Smart people are capable of doing some very dumb things! Volkswagen is the latest example.

For the past decade, automobile manufacturers have been hustling to satisfy increasingly tough emission standards set by various countries. California has been setting the pace over the years with the U.S. EPA not been far behind. Through new technologies related to catalytic converters and computer controlled fuel mixtures, the automobile manufacturers have generally been able to meet these new regulations, except for diesel engines where the technical challenges have been huge.

Much to everyone’s surprise, in 2008 VW brought out its “clean diesel” and introduced it in the U.S. In 2009 the VW Jetta, equipped with Volkswagen’s acclaimed “TDI clean diesel,” won the Green Car of the Year award. VW executives proudly declared “you don’t have to sacrifice power to be environmentally conscious.” Volkswagen as a company prides itself with having hardcore engineers all the way up its chain-of-command, including the CEO. In recent years, the engineering community in the auto industry has continued to register surprise and skepticism regarding VW’s TDI diesel. For example, the director of the Center of Automotive Research at the University of Duisburg-Essen claimed “this is a story of Santa Claus, it’s not possible to meet the emission standards with a diesel. “

Meanwhile, top management at VW publicly scoffs at hybrid cars such as the Toyota Prius. They also belittled Mercedes Benz who introduced a clean diesel running some very new sophisticated technology which unfortunately saps the power of the diesel in order to meet the standards.

Much to the detriment of VW, recently it became public that their clean diesel is a sham. VW engineers had found a way to fool the emissions testing procedures by incorporating sophisticated software that reduced the power and the emissions of their diesel engines when it sensed it was being given an emissions test (e.g., front wheels not moving, rear wheels spinning).

Importantly, when engineers in VW were confronted with this situation recently, several cited the pressure they felt from the CEO, who demanded that VW have a diesel that meets these standards and he would accept nothing else.   Net, when you boil this terrible situation down to the basics, it appears that the heart of the problem was the fear generated by top management at VW which caused the engineers to realize there was no way out; they had to somehow meet the emission standards while having the full power of a normal diesel engine. That led to the software trick which has now massively damaged the Volkswagen trademark.

Talented leaders know that they have to create a culture where employees are very comfortable bringing up bad news with the clear understanding that the leaders will be not only anxious to hear about any problem but also anxious to help. This is a powerful lesson of a very basic tenant of leadership.