An evaluation on the case of Carlos Ghosn at Nissan CM_J41 Strategy

Introduction

After seven years losses, Nissan assigned Carlos Ghosn as the Chief Operating Officer of Nissan. His main task was going to turn Nissan around two to three years; otherwise the company would go out of business. In order to achieve this goal, Ghosn applied several approaches to rescue Nissan from this worst time. This article is to evaluate Carlos Ghosn‘s approaches to turning Nissan around.

The article will start on introduction of the situation of problems in Nissan and Carlos Ghosn. Secondly, the proof of evaluation on three aspects: national culture, organizational culture and resistance to change will be presented. Finally, the article will provide the final evaluation on whether Carlos Ghosn‘s approaches are effective to transform Nissan back into a successful company as a conclusion.

Situation statement

1. The problems of Nissan

Nissan is a famous automobile manufacturing company which was founded in 1933. After the Second World War, Nissan expanded its operations globally. Nissan was very well known for its advanced engineering and technology, plant productivity and quality management. However, during the previous decade, Nissan management has emphasized on short-term market share growth, instead of profitability or long-term strategic success. Nissan‘s designs had not reflected customer opinion. In addition, Nissan managers tended to put retained earnings into keiretsu investing (equity of suppliers), rather than reinvesting in new product designs as other competitors did. These inappropriate strategies combining with the Asian crisis influence on a devaluation of the yen led Nissan to the edge of bankruptcy. Nissan was in need of a strategic partner that could lend both financing and new management ideas to foster a turnaround. Furthermore, Nissan sought to expand into other regions where it had less presence. In order to turn around as soon as possible, Nissan found an opportunity and created a strategic alliance with Renault who was also looking for a partner to reduce its dependence on the European market and enhance its global position. After this strategic alliance forming, Ghosn was asked to take over the role of Nissan COO in order to turn the company around in a hurry. 3

2. Background of Carlos Ghosn

Carlos Ghosn was born in Brazil in 1954 to French and Brazilian parents. After received his university education in Paris, he started the career in a French firm. Through the 18 years working experiences, he learned to manage large operations under adverse conditions. After he joined in Renault, he focused on increasing margins by improving cost efficiencies and achieved a big success. No doubt, he has the capacity for global leadership.

Culture issues

1. National culture

The GLOBAL research program (House, Javidan, Hanges and Dorfman, 2002) defined culture as ―shared motives, values, beliefs, identities and interpretations or meanings of significant events that result from common experiences of members of collectives that are transmitted across age generation‖. National culture adds a spatial dimension – a country on the basis of culture definition. Therefore, national culture comprises the beliefs, value systems, norms, mores and structural elements of a given nation.

2. Organizational culture

Organizational culture is also called corporate culture; it describes the psychology, attitudes, experiences, beliefs and values (personal and cultural values) of an organization. It has been defined as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization."(Wikepedia)

3. The role of national culture and organizational culture

Culture plays a significant role in shaping employee and management behavior and effects operates. National culture and organizational culture have a direct impact on a company‘s dominant values and behavioral norms, and ultimately on the execution of organizational operations.

Because successful execution rests on employee acceptance and employee behavior, any value, belief or assumption they hold can frustrate or aid successful implementation. Therefore, leaders 4

should identify the forces that have aided or deterred the successful execution. If a company cannot make culture compatible with the execution, it will be a big risk to result in the resistance which will impede the strategy implementation. In addition, top management should take another dimension – the type of activity into account when they try to reconcile culture with company‘s operations. In other words, they should adapt strategy to organizational culture when formulating the strategy; and adapt culture to selected strategy when conducting the strategy execution.

4. The cultural differences between Ghosn and the Nissan organization

When Ghosn went to Japan, he knew that there were big cultural differences between the Japanese and himself. In Japan, age, education level and number of years of service to an organization are key factors determining how an employee moves up the career ladder. Promotions are normally based on seniority and education. The only things that hamper these time- and education-based promotions are performance errors. This institution leads to the key business culture in Japan that professionals tended to avoid making mistakes at all costs in order to protect their career growth. Therefore, in Japanese firms, rules and conformity replace process; avoiding performance mistake substitutes attempting new concepts or more efficiency methods.

In Nissan, the management adopted consensus decision-making mechanism to preserve harmony; the employees avoided making mistakes to protect career and they always considered their own department was operating efficiently. These cultural norms impeded the company‘s decision making by the mid 1990s; furthermore, these norms severely hampered risk-taking and slowed decision making at all levels. In addition, the employees of Nissan lacked a sense of crisis about the possibility of bankruptcy. This was because of the Japanese tradition, which the government of Japan would always bail out those large troubled firms.

All above mentioned Japanese business culture were different with what Ghosn faced on his previous career. However, with the sufficient global leadership capacity, Ghosn had a belief that ―cultural conflict could provide opportunity for rapid innovation‖ if paced and channeled correctly. In order to deal with the cultural differences, Ghosn accepted the different Japanese culture instead of trying to impose his culture on Nissan staffs. Ghosn was the first manager to 5

walk around the entire company and meet every employee. Through this way, Ghosn expressed his attitude toward cultural respect so that closed the distance between employees and him.

Besides the Japanese cultural norms, there were also procedural norms at Nissan which should be contended with. These procedural norms made communication between the layers of the organization difficult which led to no shared vision or common long term plan. For Ghosn, communication of company direction and priorities is the only way to get truly unified effort and buy-in. This is also common agreed in the field of strategy execution. One of the main reasons why strategy failed to implement is the lack of communication. Without communication, staffs do not know what the company‘s plan is; they do not know how their day-to-day tasks contribute to the company‘s success either.

In order to build a communication climate at Nissan, Ghosn had long discussions with several hundred managers to discuss their ideas for turning Nissan around. This made middle and lower management feel that they also had responsibility on bail out the company and the top executives considered their suggestions or ideas important. After these interviews, he developed a program for transformation which relied on the Nissan people to make recommendations rather than outside consultants. This action motivated employees to participate in the action of turnaround the company, then strengthened confidence in the company. Ghosn not only overcame the Japanese cultural obstacles, but also successfully adopted the Japanese culture as a helper to achieve the success, as what he said ‗When you get a clear strategy and communicate your priorities, it‘s a pleasure working in Japan. The Japanese are so organized and know how to make the best of things. They respect leadership.‘

Resistance to change

1. The definition of resistance to change

It is almost universally accepted in organizational life - people resist change and managers must overcome this resistance. Resistance to change is the action taken by individuals and groups when they perceive that a change that is occurring as a threat to them. Even resistance to change is agreed by the most scholars, Dent & Goldberg have the opposite declaration that ‗people do not resist change, per se‘. 6

2. The underlying causes of the resistance and solutions to mitigate the resistance

In order to address resistance, it is necessary to identify the causes of resistance. Some scholars classify several causes of resistance; they are summarized as follow,

- Cause1: people resist change because they are in fear of losing something valuable, for example, status, job, pay, comfort and so on.

- Cause 2: people resist change because of the fear of the unknown. The unknown might derive from that change was not explained properly; it also might because of vague formulation of or rationale for change.

- Cause 3: other reasons result in resistance to change, for example, people are satisfied with themselves or with a situation, so that they do not think any change is necessary; or because lack of trust, people do not want to change.

According to Kreitner (1992), resistance arises from those whose jobs are directly affected. Both rational and irrational resistance can impede the change process. In order to manage the change successfully, management must foresee and neutralize any resistance that may occur. In addition, with the purpose of overcoming resistance to change, scholars in the field of management and organizations propose some strategies to mitigate resistance. It should be emphasized that the key to success is adapting their use in a way that is situationally appropriate (Kreitner, 1992).

The following table describes the causes and solutions separately. Causes

Solutions

Cause1: fear of losing something valuable

- Engagement: involve employees & elicit ideas

- Broadening employees‘ interests

- Making the change non-threatening

Cause 2: fear of the unknown

- Communication: explain the ―who, what, why, when and where‖ of change

- Education

- Support: address legitimate concerns of the employees

Cause 3: other reasons

- Negotiation: offer incentives to active/potential resisters

- Coercion: explicit or implicit threats(loss of job, promotion opportunities)