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HR Chronicles: Enduring a scandal

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In 2006, Siemens AG was caught in a corruption scandal for bribing employees of other companies for contracts. Dr. Nicolas von Rosty, corporate vice president of executive development, tells us about how they gained back consumer trust and respect.

In order to really change a culture, you have to start at the top, sending the right signals at the beginning and also be very speedy about it. Speed is of the essence in being successful.

We had to exchange the majority of our top leaders after the bribery scandal, and from the first moment, we jumped in with our new leadership team. There’s a good quote that (Siemens’ CEO) Peter Löscher said when he started: “Never miss a good crisis.”

It can be difficult, because you have to look right into your leadership potential. At the time, we did a management appraisal for our top 100 leaders, where we really looked into their competencies and capabilities. We moved those who were on the second or third level to the first level in a very short period of time. If you have compliance issues such as this, you have to look into your management portfolio, define what capabilities you are looking for, then place them in positions according to those capabilities.

Before the scandal, we had so many layers in between the executive board and the operating functions, and we had to get rid of them. The board then had a much more direct line of command – a clear segregation of duties and responsibilities. These were the instant measures we took alongside building up our compliance rules and implementing a zero tolerance on this. But, like I said, more important than all of this is the speed at which you do this.

Collaboration at all levels is one of the main ingredients. It’s always difficult to foster collaboration, but we did many concrete things to help. One thing which had a big effect was incentivising the direct reports of the board members to 20% of their variable pay, exclusively according to their collaborative behaviour. I think this is quite unique and this doesn’t only have an effect on their variable pay, but also on internal culture, because the issues raised will be cascaded down.

Our employees are proud, and there were many who couldn’t be proud of Siemens anymore. Everyone wanted to clean the house and get rid of the people who carried in dirt. They were really interested in reestablishing the company’s good reputation.

But, in a company of 360,000 people, you can’t know everything.

I can’t say there will never be other compliance issues, but I’m not staying awake at night because we now have the right systems and principals in place. We have several hundred compliance officers all over the world who make sure everything runs in accordance with our rules. We also have measures like a hotline, where whistle blowers are encouraged.

There are enough examples in history where large companies have just vanished after a scandal, and we could have vanished too, so it’s definitely a question of having the right leadership and jumping onto solutions quickly.

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