WHAT YOU'LL LEARN THIS EPISODE...
- [1:25] How has Werner’s career path led her to her current position at Volkswagen?
- [3:47] What did Werner learn about VW’s culture in light of the emissions issues? How did she and the board enact the changes they did?
- [5:21] What was the program that was in place at VW to encourage employees to come forward with concerns? How has it been strengthened?
- [6:58] How challenging was it to get buy in at VW on these new programs? How is progress measured?
- [8:47] How has COVID-19 impacted her planning and implementation of these goals?
- [10:23] As someone who sits on a board representing ethics and compliance, what are some things the E&C community does well and what are some areas for growth?
- [13:17] Germany recently passed a law mandating a percentage of board members be women. Are these laws necessary for diversification and why are so many companies resistant to this change?
- [15:15] What advice does Werner have for E&C professionals for what they need to do to make themselves attractive candidates for board service?
Intro: Welcome to the Principled Podcast brought to you by LRN. The Principled Podcast brings together the collective wisdom on ethics, business and compliance, transformative stories of leadership and inspiring workplace culture. Listen in to discover valuable strategies from our community of business leaders and workplace change makers.
Ben DiPietro: Hello and welcome to another episode of LRN's Principled Podcast. My name is Ben DiPietro. In addition to being the editor and host of this podcast, I am also the editor of LRN's E&C Pulse Newsletter, and I hope you can find that and subscribe. We're speaking across the pond today to someone in Germany, Hiltrud Werner. She is a member of Volkswagen's Board of Management, and she is in charge of their integrity and legal affairs. And so, we welcome Hiltrud here with us today. How are you, Hiltrud?
Hiltrud Werner: Hello, and thank you for the warm welcome.
Ben DiPietro: You've been in charge of restructuring the company's compliance after the emissions problems of a few years ago. And so, we're excited to hear about all the things you've done. Before we do that, though, tell us a little bit about your career path and how it led you to this position here on Volkswagen's board?
Hiltrud Werner: Yeah, thank you very much. The position of a board member for integrity and legal affairs had been introduced at the beginning of 2016, after the emissions' scandal and I assumed my role just one year later. Before that, I was the global head of internal audit at Volkswagen from early 2016 on. Before that, I had already worked around about 15 years in internal audit in companies such as BMW, MAN and ZF Friedrichshafen. This title, board member for integrity and legal affairs, doesn't say it, but it also includes that I oversee departments like the co-op compliance function and our global risk management.
To manage all these activities, also, I was responsible for overseeing our central monitorship coordination and also the diesel task force, to investigate the technical side of our former misconduct. This board position that I took was a clear mandate from the supervisory board and it was very important for them to give the issue of integrity the right importance. Doing the right thing out of personal conviction, what integrity means is for us now, just as important as acting only in accordance with the law.
Ben DiPietro: What sparked your interest in ethics and compliance? Where did you first come encounter with it and decide you wanted to be a part of that as your career path?
Hiltrud Werner: I took off my career in IT. When I changed to internal audit, that was clearly because I saw that I was good at driving change and looking at processes. And I was always interested in compliance and good corporate governance and risk management. So, it all came together nicely for me.
Ben DiPietro: And, obviously, you had to exercise those change management muscles when you helped steer the company out of this scandal you recently exited, the monitorship for what was happening. So, let's spend a little bit talking about that. What did you learn about VW's culture as a result of what happened with the emissions issues? And, how did you and the board use that information to devise and then enact the changes that you did?
Hiltrud Werner: Yeah, that's a very good question. As I said, I came to Volkswagen in 2016, so after the scandal. But I believe that Volkswagen had a very strong hierarchical culture, where a lot of people were not used to speaking out to their superior or people even above their own superior. That meant that after the scandal changes had to run through the entire company. Especially in my own board area, for example, and, of course, even more in the HR department, there were lots of challenges for initiatives to change the corporate culture towards a speak-up culture, and to anchoring compliance and integrity in many processes.
In HR, for example, alone, there were several of those processes from recruitment to management development that really needed to look into fostering a better corporate culture. In my board responsibility, of course, I could contribute to those processes as well, by putting a very strong, visible system in place, where people had to live the speak-up culture and also could trust the system, that they knew we protect whistleblowers. And that's working pretty well now.
Ben DiPietro: Can you tell us a little bit about the changes that were made then? What was the program, if there was before? And how it has been bolstered now, because of what you guys have done to make that a little bit more welcoming for people to come forward?
Hiltrud Werner: You cannot dictate the change of the corporate culture. It really has to be supported by the motivation and the willingness of the whole workforce. So most important to achieve that was the tone at the top. As everyone at the boardroom was firmly convinced that an open corporate culture and strong values, and also integrity of our actions were very important, we tried to lead that change with a very strong role-model program and effective ethics and compliance program.
We have invested heavily in rebuilding and developing those programs. And what the board did at the time, we installed a program that's called "Together for Integrity," which is a worldwide cultural change program, as an integral part of our co-corporate strategy, "Together 2025 Plus." And these cultural changes are still ongoing. They are far from over. As you know, corporate culture is never stable. Yeah? At every moment in time, it either deteriorates or it improves. So, it's a never-ending process. We need constant focus. And, of course, compliance is also evolving all the time, because you always get new social and legislative issues to deal with.
Ben DiPietro: So how challenging then, was it to get buy-in from rank and file? And how are you measuring the changes then? What are you using to see if progress is being made? Or if there's one step back and two steps forward, how are you figuring out where you are at any given moment?
Hiltrud Werner: For Volkswagen, this is the biggest change process ever, because you could say it's a three-dimensional change. It's overcoming the crisis, it is the electrification of our vehicles, of our fleets and, at the same time, it's also changed because of the digitalization and digitization of our business processes. So that means there was no one who was not affected by any changes. And the entire group board management, but also the board members and top managers of all brands, and many of the companies, they had given a very clear commitment to this. Also, a formal declaration of commitments.
And in our way, to get that buy-in, we focused quite heavily on discussion formats, on collaborative measures, on being there worldwide, reaching out to our employees, engaging them in perception workshops and meetings and votings. And that was a very good investment for sustainable change. It did cost a lot of money, and it needed also quite some time, but I think everyone has understood that it's not enough to overcome the diesel scandal. We need to be a scandal-free company. And the scandal can break out in many departments, in procurement or in finance or wherever as you can see in other companies. So, we had to make sure that our culture's strong enough to make us robust, and that people would speak out if they have the feeling something is wrong.
Ben DiPietro: What would you like to see next then in the evolution of the culture? What's the next goals you have? And, how is COVID changing your planning and implementation in this whole area? Obviously, it's had an impact on life in general.
Hiltrud Werner: The next really is that we prove to the outside world that what we do is not done only because we had to do it, because of the must, in terms of the monitorship, but also that we want it, that it comes from inside. And that this heavy work on corporate culture compliance and risk management, also on product and environmental compliance, was really because we have understood our lesson. With COVID-19, of course, that put an additional pressure on such processes and on the cultural change, because we had to switch from face-to-face events to virtual formats. And it's a great challenge if you want to get buy-in of people and if you want to motivate people.
But I must say, so far, we have mastered that quite good. And Volkswagen also had an excellent crisis management and high discipline and integrity of our employees in the factories and the offices. So, our infection rates on all our plant locations below the infection rates in their societies. So, we are particularly proud of the process, how we have managed COVID-19 in our organization.
Ben DiPietro: Let's move a little beyond the emissions then. As someone who sits on a board, then who has also worked in E&C and led the program, what do you see as some of the good things the E&C programs do? And what would you like to see the function improve upon?
Hiltrud Werner: It's like with every process, you have to take it serious. It's about clear processes, and it's also about ongoing training. Ethics and compliance don't have a finish line, for many reasons. New stuff is joining I, there are new regulations or legislation coming in. And that could always be bad behavior or bad culture just waiting outside your door. So, it's not about printing colorful brochures and distributing them. It's about training. It's about holding model programs. It's also about targets for the management, 360-degree feedback, for example, also. And giving clear feedback to everyone, what's expected from them, and whether they are there yet or not. And for Volkswagen it means that the whole management team has to stand behind it. And that must be visible to our employees. My team just recently made an analysis where we saw that 20% of time spent by the board in meetings over the past two years were topics about compliance, integrity, risk management or business partner due diligence.
And if people read our board meeting minutes, then they see that we have given those topics a lot of room. So, a department manager cannot say, "We have to deal with KPIs and the number of cars we produce. We have no time for that." We set the example and show that you have to have time for that, on top of your business targets.
And, at the same time, we also take every single board proposal and measure it also with an integrity statement, where we look, if we make that decision, how does it line up with our integrity statements? Is it in sync with our targets? Does it positively or negatively affect our reputation if we do so? So, looking also to incorporate the new thinking in each and every board decision, no matter whether it's about a new model or a new plant or financial targets, I think that this really setting an example, and it's also a sustainability statement in itself, because it's a huge success if the tone from the top shows we enforce what we also ask others to do, what we ask our management to do.
Ben DiPietro: Again, it’s certainly a way to embed it into the program and more meaningful way than simply making a program and just saying it's there.
Germany recently passed a law mandating a percentage of board members be women. Are these laws necessary to make companies diversify their boards? And, why are so many boards reluctant to do this without being told to?
Hiltrud Werner: I think a lot of boardrooms had their chance to do it without a law. So, at the stages where we are at the moment, I welcome the legal initiative. I must say, the older I've gotten the more far-reaching my experience that ... And, therefore, I have become a proponent of the quota. I believe that there are enough women who meet necessary criteria and necessary skill sets, but unfortunately, often enough, they cannot assert themselves.
So, in many companies, those changes to a larger proportion of women, it's just taking too long. And in the time where we are now, where we cannot risk to overlook potentials in our companies, I think that will be beneficial to men and women, likewise. And, at the same time, of course, diversity is for me and also for everyone else in the company, more than just a gender issue. Other criterias like nationality, age, education, biography, or sexual orientation, they all bring added value to every discussion and everybody, including the boardroom. So, I welcome the initiative and I hope that a lot of boards experience the benefit of diversity in decision-making, and see that new thoughts and solutions help them to come to better decisions, or even boost creativity and helps creating fresh ideas or discussing topics more openly. So, this will hopefully help, especially in the disruptive transformation in the automotive industry as well.
Ben DiPietro: So, on the flip side of that, what advice do you have to E&C professionals on what they need to do to make themselves attractive candidates for board service? And, what skillsets do they need to develop beyond the ones they already have?
Hiltrud Werner: I think a lot of people that work in ethics and compliance have profound knowledge of the business processes in their organization. And that is really a must. Yeah? You have to be very close to the business. You have to be able to talk eye-to-eye level with the business. And it needs to be an integral part of every business decision, really, that compliance sits on the table, even if there is no compliance manager in the room. And I think that's where our job is. And I think if ethics and compliance officers act in that way, the way they understand their own job, that they are an enabler for management to ... or the consultant, then they also qualify for other jobs in the company, likewise.
Ben DiPietro: Great. Well, I want to thank you so much for taking time with us today. And hope you stay well and look forward to seeing what comes next out of Volkswagen. Thank you so much, Hiltrud.
Hiltrud Werner: Ben, it was my pleasure. Thank you for having me.
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