Cheating Doesn’t Pay By Dave Alford

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Another global automaker announced last week that it had been cheating on data provided to regulatory agencies. Mitsubishi reported that it had been overstating fuel mileage on its cars. Initially the company said that it had misreported mileage on 625,000 vehicles manufactured since 2013. Later it admitted that the problem had been going on much longer with false reporting stretching back 25 years to 1991. Mitsubishi’s announcement was a reminder of the scandal at Volkswagen last year that involved designing emissions control equipment to shut down when VW cars were not undergoing smog testing.

How could such large and seemingly reputable companies become enmeshed in such brazen acts of cheating? Mitsubishi suggested that aggressive performance objectives might have been the reason. Employees might have felt pressured to falsify data because of their goals. But this explanation fails to identify the true problem. Challenging goals by themselves do not result in cheating.

Cheating happens when individuals or corporate cultures do not have an engrained set of values to prevent it. Defining values is one of the most important ways for leaders to serve the organizations and the people they lead. Far from being a drag on performance, values actually make an organization stronger and better. In fact extraordinary leaders understand that when they instill the values they stand for into those they are leading, their followers are transformed into leaders. Strong values produce leaders. Weak values produce cheaters.

For Mitsubishi, weak values are also proving to be very expensive. What must have seemed an expedient way to market cars at the time now is a very costly mistake. Since its announcement, Mitsubishi’s stock has lost half its market value or about $3.9 billion. While that’s a big hit, it pales in comparison to VW, which has had to set aside $18.3 billion against buybacks, repairs, and regulatory fines related to its scandal. The bottom line in at least these two cases is that cheating is not only wrong; it’s also very, very expensive.

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