Organizational culture and the rise and fall of MEG

MEG used the Internet to expand its customer base. When potential customers searched online for information about private health insurance and other insurance products, MEG offered them the opportunity to compare the proposals of different insurers, even before inviting them to provide contact information for a free consultation. MEG paid search engines to generate such records or purchased qualified address data from other vendors to reach potential customers. When, as a result of MEG’s intermediary service, clients entered into a contract with an insurer, MEG received a commission, often a high one, from the insurance company. To incentivize MEG to sell more of their company’s products, insurers offered MEG commissions above the industry average, extra bonuses for exceeding set targets, and upfront payments.

In a context of strong growth, finding the right people quickly was critical. MEG’s job advertisements highlighted attractive conditions and a unique experience: luxury company cars, a fixed salary with driving allowances, exceptionally high commissions and bonuses. Socializing was an integral part of success at MEG. Events, dinners, and parties were frequent and provided opportunities to create a bond beyond the daily routine. In return, MEG expected excellent performance.

From the end of 2007, MEG came under scrutiny by the German authorities for failing to comply with tax and labor laws. Then in 2009, MEG, which was valued at €200 million in 2007, was sold to Aragon AG, a subsidiary of the AXA insurance group, for €1. A few months later, MEG filed for bankruptcy and was liquidated. Göker, wanted for fraud and other crimes, left Germany. As of 2023, he was still a fugitive.

According to Fritz Westhelle, who was responsible for the liquidation of the company: “At MEG they were only concerned with making as much money as possible. That was the end in itself. There were no other values, really. The only value was earning a lot of money. And whoever made the most money was worth more.”

According to Edgar Schein, a leading scholar of organizational culture, culture can be created, managed, and strongly shaped by founding entrepreneurs. Organizational culture hugely influences the thoughts and behaviors of its members (individuals and subgroups). It is a powerful and often unconscious set of forces that determines individual and collective behaviors, ways of perceiving, thought patterns, and values.

Culture exists at three levels that differ in visibility and depth: artifacts, values, underlying assumptions. Crucial to understanding organizational culture is the third level. These assumptions may have originated from founders or focal individuals (e.g., charismatic leaders) who imposed them on others. Such internalized assumptions are then subsequently transmitted to new (generations of) employees through socialization processes.

To truly understand an organization’s culture, artifacts and values are not enough. Instead, it is necessary to decode the shared and tacit assumptions. These assumptions guide the thoughts and behaviors of members of the organization. They provide a specific and shared perspective to make sense of reality, an explanation of how things are and how they should be.

Where there is a strong organizational culture, core values are intensely upheld and widely shared. Such a culture will have a greater influence on employee behavior and will also be able to provide a more effective (social) control system. MEG can be seen as representative of a strong community culture in which high sociability was promoted through aspects such as the sociodemographic similarity of employees (young males) and participation in company events and parties. Through a rigorous focus on performance, performance-based pay and constant visibility of all employees’ performance, MEG also achieved high levels of solidarity.

The MEG case allows us to explore the phenomenon of organizational culture, investigating whether and how this can be shaped or modified, and how the perception of organizational culture differs between different people who have experienced it. This case also helps us understand the factors that can lead to the emergence of a dysfunctional, toxic, unethical and manipulative corporate culture.