I have a VDO fluxgate compass with the declination on the dash. If my magnetic variation is 8 degrees W of North, do I turn the knob counterclockwise or clockwise 8 degrees?

You could make the adjustment in one direction then check it for accuracy then adjust it in the other direction if it wasn't correct. The check would be the old school way (same as a magnetic compass). Line your boat up between two markers of known headings (from a chart or GPS) then see if the compass indicates the same heading. The check should be done in both directions.