The former VW CEO received a memo where concerns were raised on the inconsistent gas emissions measures. It was on a weekend and there were many other reports and memos to read as well. It seems that it was difficult for him to be aware of what could be going on……really?
Is it really so difficult for senior executives to know what is going on? What is the escalation process? Is there any? If so, how does it work?
Let me tell you a story from my internal audit times. I was once reviewing the stock management prodecedures and processes of one of the main plants in UK. When having a look at some stock counts I realised that these were not done regularly. Further, there were some stock flows in and out of the plant into a temporary sort of depot. When I asked the Plant Manager about the stock counts of that depot, I could sense the atmosphere becoming more tense. Faces were more serious. There were no stock counts as it was a temporary depot only used when the plant was overloaded with stock.
I decided to have a look at that depot. What I found was an open space where everybody could come in. By everybody, I mean, everybody. There were no buildings, stocks were piled up on the grass and mud. There were thousands of products. This was not a temporary used only. It might have started that way, but it clearly had become an adjacent plant, albeit in the middle of an open space with no buildings, walls, doors (what for?!).
The Plant Manager called the Plant Director for UK immediately. That evening, in my train journey back to London I was called by the UK Plant Director. He wanted to discuss with me the findings and the actions to address them. During that journey, a set of actions was drafted. The next day, I had another call from the UK Plant Director, 8.30am. He was with the VP Operations for Europe. We went on discussing the findings, the risks involved and the drafted actions to address them. By the time I reached their office, 9.30am, the draft report of the audit was nearly finished. Later that morning, a meeting was held with the VP Operations for Europe and the SVP Operations Globally.
The key actions to address the findings were fully deployed within 24 hours. I’m certain the President of Europe was informed too. In less than a week the audit report was ready, with many of the findings having been addressed by then. The remaining opened findings had a clear deadline to be mitigated.
This story clearly shows the speed at which an issue can be escalated and how quickly action can be implemented by senior management. It shows as well that it is a team exercise, from bottom up. The President of Europe was informed of the issues immediately and of the actions being taken to mitigate them. Below him, the team had been fully involved and had got down to work, from SVP Operations down to Plant Manager.
So coming back to the VW case, where was the internal audit team? Where was the rest of senior management? Was there a Compliance department (although Compliance has sometimes other different goals….). Reports are written by people. In my example, the audit report, including findings and actions agreed with management to address the findings, was written amongst myself, the Plant Manager, the UK Plant Director, the VP Operations for Europe and the SVP Operations Global. Most of the discussions were held over the phone as it was quicker than arranging a face to face meeting since people were located in different countries. My boss had been also immediately informed by me, by email and over the phone. He was based in Australia, so I had enjoyed a midnight call on the day of the review of the plant. He was kept informed by email and phone (yes, more midnight calls and 7am calls!) on the discussions to address the findings and on the report progress.
What about the banks that collapsed? Where were their internal audit teams? Their Compliance departments? The management?, from SVP down to Managers… Whilst some lessons are learned, more needs to be done. Internal Audit and Compliance departments are at the forefront of the speak-up and escalation lines and yet, when looking at the scandals, it seems these lines are not very busy.
I know, the hard way!, that it is extremely difficult to speak up, to escalate serious issues. We all want to hear good news. Bad ones are not usually welcome. My experience, however, has always taught me that, bad news, calling a spade a spade, helps address the problem and that, eventually, brings good news.
My hat is off for the Operations team, from SVP down to Plant Manager, for their professionality, team work, responsiblity and accountability. I have not seen any similar response so far.