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There was a lot of talk about Tesla in Berlin-Grünheide and the crisis at Volkswagen. It was quickly agreed that US billionaires like Elon Musk and the executives should play their part in solving the crisis.
If this is so clear, why hasn’t it been done so far?
Career change at 40 or 50.
Almost all manufacturers are in a historic crisis. Fewer cars are being built and sold, and not just in Germany, due to market decline and increased competition, particularly in China.
Carlos Tavares, a year ago a superstar with a 10% return on sales, is now fearing for his job and says: “There are no taboos.”
There have also been market downturns in the past. These were cushioned by short-time working and not extending the contracts of temporary workers. This time, however, the management team is also affected.
And massively so.
This is because the management team is responsible for a crisis in the company. Simply accepting this responsibility contradicts their profession as managers.
Car managers act like front-line soldiers.
The influence of a single manager, such as Tavares, is overestimated.
Before the crisis, management teams failed to adapt decision-making structures. Decision-making structures are more important than individual managers. Strategic decisions are not made or are made incorrectly. As a result of wrong decisions, the team is occupied with the wrong things and loses time and productivity.
With this in mind, Audi is currently restructuring its product development process. The new cars do not fit the market. Too many bad and wrong decisions were made.
The resistance to such changes is enormous and absolutely rational. After all, the main task of managers in the automotive industry is to maintain their position every day.
They are like frontline soldiers with years of experience in battle. Most of the time they work to hold and defend their position. When opportunities arise, they advance and expand their positions. They want to defend a place in the money flows fed by industrial car production. Some fight their way forward until they reach the source of the money. A lot of time and energy is spent on this. Actually, they should be the priests of the source and ensure that the flow keeps growing and never dries up. In fact, they use their time and energy to maintain and advance themselves. The actual task of building sustainably profitable businesses is not given much time in day-to-day business.
Now there is a hectic change of direction. However, this is impossible with the existing management systems.
The severance factor is as great as the resistance.
A lot of money is spent on moving the old management team. The severance factor indicates how many monthly salaries are paid per year of service if a severance offer is accepted.
- Statutory settlement factor: 0.5
- General industry range: 1 to 1.5
- “Golden Handshake” offers: 3+
But even generous severance offers are often not accepted. This is because they take too little account of the way a manager thinks and weighs things up. Rational action is the hallmark of a manager. Rational people have clear preferences, weigh up different options, consistently optimize the benefits and obtain all the information they need to make a decision. This makes decisions and behavior very predictable.
However, nobody has perfect information and habits of thought also come into play. A small mental model makes it clear where the forces of inertia come from and why it is so difficult to overcome them. A person makes a decision by first evaluating their current situation against two reference points: their ideal and the option they can actually achieve with the decision. The ideal is always better than the actual situation.
The question remains as to how the available option (in this case a settlement offer) is classified.
This results in a total of three scenarios:
- The option is better than the ideal (and therefore also better than the actual situation). In this scenario, the decision is made quickly: The person decides in favor of the option offered, in this case the severance offer. This is the GOLDEN HANDSHHAKE.
- The option is worse than the ideal, but better than the actual situation. This leads to a NEGOTIATION, because the person has not reached their ideal: Can the alternative be made palatable to them? Can the person get something out of it to get closer to the ideal? The probability that the person will choose the option is not small. However, it takes a lot of thinking and persuasion to get them to accept the alternative.
- The option is worse than the ACTUAL situation. Here the person is dependent on or not free from the ACTUAL situation. Any rational person will resist this disadvantageous change with all their might. It takes FORCE to bring the person to the worse option.
Creating a scenario like scenario 1 is easy, but expensive. Scenario 3 can only be implemented with coercion, is therefore culturally difficult and is normally avoided.
Most offers will be similar to scenario 2. They can simply be misunderstood as scenario 3 (compulsion). This is because they are multidimensional, unclear and highly dependent on the personal “ideal” and the actual situation: What personal goals is the person pursuing? What is their family situation and what influence does their social environment (friends, work colleagues, others) have on their decision? What is their financial situation (home loans, other debts, other types of income)? Is their scope for reorientation limited by their health or by their ties to their current place of residence?
All the answers to these questions are difficult to find. Because they are often personal and sometimes unconscious.
And then it often seems that even the most rational managers make irrational decisions for themselves.
Too often there is a lack of clarity about alternatives.
The average length of employment is often 20 years or more. In a working environment that has been very stable and structured for decades, with predictable careers and clear expectations. In this environment, a person learns to orient themselves. The most important life parameters are predictable. Income is secure. The pension is predictable.
If the management team is now dismantled, individuals will have to make decisions that lie outside of predetermined life paths. They have to relearn that their life is not dependent on their employer. That it is their life and that they alone are responsible for it.
The employer can help here by offering more time and help with orientation. Managers and employees need scenario 2 and support with professional and private orientation.
Coaching helps with this.
Coaching is the decisive lever in the restructuring of decision-making processes – for all those who leave and for all those who stay. That’s why I expect a huge wave of coaching in the automotive industry. 68,000 managers will have to find new ways in the next three to four years. At a cost of €3,000 to €10,000 per manager and a rate of 50% who sign up for coaching, this represents a market of €25 to €100 million per year for B2B and B2C coaching in the German automotive industry alone.
Coaching pays off in a severance situation.
I am often told: Why should we pay a severance package and also cover the costs of a coach?
We have calculated business cases for various companies that show that investing in coaching pays off:
- Settlement packages in scenario 2 are accepted more frequently and more quickly. Amicable decisions can be reached within 6 to 12 weeks, even in very difficult cases.
- The average amount of severance packages can be reduced.
- Coaching replaces outplacement counseling.
- The costs of legal disputes are significantly reduced.
- Coaching has positive effects on productivity in the company and the remaining talent.
Read on to find out how to recognize a good coach (spoiler: not just by certification) and what role technology and new forms of coaching can play in this.
