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After the state election in Brandenburg, Tesla in Berlin-Grünheide and the crisis at Volkswagen were discussed. It was quickly agreed that US billionaires like Elon Musk should also accept concessions on collective agreements and that executives should also do their part to solve the VW crisis.
If this is so clear, why hasn’t it been done so far?
If the car industry is doing badly, why not simply replace the management team?
The management team is to go.
Almost all manufacturers are in a historic crisis. Due to market decline and stronger competition, especially in China, fewer cars are being built and sold, not only in Germany.
Carlos Tavares, a superstar with a 10% return on sales a year ago, now has to fear for his job and says, “There are no taboos.”
There have also been market declines in the past. Short-term employment and the non-renewal of temporary workers served as buffers for these. But this time it also affects the management team.
And massively.
Because the management team is responsible for a crisis of the company. Just accepting this responsibility contradicts their profession as a manager.
Car managers act like experienced front-line soldiers.
The influence of a single manager, such as Tavares, is overestimated.
Before the crisis, the management teams failed to adapt the decision-making structures. Decision-making structures are more important than individual managers. Strategic decisions are not made in this way or are made incorrectly. Due to wrong decisions, the team deals 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 into the market. Too many bad and wrong decisions were made.
The resistance to such changes is enormous and absolutely rational. After all, the essential tasks of managers in the automotive industry are to maintain their position every day.
They are like front-line soldiers with years of experience in combat. Most of the time, they work to hold and defend their position. When the opportunity arises, they advance and expand their positions. They want to protect their position in the cash flows that come from industrial car production. Some fight their way to the front until they get to the source of the money. A lot of time and energy is spent on this. Actually, they should be the priests of the spring and make sure that the stream grows bigger and bigger and never dries up. In fact, they spend their time and energy on asserting themselves and moving forward. The actual task of building sustainably profitable businesses leaves little time in day-to-day business.
Now there is a hectic change of course. However, this is impossible with the existing management systems.
The forces of inertia are gigantic. And that’s logical.
A lot of money is being spent to move the old management team. But even generous offers of severance pay are not accepted. Because they take too little account of a manager’s thinking and consideration.
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 necessary for a decision. This makes decisions and behavior very predictable.
However, no one has perfect information, and habits of thought are added to this. A small mental model makes it clear where 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 with two reference points: their desired image or ideal and the option that they can actually achieve with the decision. The ideal is always better than the actual situation.
The question remains as to how the option to choose from (in this case, a severance offer) will be classified.
This results in a total of three scenarios:
- The option is better than the ideal (and thus also better than the actual situation). In this scenario, the decision will be made quickly: The person decides on the option offered, in this case the severance offer. This is the GOLDEN HANDSHAKE.
- 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 chances of the person choosing the option are not small. However, it takes a lot of thought and persuasion to get them to accept the alternative.
- The option is worse than the actual situation. In this case, the person is dependent or unfree on the current situation. Every rational person will defend themselves against this detrimental change with all their might. It takes COERCION to get the person into the worse option.
A scenario like in 1 is simple but expensive. Scenario 3 can only be implemented by force, is therefore culturally difficult and is usually avoided.
Most offers will be similar to scenario 2. They can very easily be misunderstood as scenario 3 (compulsion). This is because they are multidimensional, unclear, and very strongly dependent on the personal “ideal” and the current 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 the decision? What is their financial situation (home loans, other debts, other types of income)? Are their health or their attachment to their current residence limiting their ability to reorient?
All the answers to these questions are hard 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.
There is often a lack of clarity in personal and professional goals.
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 forgets to orient themselves. The most important life parameters are predictable. The income is secure. The pension is predictable.
If the management team is now being dismantled, the individuals will have to make decisions that are outside of predetermined life paths. They have to relearn that their lives are not dependent on their employer. That it is their life and that they alone are responsible for it.
This is where the employer can help by offering more time and helping with orientation. Managers and employees need scenario 2 and support in 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 an immense wave of coaching in the automotive industry. 68,000 managers will have to find new ways in the next three to four years. With costs of €3,000 to €10,000 per executive, a rate of 50% who sign up for coaching, then this is a market of €25 to €100 million annually in the German automotive industry alone, for B2B and B2C coaching.
Coaching is worthwhile.
I often get the statement, Why should we pay severance pay and also cover the costs for a coach?
We have calculated business cases for various companies that show that the investment in coaching is worthwhile:
- Severance packages in scenario 2 are accepted more frequently and more quickly. Within 6 to 12 weeks, amicable decisions can be reached, even in very difficult cases.
- The average amount of severance packages can be lowered.
- Coaching replaces outplacement consulting.
- The costs of litigation are significantly reduced.
- Coaching has positive effects on productivity in the company and the remaining talents.
How to recognize a good coach (spoiler: not only by the certification) and what role technology and new forms of coaching can play in this—more on this in one of the next issues.
