Posted at 06.10.2018
It will be assumed that the reader knows the truth; hence referrals to the case will not continually be explicit and abbreviations used in the case may not always be explained. The article will be organised as follows: First an extremely short summary placing the scene of the case, then my bottom-line analysis where I give my conclusions on the situation accompanied by the evaluation conditions that I have used to attain this conclusion and lastly a proof the analysis will be given.
Carlos Ghosn joined up with Nissan as COO in 1999 at a time where in fact the company had endured deficits for seven out of eight of the last years. Against all possibilities he manages to carefully turn Nissan profitable within 2 yrs, despite huge cultural differences. The primary instruments used for this turnaround was engagement, communication, structural changes and change of some ethnical areas that contain been holding the company back.
When looking at the results from the Nissan Revival Plan (NRP) it is quite clear that Carlos Ghosn's turnaround of Nissan proved helpful extremely well. The reports from appendix 1 in the case leaves without doubt about it.
I assume that Ghosn's success with the turnover was due mainly to his excellent way (with an overall "approach-score" of 92%, cf. Appendix A), seen as a significant amounts of modesty and a willingness to comprehend and respect japan culture, before trying to change the organization. Further he made a brilliant choice by professing that he'd turn the company profitable within 2 yrs or step down, and at the same time give the employees a great deal of responsibility in achieving this profitability. In this manner he put himself in the same motorboat as the employees and therefore they might either succeed jointly or fail collectively. His ability to get people involved and encouraged in the project was one of the key factors of success together with his honest and direct communication.
I this section I present and define 4 evaluation criteria to be able to judge Carlos Ghosn's method of the turnaround of Nissan.
Nissan was facing the prospect of either making the necessary changes to carefully turn the business profitable within 2-3 years or go out of business. Hence, a sizable change was required which is clear from Ghosn's four main concentration areas that handles everything from new product development to cost reductions (everything important is going on together). Further it had to occur with an extremely small amount of time horizon. Given these characteristics I'd express this as a complicated change. 4
In order to reach your goals with such a intricate change, it is essential to get the organization (i. e. the employees) to buy-in on the course of change from the start. One very important way to get this done is by participating the people that the change will affect and to connect very clear. Further, it's important to have the ability to execute the desired change and in relation to all this being able to manage folks engaged. This leads me to the next four evaluation conditions:
1. Support from organization
o the entire determination of the employees to contribute favorably to the change of Nissan at all levels of the organization
o the ability to communicate efficiently, effectively and clear with and within the organization
o the ability to make actionable changes and utilizing the required strategy
4. Manage in a overseas culture.
o the ability to successfully control in a international culture where people have completely different paradigms than you
The pursuing section provides the audience with a discourse of each analysis criteria.
This section will consist of a discussion of the evaluation criteria unveiled in the section above. Each criterion will be reviewed and a score of every action/approach will get to give an analysis of Ghon's overall approach, cf. Appendix A.
"Be sure you are centered on your own people. Generate them inspiration and sense of ownership, you'll be able to do your miracle. "
- Carlos Ghosn
Based on the case it appears that there were hardly any resistance to change from the business, the only real explicit resistance mentioned was that promotions of younger leaders over older, much longer serving employees brought on some problems regarding lack of cooperation (p. 553) - this is likely to happen at the middle to lower management level. The root cause of their amount of resistance was probably a concern with loss of position, job, pay and also a general concern with losing face whenever a younger staff gets advertised over you. Further, the marketing and the federal government criticized the layoffs of employees; however this did not seem to have an impact on the change inside Nissan. 5
To my best judgement I believe that the level of change he attained was inevitable given the situation. The reason why Ghosn didn't experience more level of resistance was that he took some very good actions to mitigate any level of resistance to improve and get people to support the change.
Ghosn chose to rely on the Nissan people somewhat than external consultants, by establishing nine Cross-Functional Groups (CFTs) that were to go over the business enterprise and come up with alternatives for a revival of Nissan. Via this empowerment of the employees he gained encouraged employees that sensed an ownership of the change plus a new corporate and business culture in the business, that build on the best of the Japanese culture. Further, the CFTs came up with some of the hard decisions needed (such as place closures and staff reductions) which is quite possible that since the employees themselves developed these solutions, the organization as a whole was less resistant. One drawback of choosing an interior solution is the fact it might be a slower process than choosing an exterior team of consultants without relationships inner in the business to consider, etc.
Additionally Ghosn put himself on the line by saying that if he previously not transformed Nissan profitable within 2 yrs, he'd step down. This declaration, combined with simple fact that he relied on the employees to create a great area of the solution, revealed the employees that these were all in the same boat - either they would succeed jointly or fail along. It has definitely helped mitigating change level of resistance since the employees could notify that Ghosn was honest in needing this turnaround to work out. It was a very brilliant move and I don't really see any down sides of doing this, because if he hadn't turned Nissan profitable within both years, he would probably have been asked to leave anyways.
An exterior event proved helpful as Yamaichi went bankrupt just around the time he arrived in Japan, plus they weren't bailed out by japan government. This explained a perfect example that employees could no more be certain to keep their careers. By frequently using Yamaichi as an example, Ghosn made the employees care about the organization problems in Nissan thus increasing their willingness to change. Unquestionably this made Ghosn's job of changing the organization easier, and I know it would not need been as soft acquired Yamaichi been bailed out, though Ghosn seems just like a leader that would still did well relative to others.
Another important point is the fact that Ghosn was specifically wanted by Nissans CEO, Hanawa, and for that reason got the support of the top-management. This probably gave him a lot of leeway to choose his own approach to the turnaround.
In all, the amount of resistance to change that Ghosn encountered from middle-managers, was unavoidable. The underlying reason behind this amount of resistance was concern with losing position, job, pay or face. However, Ghosn does a very good job enlisting support from middle and lower degrees of the organization (he already possessed top-management's support). 6
Consequently resistance to change was mitigated and instead involved and encouraged employees was doing their best to come up with a revival plan for Nissan. Nevertheless it seems quite evident if you ask me that things would have not run as effortlessly a couple of years earlier, since the crack of Yamaichi dished up as an eye-opener for the employees and facilitated a willingness to change credited to a fear of losing their jobs.
Ghosn's method of gaining support from the business scores 92% which is very high and leaves little room for improvement, cf. Appendix A.
"The solitary biggest problem in communication is the illusion which it has occurred"
- George Bernard Shaw
From the very beginning Ghosn was centered on communicating evidently with the business. He took lots of steps to ensure that communication both from him to the organization but also within the firm would be immediate and true. Very early on he explained three guidelines (Transparency, Execution and Communication) of management that I believe shined through in every his communication. It had been a very clear assertion of "how we do things in Nissan" and it was aimed at changing the culture of the business. Below I am going to go through what I see as the key communication contributions Ghosn made.
Unlike any preceding manager, Ghosn utilized "management by travelling" which will need to have been a very effective method for Ghosn to understand the employees at the low to middle levels of the business and vice versa. As a consequence of this, a good basis was created for even more interactions. At the same time it served for him to set an example for other managers. Further, he reviewed ideas for turning Nissan around with several hundred managers which experienced two positive final results; one which he acquired a great deal of relevant input for the proper changes needed; two that the issues regarding the vertical communication in the business got addressed. This way, Ghosn was able to start an organizational culture change where employees throughout got more touching each other's work and issues. The downside of the two activities is that it is very frustrating, but when it comes to building trust and admiration there are no shortcuts and I believe he made an excellent choice in doing this.
The group reaped another benefit from the establishment of the CFTs brought up in the section 4. 1, namely that it led to a composition with long lasting cross-functional departments that dished up one products. This reorganization tackled the horizontal communication problems that Ghosn had experienced throughout the business and the staff began to focus on total business success rather than keeping a thin give attention to their own division. Another structural change was the matrix-structure that was executed for higher-level staff to improve transparency and communication that was consistent with his three key points of management. 7
For an international company like Nissan with a worldwide strategy, a matrix structure seems to be the right way to go, precisely due to its dual concentrate on both region and function. Further it gives you the ability to incorporate efficiency with success, a couple of things that Nissan really necessary for instance in regards to purchasing (efficiency) and responsiveness to customer needs (efficiency). The downside is of course the two-boss system that can create distress and power challenges. However, given the horizontal communication problems, it again seems to me that Ghosn made the correct decision with the matrix composition.
One area where Ghosn didn't as well as in those above, was with the communication of four main target areas specifically (1) development of new cars and marketplaces, (2) improvement of Nissan's brand image, (3) reinvestment in research and development, and (4) cost lowering. I consider all four areas very important, however (1) appears to require a lot of money and at that point in time Nissan was very brief on liquid capital (p. 546) so maybe one could challenge this concentrate area on the short term. More critically I find it that no timeframe no quantifiable goals have been attached to these four areas, thus making them non-measurable. You can argue that there is an implicit way of measuring success and time, particularly Ghosn's goal of turning Nissan profitable within 2 yrs. I still could have preferred if it had been stated more explicitly like in the "Nissan 180" plan that was measureable and very easy to talk.
Due to his practical approach to leading and, especially leading by moving around and the conversations with managers, it appears he acquired the esteem and trust of the organization in any way levels.
His method of communication results 88% which is high, but if he had fastened some measurable goals to the target areas it might have been higher, cf. Appendix A.
"However beautiful the strategy, you should once in a while look at the results"
- Winston Churchill
It is one thing to create a fresh strategy but it is quite another to execute it. Often good strategies are unsuccessful because of limited focus on execution, or insufficient capabilities of the individuals responsible for the execution. Ghosn, however, was experienced in the field of turnarounds and was focused on the execution right from the start. Some of the points made in section 4. 2 above, makes sense to say again here, since they were part of the execution strategy.
When Ghosn decided to go with "managing by travelling" he did not only undertake it to connect with - and understand the staff. It was also a substantive action that allowed him to become role model. 8
The same goes for the a huge selection of discussions he had with professionals that, besides giving valuable source to the strategy change, dished up as a symbolic activities that conveyed a message to the other professionals: get in touch with issues facing middle and lower management!
Ghosn appeared very centered on execution and within a month he had founded the nine CFTs. This was a strong signal to the business that change was approaching and actual changes had already been made.
In expansion of the matrix composition stated in section 4. 2, Ghosn put emphasis on that each person should be sensible and was to be kept in charge of their actions. This was backed up by an insurance plan of 100% reliability in all reporting. By disciplining bad data harder than misjudgement he activated the risk-taking behaviour needed to change the organization. Further he launched a performance based mostly incentive system and in so doing, he moved the target to towards performance that was what Nissan needed.
Of course Ghosn wouldn't have had the opportunity to execute the tactical changes without the support of the business, so lots of the tips in section 4. 1 is also relevant here. Especially his potential to activate and encourage the employees in your choice process feels like a great idea in terms of execution.
Overall Ghosn's method of execution results 92% which is high and leaves little room for improvement, cf. Appendix A.
"Seek first to understand, then to be understood"
- Stephen R. Covey
Ghosn had had experience controlling in many different cultures before coming to Japan and appeared like the right man for the work. Maybe this was why he decided to come to Japan with very little understanding of the culture but with an open up mind, ready to learn. I agree with the fact very much with this approach, it will always be smart to seek first to comprehend, then to be comprehended.
It is quite apparent that Ghosn experienced a lot of cultural differences between his and japan culture. The idea of consensus decision making (murashaki) the deals predicated on seniority and education (Nennkou-Jyoretu), the extreme risk-aversion and the lack of accountability was probably definately not what he was used to. However, he felt that the ethnical differences can work as a catalyst for speedy innovation. He laid out an extremely respectful process that no innovator should make an effort to impose his/her culture on someone else who was simply not prepared to check it out with an available mind and heart. This is part of his technique to turn the business around not by using his formal ability, but rather by understanding and working through Japanese culture. However, it is a good idea to talk frankly about the ethnic aspects that needs to change and follow up with action quickly. 9
Ghosn organized the three concepts of management brought up earlier, that was very much consistent with what you would expect from a traditional western culture, and started out practicing them right from the start. Further he looked for to remove the elements of the culture that was holding the company again, such as keiretsu ventures, murashaki, nemawashi, Neenkou-Jyoretu. It actually seems that he was eliminating the majority of the cultural items mentioned in the event. I think this is a wise and bold move, since we were holding the underlying causes of lots of the problems within the business. One culture, however, he didn't want to improve was the Japanese culture to be well-organized, making the best of things and being very respectful to management. Somewhat, he used this to put into practice his strategy quickly.
In conclusion I would say that the ethnical differences between Ghosn and the Nissan organization were very pronounced and the culture was a hindrance greater than a helper for Ghosn and he had to change quite a lot. However, Ghosn had taken his time to understand it and customized his strategy so that it would fit the best elements of japan culture, this way Nissan could change fast.