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The German automotive industry is under severe pressure. The restructuring is going too slowly, it is said, due to a clinging to vested interests and a lack of willingness to change.
Is this rather simple explanation correct, and why does nothing change anyway?
Prof. Dr. Sabine Pfeifer did the deep drilling at Volkswagen and conducted 100 interviews, analyzing 5,400 pages of transcripts. Countless workshops were held. 3,500 employees were involved in the study. A globally unique database on the topic of “automotive transformation”: what does it mean for employees, are they willing to change and where are the real obstacles?
Hello, Professor Pfeiffer. Everyone has a connection to cars. What does your dream car look like?
Prof. Sabine Pfeiffer: I don’t have a car at all. But that also has to do with the fact that I live in the middle of the city and don’t really need one. When I do borrow one, my favorite car is the Fiat 500. There is hardly any other car that has managed to transform the charm of the old form into a new form so beautifully. A little racing car.
The digital transformation: slow, but not fearful
You conducted a study on the readiness for transformation in the automotive industry. Is there a comparable study? And what are the results?
Prof. Sabine Pfeiffer: There is nothing comparable in recent times in terms of the database and the short time in which we generated all this. Normally, you need three years for a project like this.
We worked on it for over a year and still have a lot of material. There could have been three more reports on our study. We are also planning to write a few more articles on special topics. There is still a lot of music in it.
It was great access, I have to say. It’s not that common for companies to give you so much access. And it also went very quickly. Everything was clarified quickly, the works council and data protection issues were no problem. Otherwise we wouldn’t have been able to do it in such a short time.
This is probably the most comprehensive and in-depth study on this topic. What are the consequences of the so-called double transformation for employees in the automotive industry? You can always say that Volkswagen is a world of its own. On the other hand, many things can be generalized to the industry as a whole. Even if every OEM believes it is very unique, research in different companies reveals more similarities than differences.
What are the most surprising results from your point of view?
Prof. Sabine Pfeiffer: The most surprising thing is that many people say about the digital transformation: “It doesn’t feel like a transformation at all.” “It’s all happening far too slowly.”
Many have said that it is too slow for them. “I’m much more digital in my private life than at work.” The image is still as if the great wave of digitalization is now coming upon employees who have never heard of the Internet before and are now anxious and disturbed.
This image is also prevalent in science, in the media and in management.
I was just at a conference today where the topic was once again digital transformation. And there really was someone sitting on the podium who said that if you give employees a tablet, they’ll think it’s something to put their coffee cup on. When you hear something like that from someone from management in the year 2023, you ask yourself: what kind of world do people live in who make statements like that? Because, of course, most employees – and we know this from the private usage figures – have long since arrived in the digital world.
Colleagues in the automotive industry work with technology every day, whether in the office or in production and logistics. This would not be possible without technology. The automotive industry is a leader in many areas.
Prof. Sabine Pfeiffer: That’s exactly what I mean by reality-distorting memes.
In the discussion about transformation, I often hear the statement that many people believe that once they have learned a profession, it remains unchanged until they retire. However, constant transformation and therefore lifelong learning have long been the norm for most employees.
Wherever I conduct interviews, it becomes clear that something is constantly changing almost everywhere. In our studies, we always ask people directly what has changed in their workplace in recent years. They then often talk for half an hour about the many and sometimes dramatic changes that have taken place.
It’s not as if nothing happened from the 1950s to electromobility, but something is happening all the time: product changes, markets change, customer wishes change, technical possibilities change. Digitalization is part of this, and not just since yesterday. This is the standard experience of the broad mass of employees.
However, this meme about the alleged novelty of lifelong learning is often coupled with the assumption that employees are afraid of learning or are incapable of engaging in learning again.
That’s why we asked specific questions: What exactly are the hurdles, specific fears and resistance?
Hurdles and fears: further training and changes in professional life
What we did not find, however, were fear and despondency in relation to their own change, but two major hurdles in relation to participation in larger further training courses:
On the one hand, it is the compatibility of further training with private life. People are at a certain age when they consider undertaking comprehensive further training or seeking a career change. These are usually people who are already heavily involved in their professional lives, who may (want to) grow into their first management roles and start a family at the same time. These people may have to manage both the care of older family members and the upbringing of their children. This raises the important question of how to reconcile these different responsibilities.
The second aspect is a personal benefit analysis. If I am undergoing a transformation that will inevitably have a major impact on my private life for a long time, I want to be sure that the time invested will be worth it.
And it’s not just about the financial aspect. Our data shows that. Instead, it is more important that the effort pays off in the form of an appropriate and promising position. It shouldn’t be a dead-end job, where after two years I’m faced with the decision to start another major training course or reorientation. The investment should also be worthwhile in the sense that the work is exciting and fulfilling, i.e. fun and challenging.
Older employees often report to younger employees, based on their experience with technician or master craftsman courses, that comprehensive further training does not necessarily lead to better career opportunities. Some of the interviewees have even obtained both qualifications, which represents a considerable effort. Nevertheless, they were unable to achieve improved career prospects. No wonder that such experiences can lead to younger colleagues being discouraged from embarking on lengthy training courses that may not benefit them professionally.
Unfortunately, this experience is not uncommon and has become ingrained in the culture. There is often a perception that further training does not necessarily lead to a more interesting, secure or sustainable job.
The statement reflects both positive and negative elements. On the positive side, there is openness towards digital transformation and a willingness to undergo further training. On the negative side, however, is the gap between the “under-complex” and often unrealistic ideas about transformation and people’s actual experience. This distorted perception represents an obstacle to transformation.
Prof. Sabine Pfeiffer: Well, that’s actually not such good news. And that sometimes leaves me a little perplexed.
For example, we investigated whether people are afraid of learning, whether they are worried about facing exam situations again or whether they fear they will not be able to keep up mentally. We found that these fears and worries are very low overall.
I have observed – and this is not a phenomenon specific to Volkswagen – that in every industry, in every interaction with decision-makers, be it in politics, the media or companies, certain attributions are repeatedly made. It is often assumed that people do not want to change or continue their education and therefore have to be forced to do so against their will.
There is also the assumption that employees are very anxious about the impending changes. However, when we talk to those affected in our research, this is not confirmed to the same extent.
There is a certain skepticism and sometimes criticism of delayed strategic decisions by company management. There is also concern that technological developments could lead to job losses. But this is seen as a normal part of experience in the industry, as employees know that jobs can be lost and have experienced this time and again in the industry in the context of competition between locations or relocation.
However, this does not mean that there is an automatic threat of unemployment in this industry. This is not the case in every industry, but in the automotive industry with its strong representation of interests, it is common for people to find another job. Job losses do not lead to employees falling into a state of shock and not knowing what to do next. On the contrary, many are very active in finding their own way and applying for new positions internally.
We have found that especially those who have been with the company for a long time on average often only stay in their current job for a short time. This is not normally recorded in the labor market statistics. They only ask how long someone has been with their current company. In the automotive industry in particular, especially in large corporations, it is common for positions and the content of activities to change frequently. What you may have done five years ago may have changed completely. Such dynamics are often not taken into account in traditional labor market research.
In our survey, we found that employees are very mobile. They apply for new positions internally, find out about further training opportunities and some have taken part in further training. So there is a lot of movement and activity among employees. So there is really no reason for management to be overly concerned.
The real question is why the management is still constantly worried. We can only speculate about that.
Let us speculate. What can you do as a manager with these scientific findings?
Prof. Sabine Pfeiffer: As a manager, I should say: “That’s great! People are much more agile, open, future-oriented and transformation-oriented than I thought they would be. Then we can get started. Then I won’t have to worry about them anymore.”
On the other hand, as a manager you might actually ask yourself: “Why do I need a study for this?” Couldn’t I have realized that myself? At least for the area I’m responsible for?
My hypothesis is that this is a kind of immunization. If your own transformation strategies that you want to implement in your department and the measures devised for this are ultimately unsuccessful, for whatever reason, then you already have someone to blame in advance: It was the inflexible employees.
I would even argue that even if employees were immobile – which we have been able to show that they are not – it is still the responsibility of managers to shape the transformation with the available human capital. Instead of complaining that you supposedly have the wrong people with the wrong qualifications, attitudes or fears, you should consider how you can work with the available resources.
In this respect, we can send a message to managers to relax. The employees they have are not the problem. That is actually a positive message.
Departments in transition: a proposal for a successful transformation
Your report sets out numerous proposals in the annex. The “Departments of Transition” proposal is particularly interesting. Can you explain this concept and its significance?
Prof. Sabine Pfeiffer: In many companies, not only at Volkswagen, management tends to strongly promote new developments such as electromobility and support them generously with resources.
There is a high willingness to hire external employees with new qualifications for these areas, so there is no shortage of resources. On the other hand, the “old world” faces the opposite problem: fewer resources, gradual staff cuts and a tendency not to fill vacancies as these areas are seen as obsolete or being phased out.
However, this division into two worlds – the new and the old – is an under-complex, oversimplified view. In a company of this size, there are many areas that will continue to operate regardless of the type of mobility, such as the canteen. There are therefore numerous departments that remain unaffected by this division and continue to fulfill their functions.
In companies, there are departments whose tasks remain stable, regardless of new trends. But there are also departments that, at least in a transition phase, have to manage both old and new technologies. A typical example is engineering, where employees work for the combustion engine world and on electromobility at the same time, which means a double burden. However, for reasons that are not entirely clear, some of these employees are often assigned to the “old” area, which leads to various problems. This is because decisions about resources are linked to this: those who are assigned to the “old” area are often no longer allowed to travel to trade fairs or conferences and, above all, employees who retire or change jobs are not replaced. The result is a situation where, on the one hand, there is a double workload (because engineering for both worlds at the same time) and, on the other hand, a gradual reduction in personnel in such teams. This situation understandably leads to younger employees in particular trying to move elsewhere. However, this exacerbates the situation in the old and new areas even more.
Our recommendation was to create “Departments of Transition” to specifically meet the needs of those areas working for both the old and the new technology.
These departments may even require special resources during the transition phase.
At the time of our investigation, the affected areas had already reported their misallocation and its negative consequences for employees and ultimately also for the company and the transformation to the company management.
At the time, however, there was little willingness on the part of management to address the problems communicated upwards by employees, operational managers and works councils in these areas. This is a phenomenon that can also be observed in other companies and in politics, where major changes are often only tackled with financial resources and appeals to the right mindset instead of seriously addressing the necessary structural changes.
In our study, we identified areas in which too little thought was given to what structures are needed for a transition phase of perhaps three to five years. As soon as the “transformation moment” is over, it will be possible to move on to a less dramatic change.
During this transition phase, the current processes and structures should be critically scrutinized. Management needs to be more sensitive in order to react to signals from below when employees point out that something is not right. Structural and procedural adjustments must be made by the company management.
In upper management, there is often a tendency to rely on proclaimed strategies and expect employees to follow without complaint. As a result, feedback from the rank and file is not sufficiently taken into account. A more sensitive and open response to this feedback would be more beneficial.
Employees’ perception: change has long been part of everyday life
Simple instruction, simple explanation and clearly stating problems are “Management 101”. And now we realize that some of the explanatory patterns in management are “under-complex” for an entity like Volkswagen.
Yes, although I wouldn’t have put it exactly like that myself, I agree with your statement. The reason for this is that there is indeed a tendency to oversimplify in various areas such as society, politics, media and management.
A simple, catchy vision, a quickly understandable strategy and some storytelling will often be used to deal with complex issues.
However, perhaps we should recognize that the world we have created for ourselves is extremely complex. During normal, incremental change, the simplistic explanations may be sufficient to deal with this complexity. But the complexity at Volkswagen, for example, is so enormous that it’s almost a miracle that everything works and doesn’t break down.
In the case of major, comprehensive changes, it would be helpful to acknowledge that the situation is extremely complex and the solutions are often not simple. Perhaps we should say goodbye to the simplified messages that we usually communicate.
The importance of fault tolerance, feedback loops and continuous improvement processes in the context of complex transformation processes in companies should not be underestimated.
It is important to take these processes seriously and to reflect on them at higher levels of company management. This includes recognizing that even executives are not infallible and can make mistakes, as well as underestimating the complexity of the transformation process. It is therefore crucial to pay attention to signals from lower levels and possibly even implement additional processes to ensure that these signals are also heard at higher levels. This makes it possible to make timely corrections and react flexibly to changes instead of rigidly sticking to simple, black-and-white messages. An open dialog and joint reflection on possible answers are required, whereby it is important to be aware that even these answers can only be provisional and must be continuously questioned and adapted.
The real challenge of transformation lies in the realization that it is not a simple, linear process, but a complex interplay of many factors that requires flexibility, openness to feedback and a willingness to constantly adapt.
The statement that real transformation is not a simple, linear process, but a complex challenge that requires continuous rethinking and adaptation, is central. If transformation were really simple, then it would not be a transformation, and all the excited discussion about it would be superfluous. Transformation means overcoming outdated ways of thinking. An image that is often quoted, but rarely used in the current discussion, is that of the transformation of an airplane in flight, which illustrates the complexity and the constant need to adapt well.
In this sense, answers to challenges are often only provisional and evolve through trial and error. It requires the continuous attention of everyone involved and the willingness to constantly question and rethink existing solutions. This is particularly challenging in large companies with their often top-down mindset. Despite all the talk about lean management and similar approaches, there is often the idea that the strategies developed by the company management are already optimal. However, as in a Volkswagen factory canteen, the actual “success” of the strategy must first be achieved during implementation, which requires many “cooks”, i.e. the cooperation and commitment of all those involved.
When I hear her words, I feel optimistic, because there is obviously enormous potential in terms of skills and knowledge in the 130,000 employees surveyed. A lot has already changed since the study was conducted between summer 2021 and summer 2022.
If the study were to be conducted again now, would the results be different?
The announced job cuts at CARIAD will undoubtedly have a significant impact, especially in the context of the study you mentioned and the previous study by the Fraunhofer Institute. The latter focused on the shifts in the labor market, particularly the areas where jobs are being lost and created, with a focus on fields such as data science, artificial intelligence, automotive software development, autonomous driving and connected cars. These areas were classified as growing strongly, with an increase of 350% predicted. This led to the assumption that this is where the greatest need and challenges lie for companies, particularly in terms of recruiting qualified specialists.
Many employees asked themselves whether they should train to become data scientists in order to secure their professional future. This perspective was reinforced through various communication channels. Now, with the developments at CARIAD, we are experiencing a kind of reality check that challenges these assumptions and shows that the transformation in the automotive industry is not as linear and predictable as originally assumed.
This brings us back to the importance of “positive substance” in companies. It would be desirable to take a holistic view of these strengths together with the developments and challenges in the area of software and digitalization. It seems that the previous, perhaps somewhat uncoordinated focus on software and digital skills must now give way to a more realistic assessment. This requires a reassessment of the skills and resources available within companies and how these can best be utilized and developed to meet the future challenges of the industry.
We have not examined the field of artificial intelligence (AI), but we have in areas such as AI applications, UX design and cybersecurity. In these areas, management, not only in our Group but also worldwide, often looks at Silicon Valley and its approaches with wet eyes. They then come to the conclusion that we Germans are over-engineering and that we should pursue the principle of “good enough” instead.
In my view, what is particularly relevant for the German automotive industry is the question: What are our strengths? What are the things we are really good at? What substance do we have? And how can we effectively combine these strengths with new developments in the software sector? I am convinced that we could even be better at software development than our competitors in Silicon Valley. As an example: We conducted interviews in one of our divisions. The people working there, most of whom do not come from the automotive industry but from academic circles or external areas, deal with pair programming on a daily basis.
In this situation, two people work together on programming, with one either directly or virtually supervising the work of the other and ensuring that the code is of good quality. This is a very luxurious way of working and learning. However, when these employees are asked about the future development of their area – the Fraunhofer study predicts that this area will grow by 350% – and how work processes will have to adapt accordingly, there is often confusion. The question of whether they will continue to do pair programming all day remains unanswered.
Interestingly, we have found that employees who have already undergone a transformation, for example through further training via Faculty 73, and work in such areas, have a strong DNA for process optimization. For example, we had a case where a person coming from the store floor had completed this training. This person is used to constantly scrutinizing processes and looking for ways to make them more efficient, more robust and therefore more technically sophisticated.
This leads to a certain culture clash: on the one hand, there are those who work with a more casual approach to software development and, on the other, those with a strong inclination towards process optimization. These differences in working cultures and approaches within the same company can present both challenges and opportunities for the organization, especially in terms of adapting to the changing demands and growth in the industry.
They are stuck in their pair programming world and can hardly imagine that work could be organized differently – a change that could be necessary sooner or later for economic reasons. Because there are the colleagues from the factory who are fresh out of Faculty 73 and still need to gain experience in this new area. Although they have in-depth knowledge of process optimization from automotive production, they are not immediately able to fit into a harmonious, synergetic working environment, which initially leads to irritation.
However, I believe that the combination of these different strengths could represent enormous potential for the German automotive industry. It is particularly important to emphasize that the manufacturing industry in Germany, especially on the store floor, has highly qualified employees by international standards, many of them with skilled worker training and extensive further training. This represents a skills surplus, and these employees are used to coping with constant change and putting it into practice. If these different skills can be effectively combined, it could be a significant advantage for the entire automotive industry.
Managers and transformation: responsibility and perspectives
Prof. Pfeiffer, you have the opportunity to write a letter to the CEOs of the German automotive industry. What would you write in it?
I wouldn’t just write a letter, I would make them commit to spending at least three days a month in the next quarter at a normal workplace in your company.
Spend eight hours there at a time to really see, experience and understand how much the employees do, what skills they have and how complex their job requirements are, which often seem so simple from the outside. By getting involved and talking directly to employees, you will gain insights that extensive studies cannot always provide.
It’s a familiar situation in large corporations like yours: when a board member visits a site on the store floor, it’s often staged, with a large entourage and little opportunity for authentic conversations. I believe that if you took the time to speak directly and unadulteratedly with your employees, it would make a big difference. You could recognize the substance that lies within your employees and understand what they really do and how complex their tasks are. This could be enormously helpful. So instead of just writing a letter, make a commitment to yourself to really engage in the experience.
Prof. Pfeiffer, thank you very much for this insightful interview.
