Despite a clear statement of ethics in their company literature, similar to many that exist in other successful companies, something went terribly wrong at Volkswagen Group.

Despite having clear public codes, why do leaders continue to breach their own codes of conduct and ethics? The executive director of The Ethics Centre, Dr Simon Longstaff, has proposed that significant failures arise whenever “technical mastery is divorced from ethical restraint.” His point is not one that can be met by rules, but by the disposition of people to do what is right.

Often you will find psychology, biases and organisational theories are at play. These are ‘bread and butter’ areas for the HR function. HR has a role in filling the gap between the creation of rules-based organisations and organisations regulated by the practical application of core values and principles (with which the rules must accord). That gap can be wide enough for companies to fall through.

Decisions about right and wrong can be difficult, but understanding and articulating ethical theories can help your organisation’s leaders develop better decision making.  It’s important to know the theories and how to apply them.

An example would be to test whether the VW leaders tried to use a consequentialist framework to justify their decisions. Was their primary motivation the need to optimise the outcomes of revenue or sales for the company at any cost?

If, as an HR professional, you see this trend, you need to understand that other theories can counteract this. A framework based on the concept of duty would prompt you to ask questions such as “what are my obligations, and what should I never do?”  Add to that the virtue framework and ask “what kind of person (or organisation) should I try to be and how will my actions both shape and reveal my character?”

Using theories like this can counter weak or warped arguments and are good management tools to assist with decision making.

Psychological biases are the blinkers that can blind us all. They act as if you’re wearing sunglasses and it’s grown dark. You can still see but the perspective is not quite right, your vision is skewed and that can lead to you missing something.

Did the leaders at VW think that it paid to ignore their own code of ethics (motivational blindness)? Did they think that they were safe by delegating the work to a third party to remove the onus (indirect blindness)? Did they surround themselves with followers who merely agreed with them and did not challenge their decisions and direction (confirmational bias)?

Before you can call out biases, you need to be able to recognise them. You need to point out that the sunglasses are still on.

Codes and rules are the ‘hardware’ around governance. However, the quality of the ‘software’ is critical.  How those rules are applied to create a healthy climate, one where individuals can challenge the system and each other without threat or compromise, is the key. Rules alone will not keep individuals or companies safe.

Developing a strong ethical quotient with leaders is critical. That enables them to know what is right and wrong. HR cannot merely follow orders from above; it needs to point out strategies or decisions that may have negative human resource or reputational repercussions for the company.

HR leaders need moral courage to be a role model, to know how to identify and deal with ethical issues, and how to educate others from a moral perspective to ensure they can do the same.

This article is an edited version. The full article was first published in the February 2016 issue of HRMonthly magazine as ‘What went wrong at VW’. AHRI members receive HRMonthly 11 times per year as part of their membership. Find out more about AHRI membership here.