After the diesel gate incident, the Volkswagen went through a significant change process evident in their promised and enacted reforms. The first reform was the decentralization of power from Wolfsburg headquarters in Germany. For instance, Czech Brand Skoda started to produce low priced cars in India (Tovey, 3). The headquarters authorized the company to take incremental decisions and inform them of such steps. This approach empowered the international subsidiaries to autonomously make some changes in their operations. Besides, the management team began holding its regular meetings outside its headquarters. For instance, they held their first meeting in Shanghai (Tovey, 5). Other changes were symbolic. They include selling the Volkswagen’s corporate Airbus jet and launching the executive dining room to factory workers at Wolfsburg (Tovey, 5). Additionally, they empowered senior engineers to control the budget and deadlines. The company reduced the number of corporate committee members by a third. Further, the firm increased the remuneration of its managers globally. The aim of the pay rise was to encourage innovation and risk-taking within its human resource.
There was also culture change in the firm. The change in norms was through the elimination of the executive car park and replacing it with bicycle riding in the factory grounds (Tidwell 23). Besides, the company put on hold the launch and selling of all these cars that were affected by the diesel gate while others were recalled from the market. The vehicles included Volkswagen 2012-2015passat AUD Q5 (2014-2016) and Volkswagen Toureg 2009-2016 AUD Q7 (2009-2016) (Tidwell 24). As part of their vision 2025, the firm embraced digital and electric cars, where the company will produce one electric or hybrid vehicle in every ten vehicles. However, despite calls to include more managers from the outside world, the CEO rejected the call to change the supervisory and management board of the firm (Tidwell 29). The firm applied both episodic (major infrequent changes) and continuous (ongoing actions) transformation strategies to rise back to profitability and redeem its corporate image.
Analysis of the Change Process in Volkswagen after the Diesel Gate Using Kurt Lewin Organizational Change Model
The 1940s model by Kurt Lewin is commonly called unfreeze-change-refreeze model (Burnes 984). The model borrows from the entire process of changing the physical shape of a block of ice. Its proponent notes that if one has to change the appearance of an ice cube to that of a cone, one has to melt the ice cube first (unfreeze) to make malleable for the desired change (Burnes 997). Then one molds the iced water into a cone shape (change) and proceeds to solidify into the new shape (refreeze). This model shall analyze Volkswagen’ organizational change process.
Unfreeze stage
Unfreezing is the initial stage of the change process in any given organization. Here the management should generate or identify the need for change and communicate the benefits of this changes to the firm and the workers. For instance, following the diesel gate incident, change was inevitable in the company. In this stage, the Volkswagen firm prepared for the change by breaking away from the status quo and demonstrating the essence of the transformation (Casasola 17). Almost the entire senior management of the company faced charges.
The situation creates the need for change in the administration. Additionally, the stakeholders felt that the former administration was closed to the outside world causing dictatorship and authoritarianism from their centralized power (Casasola 17). As the way of identifying the need for change, the new CEO points out on the importance of delegation of power in the company (Casasola 17). Decentralization is the excellent way to challenge the culture and beliefs of the Volkswagen before the incident. It is vital for the company in identifying the negative ramifications of autocracy in company management. Additionally, the corporation recognized that its cars were not environmental friendly. It is through the identification of this driver for change that the CEO proposed recall of all the cars affected in the incident (Ater 18). Moreover, the firm stopped further launch and distribution of these cars. Although the CEO aimed at transforming the entity, there were many legal and public issues that posed challenges to the unfreezing process. For example, when the organization was under investigation by the law enforcers, any initiation of change or its implementation would raise eyebrows. The public and intelligence investigation of its operations limited the potential of the company to explore more areas for unfreezing until the completion of the investigations. Any changes may be subject to disclosure because it may tamper with evidence for the scandal.
However, while there was unfreezing of power and products, the company management failed to identify the necessity for change in the supervisory and management team. Notably, the CEO who took over the leadership mantle after the diesel gate stayed in the corporation for over two decades, causing some reservations of the entity’s management (Ater 14). Consequently, one can argue that the unfreezing stage of organizational change in Volkswagen was not complete because of these aspects that stayed constant.
Change Stage
Change is the second state of organizational change in Kurt Lewin’s model. The step involves a point where people start to solve the uncertainty from the unfreezing stage as they embark on new ways of operation (Burnes 1000). In this stage, people act and start believing in a way that supports the new organizational direction. This may involve introduction of new norms, practices, and systems that elevate an organization’s performance.
In the case of the Volkswagen, the firm began assigning the Czech Brand Skoda the duty to produce low priced cars in India (Abuhajaj 70). The executive team started holding their regular meetings outside the headquarters. Additionally, the firm introduced reforms to encourage employee involvement and participation in the firm’s strategy through the suggestion to open up the executive dining hall to the factory workers (Abuhajaj 74). This employee involvement process aimed at creating trust among the employees for feedback sharing and idea generation to support the entity’s growth. Moreover, there was the consideration to increase the salary of all the Volkswagen managers across the globe. The increase in compensation was among the strategies to increase employee morale, retain staff, and attract new talent. There was an objective to come up with electric or hybrid cars as a way of changing the initial car operations. With increasing innovation in the motor industry especially on hybrid vehicles, the company deemed it fit to invest in the eco-friendly cars
Noteworthy, Volkswagen Company focused on the formulation and execution of some rapid reforms that it regarded would elevate the company from collapsing (Ater 19). These organization anticipated that these changes would provide quick wins in saving the firm’s brand and revenue. However, the company required some days and years to undergo the change stage successfully. This explains why the company has a target of vision 2025 in almost all its reforms (Ater 12).
This step takes time because people need to have a deep comprehension on how the change is beneficial to them. The understanding requires proper communication of the transition to all stakeholders and workers of the firm. A section of employees and stakeholders may resist change even where it is essential or profitable for the firm (Burnes 985). Nevertheless, the change step in Volkswagen was a success as the company set a flexible and pragmatic period to achieve the reforms. This is because people require time and communication to understand the changes and connect to the entire transition process. The Volkswagen needs a lot of time, effort, and management support on this stage (Burnes 988).
Refreeze Stage
Refreeze is the final stage of the organizational change process. It is the implementation stage of all the reforms in the change stage. In this step, the people embrace the new ways of doing things (Burnes 997). For example, the implementation of the decentralization of power began by the management holding their first meeting outside Germany, in Shanghai. Additionally, there is decentralized decision making in the Volkswagen stations across the globe. The enactment of the salary increase for the managers globally is also part of refreezing (Zhang, Jari & Denis 165). It is significant to note that refreezing involves the establishment of a stable organizational chart and consistent job description among other elements. This stage is very pivotal for Volkswagen and its workers because it enables the internalization and implementation of the reforms after the diesel gate incident. The corporation must ensure the integration of the changes in its daily operations (Zhang, Jari & Denis 168). A new sense of stability resulting from the reforms is likely to motivate the workers to feel confident with the new ways of operation.
The refreezing stage enables workers evade a transition trap, where they are not sure of what should be done and how it ought to be done (Zhang, Jari & Denis 170). Such a dilemma may cause sub-optimality in the firm’s operations. In Volkswagen, one can argue that the refreezing process is not complete. This incompleteness is because of partial implementation of some reforms. The diversity in implementation is because different changes require different timeframes to execute because of the difference in the logistic and resource requirements to implement the various reform (Shirey 70). For instance, manufacturing an electric car or hybrid car in Volkswagen needs more time and resources as compared to opening up the executive dining hall for factory workers. The latter is a decision achievable within days while the former is a project that needs months to be fully implement.