How a Nefarious Scandal Impacts Brand and Culture

Empty OfficeBy now, you have probably read more than enough about the VW scandal and the devastating trail of damage it has left behind, not only impacting its millions of customers, but also its investors, suppliers, vendors, dealers and the bank accounts of people who earn their livelihoods selling its cars.

As disturbing as the reality of it all is, we must not overlook the other side of the scandal which is equally significant – the damage it has done within VW’s culture. What we’re not hearing about nearly as much are the feelings VW employees now have about the company’s leadership. What I mean is simply this –- If you were an employee at VW, would you want your personal name and brand associated with a nefarious scandal of this magnitude? Would you be able to respect and trust an employer that has lied and cheated its way to profits and category leadership? Or, would you want to completely sever your relationship with the company, disassociate your name from the brand and take your talents elsewhere? These are just a few of the many tough questions employees and executives at VW are likely struggling with. And, of course, VW’s employees, as well as its customers, are also concerned about what other cover-ups there may be.

Where to go from here…

If we assume, just for a moment, that VW has the means and resources necessary to rise above this crisis, I predict they will have a very difficult time finding and recruiting the caliber of people and partners needed to turn things around in order to become a successful, respected and trusted company once again. Think of it this way – would you consider joining the Enron team if the company was still around and claimed to have “restructured” with new leadership? Would you be apprehensive about being a partner with or vendor to them? For most, it would come down to a question of trust, and the perceived level of risk of being associated with the brand. And trust, especially after a scandal, is something very difficult to earn back.

However, VW’s task of turning its brand around is not going to be an impossible one. There are many case studies of high-profile brands that have prevailed after suffering through a crisis – Tylenol, Apple, Chrysler, Sprint, Harley Davidson, Merck, and many others. In every single case, the brand recovery process started on the inside, not only with restructuring, layoffs and new leadership, but also with defining and infusing new cultures that radically changed how employees felt about the brand.

So what’s the moral of the VW story? There are three: 1) Your actions, both good and bad, often have consequences that reach far beyond what you may initially think. (In this case, Germany’s brand value has taken a $191 billion haircut) Hence the phrase, “I never would have expected this.” 2) Your people are your brand. 3) Trust and perceived risk are the two biggest barriers to attracting strong employees, partners and customer relationships.