats failure as an opportunity for growth.
- Overview of the Volkswagen Emissions Scandal: Scandal scope, financial losses, and sales impact
- How the Problems Developed and Who Was Responsible: Testing origins, EPA findings, and executive accountability
- How the Problems Could Have Been Avoided: Better engineering choices and employee ethical refusal
- Organizational Behavior Concepts Applied to Volkswagen: Leadership, culture, and structure failures analyzed
- Organizational Behavior Problems and Recommended Solutions: Ethics, social responsibility, and culture remedies
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What makes this paper effective
- Applies three distinct organizational behavior frameworks—leadership, culture, and structure—to a single, well-known real-world case, making abstract concepts concrete and traceable.
- Follows a logical progression from problem identification to root-cause analysis to prescriptive recommendations, giving the paper a clear argumentative spine.
- Consistently links each organizational behavior concept back to specific facts from the scandal (e.g., Martin Winterkorn's authoritarian style, the top-down decision-making structure), avoiding generic claims.
Key academic technique demonstrated
The paper demonstrates applied case analysis: it takes established theoretical constructs from organizational behavior literature and systematically tests each one against documented evidence from the Volkswagen scandal. Rather than simply describing what happened, the author explains why it happened by using the frameworks as analytical lenses, which is a hallmark of undergraduate business and management writing.
Structure breakdown
The paper opens with a factual overview of the scandal and its financial consequences, then reconstructs the timeline of discovery and assigns responsibility. A brief prescriptive section addresses avoidance. The largest section applies three numbered organizational behavior concepts—leadership, culture, and structure—each defined before being applied to Volkswagen. The paper closes by identifying two organizational behavior problems (lack of ethical behavior and lack of social responsibility) and proposing concrete solutions for each.
Overview of the Volkswagen Emissions Scandal
The central problem in the Volkswagen emissions scandal is the company's admission that approximately 11 million of its manufactured vehicles were fitted with software designed to obscure emissions tests. Specifically, the software detected when a vehicle was being tested and triggered an apparatus that reduced emissions. During normal driving conditions, however, the software deactivated that apparatus, causing emissions to rise far beyond legal limits. This was most likely done to achieve fuel savings or to improve torque and acceleration (Gates et al., 2017).
Volkswagen admitted guilt to multiple criminal charges in the United States and allocated more than $20 billion for penalties and compensation related to the scandal, with payments to American regulators and vehicle owners accounting for a substantial portion of that sum. Since the scandal broke, Volkswagen recorded significant losses, declared layoffs, and was forced to restructure its leadership.
The fallout can be observed in several ways. First, worldwide annual car sales declined from 10 million to fewer than 9 million units, a figure projected to worsen in subsequent years. Second, the company's stock price, which stood at $38.03 when the scandal broke, fell substantially to $31.46. Third, Volkswagen posted a $6.2 billion loss in 2015 (Gates et al., 2017).
How the Problems Developed and Who Was Responsible
The problems began when on-road testing conducted in 2014 prompted the California Air Resources Board to investigate Volkswagen, following research led by scientists at West Virginia University. That institution tested emissions from two Volkswagen models equipped with a 2-liter turbocharged four-cylinder diesel engine. The results showed that, when tested on public roads, certain vehicles emitted approximately 40 times the legal levels of nitrogen oxides (Gates et al., 2017). The Environmental Protection Agency (EPA) subsequently found similar test-cheating evidence on other Volkswagen and Audi models, as well as on a Porsche model (Gates et al., 2017).
Responsibility for the scandal extended across both employees and executives. Engineers accepted responsibility for the unethical conduct, and six company employees faced criminal charges in the United States. One executive, who had overseen emissions compliance, was arrested. Chief Executive Officer Martin Winterkorn and the head of U.S. operations both resigned, and Volkswagen suspended several other senior executives (Gates et al., 2017).
How the Problems Could Have Been Avoided
These problems were avoidable. First, when the diesel engine technology failed to meet established emissions standards, the company should have invested in more advanced engineering solutions capable of satisfying regulatory requirements (Glazer, 2016). Doing so would have eliminated the need for fraudulent software. Second, employees should have refused to participate in unethical activities, regardless of the professional consequences. The appropriate and ethical course of action would have been to report any requests to develop software intended to deceive regulators.
Organizational Behavior Concepts Applied to Volkswagen
Organizational behavior examines the influence that individuals, groups, and structures have on human behavior within organizations. Micro organizational behavior focuses on the dynamics of individuals and groups, while macro organizational behavior examines the organization as a whole—including the strategies, structures, and events that shape it (Boundless, 2016). Several organizational behavior concepts are directly applicable to the Volkswagen scandal.
1. Organizational Leadership
A primary function of organizational leaders is to provide direction. Leaders also establish the structure and culture that shape employee behavior. The leadership at Volkswagen was demonstrably poor, and the scandal reflects this. The core reason Volkswagen made such a damaging decision traces back to the organizational culture cultivated by its leaders. Martin Winterkorn, the company's CEO, was a demanding superior who had little tolerance for failure. Former executives described his management style as authoritarian and oriented toward creating a climate of fear. Winterkorn also set highly ambitious growth targets, including making Volkswagen the world's largest car manufacturer. Achieving that objective ultimately came at an enormous cost—an EPA notice of violation, a criminal investigation by the U.S. Department of Justice, and multiple class-action lawsuits (Glazer, 2016).
2. Organizational Culture
Organizational culture can be defined as a system of shared meaning—a set of common values and norms that governs how members of an organization interact with one another and with external stakeholders. An organization's culture represents the fundamental set of ideals, principles, and norms shared by its employees. These core values encompass ethical behavior, commitment to employees, and dedication to customers; together they serve as the adhesive that holds organizational members together (Aquinas, 2010).
At Volkswagen, the organizational failure stemmed from a culture that refused to accept failure and instead demanded constant improvement and innovation from employees. This culture established a tone in which failure was to be avoided at any cost. When employees recognized that the technology could not meet emerging emissions regulations, they resorted to fraud and deception (Glazer, 2016). A healthier culture would have treated failure as a prompt for open dialogue and creative problem-solving rather than as something to be concealed.
3. Organizational Structure
Organizational structure is the formal system of roles and authority relationships that governs how individuals coordinate their work and deploy resources to achieve organizational goals. It shapes direction, motivation, and the behavior of both individuals and the organization as a whole (Aquinas, 2010). Volkswagen maintained a rigid top-down organizational structure in which decision-making was concentrated in a powerful leader and a small circle of key advisers. This structure made the company slow to respond to market changes and left it with clear vulnerabilities in day-to-day operations (Ferrazzi, 2015).
Such an approach to organizational structure is outdated and ineffective because it leaves many employees outside of operational decisions, making them feel undervalued and distrusted. As a result, sidelined employees are reluctant to voice concerns to supervisors and lack the motivation to prioritize the organization's overall well-being. This dynamic is evident in the fact that Volkswagen employees did not report the unethical activities to management and did not act in the company's best long-term interest (Ferrazzi, 2015).
References
Aquinas, P. G. (2010). Organization structure and design: Applications and challenges. Excel Books.
Boundless. (2016). What is organizational behavior? Retrieved from
Ferrazzi, K. (2015). Volkswagen's fatal flaw: Its corporate structure. LinkedIn. Retrieved from https://www.linkedin.com/pulse/volkswagens-fatal-flaw-its-corporate-structure-keith-ferrazzi
Gates, G., Ewing, J., Russell, K., & Watkins, D. (2017). How Volkswagen has grappled with its diesel scandal. The New York Times. Retrieved from https://www.nytimes.com/interactive/2015/business/international/vw-diesel-emissions-scandal-explained.html
Glazer, B. (2016). The biggest lesson from Volkswagen: Culture dictates behavior. Entrepreneur. Retrieved from https://www.entrepreneur.com/article/254178
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