On Wednesday, Volkswagen announced that its CEO Dr. Martin Winterkorn has resigned. This came days after it was revealed that the U.S. Environmental Protection Agency had discovered that the German automaker appears to have installed software in vehicles enabling them to fool emissions tests.
Winterkorn had admitted as much in a lengthy apology he gave earlier in the week. According to reports, the company had installed software in some vehicles that only activate specific emission control functions when the car senses it is getting an emissions test. It appears that the emission control functions were not used during normal operation of the vehicle.
The story came to light when the EPA ordered the carmaker to recall almost 500,000 cars that were said to have utilized the technology. Subsequently, Volkswagen will discontinue sales of its cars equipped with four-cylinder turbo diesel engines in the United States.
Because the use of this technology could have violated the U.S. Federal Clean Act, the company could be penalized “up to $37,500, or more than $18 billion,” reported the Wall Street Journal.
This was the context for Winterkorn’s apology, which didn’t appear to be enough to stave off calls for his removal:
“I personally am deeply sorry that we have broken the trust of our customers and the public. We will cooperate fully with the responsible agencies, with transparency and urgency, to clearly, openly, and completely establish all of the facts of this case. Volkswagen has ordered an external investigation of this matter.
We do not and will not tolerate violations of any kind of our internal rules or of the law.
The trust of our customers and the public is and continues to be our most important asset.
We at Volkswagen will do everything that must be done in order to re-establish the trust that so many people have placed in us, and we will do everything necessary in order to reverse the damage this has caused. This matter has first priority for me, personally, and for our entire Board of Management.”
Obviously, there are many factors beyond mere words that will drive events at Volkswagen in the coming weeks, months and years. But for our purposes here, we can learn from the company’s seeming need to issue an apology so early in the process. With this in mind, if your organization is ever in a situation where an apology is under consideration, it is recommended that you ask yourself three questions.
1. What corrective actions are being taken?
In Volkswagen’s case, it will have a new CEO, and it is recalling a large number of vehicles. It is stopping the sales of certain vehicles in the U.S. And the company is cooperating with investigators. On Friday, the company designated Matthias Müller, who was head of Porche, as the company’s new CEO. These corrective actions are likely to help the company deal with a terrible situation going forward.
But the company cannot change the past. If the company has done what it’s accused of doing here it would have required time, money, people and resources. The one thing the company cannot correct is the record.
2. Will the apology be believed?
Because the company is being judged on a pattern of behavior in this case, and not just an isolated instance or an unexpected mistake, the very credibility of the company and its leadership is at stake. This raises questions about how the organization thinks, the way it operates, its core values and reputation. When that happens, the company’s institutional brand is in a precarious position, and an apology can only accomplish so much.
Aside from the serious legal and financial ramifications, this adds up to a crisis of credibility where the company is perceived to have intentionally violated a sacred trust between it and its stakeholders.
This is not to say the company should not apologize, but the worst thing any company can do is to build an apology around empty words and promises.
3. Is now the time to apologize?
Ultimately, timing is everything. If your organization gets out ahead and announces a series of corrective actions and apologizes, that apology is more likely to have some credibility. Or if the company waits until all of the dust settles and lays out a concrete plan of action that ensures that such malfeasance never occurs again, the accompanying apology may mean more.
But if your organization is exposed by a third party for doing something, or not doing something, and the facts are only now coming to light, the timing may not be good.
Certainly it is a time to communicate, to be transparent, and to let your stakeholders know you are committed to turning things around. But it could be best to apologize after you have a clear sense of the operating landscape and the impact of events on the company, its stakeholders and its ability to operate going forward.
Apologies in themselves almost never make a dent in a reputational crisis. They must be accompanied by corrective actions, a spirit of meaningful intent, and they must be delivered at the right time. In doing so, you can take the first step towards rebuilding any trust that may have been lost.