Introduction
Nissan’s decision to merge with Renault was prompted by circumstances that began in the 1990s. Carl Ghosn became the Chief Operating Officer of Michelin’s South America operations at the age of thirty. He was successful in improving the firm from losses to profits. Upon his move to Japan, Ghosn led Nissan as the COO and was promoted to CEO later. This was after Renault bought 36.6 of Nissan’s shares in 1999 (Yukl, 2012). Nissan struggled with dwindling market share, and brand appreciation for its vehicles, and mounting debts. Nissan’s losses reached $5 billion, and the company’s market share had dropped from around 7% to 5% in the late 1990s (Yukl, 2012). Instead of building a formidable range of products, the corporation used its financial assets to purchase other companies’ investments.
Driving and Resisting Forces For Change
A sense of urgency was required at Nissan to address the company’s financial troubles; yet, the main issue at Nissan was a lack of imperativeness. Significant changes had to be made in human resource practices. These included the pay and promotion techniques that were based on seniority and lifetime employment. The greatest challenge to transforming these aspects was how to prevent the employees from resentment and demoralization. A merit pay plan was established to achieve the change, and employees could be promoted and paid, resulting from their performance instead of seniority. This is followed by defining the accountability areas to measure performance based on specific goals. These changes were fundamental to help Ghosn eliminate the less competitive middle and upper-level managers with competent and experienced ones.
Cultural Challenges
Japan’s leadership and management approaches are vastly different from those practiced in Europe and the United States. Japanese people are courteous, modest, and rarely participate in decision-making. When Ghosn first came to Japan, he realized significant cultural differences between him and the residents. In this country, age, education level, and years of service were essential in determining employee promotion (Yukl, 2012). They were frequently granted based on the duration of service and educational attainment. Performance errors are the one factor that hinders these promotions. Japan’s core corporate culture is that employees strive to avoid making mistakes at all costs to ensure their progression possibilities. The leadership used a consensus decision-making procedure; employees avoided making mistakes to protect their jobs. By the mid-1990s, the company’s decision-making ability had been hampered by these cultural standards, limiting risk-taking and delayed decisions.
Furthermore, Nissan’s employees were unaware of how serious the threat of bankruptcy may be. This lack of sense of crisis stemmed from the Japanese tradition of the government rescuing financially challenged firms regularly. All of this demonstrated that Japanese business and cultural norms differed from those Ghosn had encountered in previous positions (Yukl, 2012). Nevertheless, he believed cultural opposition might create a favorable environment for rapid transformation if paced and managed correctly.
Ghosn’s Steps to Profitability
To effectively influence change at Nissan, Ghosn had first to persuade the company’s employees of the need for an urgent turnaround. He was able to show the staff that the Nissan culture had severe faults by instilling a feeling of urgency. Ghosn emphasized the importance of adopting cross-functional teams and improving the organization to focus on the challenge of split divisions (Yukl, 2012). The workers were able to identify with the mechanics of other departments as soon as they changed to cross-functional teams, and they accepted accountability for things that went wrong in their departments. Furthermore, they were encouraged to participate in the decision-making process. Additionally, they were encouraged to make recommendations not only for Nissan personnel but also for past employees, suppliers, and dealers.
Ghosn also closed 10% of the retail outlets, and the remaining ones were opened for longer hours. He strengthened Nissan’s relationship with Renault; this included their research and development resources. Moreover, through his leadership, the company grew from a multi-regional to a global entity. Additionally, Ghosn motivated staff employees to propose suggestions because of the knowledge of Japanese for being quiet. He emphasized the importance of workers’ individuality in this way. He also recommended staff communicate directly rather than using impersonal means such as e-mails. The cross-functional teams were pushed to come up with plans that would effectively focus on the Nissan predicament. As a result, the Nissan Revival Plan was born (Yukl, 2012). The NRP’s first stage aimed to reduce expenses while increasing earnings, resulting to increased profits.
Motivational and Organization Behaviors
The fundamental motivation and organizational behaviors that led to poor performance at Nissan included a lack of profitability, urgency, and cross-functional infrastructure. Minimum operating income to sales and the absence of a long-term plan also contributed to substandard performance. Evidently, the declining sales, inflated expenses, and poor management made it difficult to improve the above issues. The weak distribution network was the primary cause of the reducing sales.
The inspiration of the Staff employees to work harder arose due to Ghosn himself demonstrating a solid dedication to the revival of Nissan, even though the company’s problems were not his fault. Ghosn’s management style comprised two essential factors: value and motivation. He ensured that the NRP was carried out transparently at all times. To counteract the prevalent practice of keiretsu invoking high costs for Nissan, Ghosn reduced the number of suppliers from roughly 1150 to 600 (Yukl, 2012). He also persuaded new vendors to provide lower-cost products. Retirements, pensions, and payouts resulted in the loss of almost 21,000 jobs.
In motivating employees to work more effectively, the replacement of the seniority-based progression system with a performance and merit-based reward system occurred. To cut debt, Ghosn shut down a few companies and plants. Additionally, Ghosn persuaded staff personnel to discover all ways to save costs. Moreover, Ghosn advised staff members to respect the diversity of cultures to avoid cultural clashes between Renault and Nissan. Ghosn conducted routine meetings to minimize tensions between Renault and Nissan employees, and English was designated as the common language to ensure that Japanese and French employees could communicate effectively.
Ghosn’s Leadership Style
Transformational, laissez-faire, situational, and people-oriented leadership styles are associated with Mr. Ghosn, which make him a great leader. First, transformational leadership inspires, encourages, and drives employees to innovate and produce transformation to assist companies in growing and shaping their continued prospects (Pretorius, Steyn, & Bond-Barnard, 2018). Secondly, laissez-faire is a philosophy or practice marked by an intentional lack of direction or interference, particularly with individual freedom of choice and action (Pretorius et al., 2018). Finally, the people-oriented approach entails helping and developing people in one’s team. This approach necessitates a high level of leadership involvement. Thus, Ghosn’s leadership style incorporates trait, contingency, behavioral, and power and influence theories.
Leadership Actions
There were procedural conventions at Nissan that were inhibiting the company’s progress, in addition to the Japanese cultural standards Ghosn had to follow. First and foremost, once choices were made at Nissan, the follow-up was insufficient, unlike the situation with other Japanese firms. Next, upper staff had become short-sighted in its strategic goal of regaining market share at the expense of increasing profit per unit sale. It was partly due to concentration on what was ideal for the company’s size and workforce, i.e., additional units to create, instead of what was efficient for consumers: Modern; upgraded commodities to match the demand of the market, or investors; increased stock value and earnings.
There were also communication concerns within the organization, which was an unusual departure from Japanese business culture. Staff members appeared to be generally oblivious of significant corporate business decisions. At the same time, top management looked to be unaware of current policy implementation issues at the center and lower leadership levels. Ghosn determined that firm’s major crisis was management’s untapped vision, as well as the company’s continued disregard for what Nissan’s clients desired. Additionally, Ghosn highlighted the significant challenges at Nissan: The absence of a sound profitability path, less priority on clients and an excess concentration on rivals, less urgency, a lack of a shared goal or plan, and a lack of cultural work and cross-functional arrangements. As a result, this showed how aggressive and bold Ghosn is in his actions.
Leadership Theories
From the case study, Ghosn used consideration and initiating structure as a leadership style. He struck a balance between the two theories granting employees a chance to communicate their thought, and ideas with respect and without losing their responsibilities within the organization. Ghosn believed in the company, the employees, and its culture. He secured the cooperation of his people under his leadership; therefore, he was an efficient and transformative leader.
Ghosn’s Power
Sources of Power
Legitimate power is the authority that an individual has as a result of his position in the organization. The higher one’s rank, the more legitimate power one has. Expert power is a type of power that people acquire as a result of their specialized skill mastery. Coercive power is a type of authority used by leaders to compel subordinates to work toward corporate goals (Yuki, 2012). The corporation gives individuals reward power in exchange for their extraordinary achievement. In these five power sources, Ghosn deployed the four sources: legitimate power, expert power, reward power, and coercive power.
Gaining Power
Nonetheless, Ghosn supervises his coworkers to ensure that they do not make rash decisions that jeopardize the company. The situational leadership style thinks that the leader must be willing to change their strategy as circumstances dictate (Pretorius et al., 2018). For outstanding leaders like Ghosn, this ability is precious. Because of the frequent changes in the workplace, these businesses must develop and implement flexible solutions. Therefore, as a leader, he acknowledged cultural differences while respecting them. His cultural insight, combined with his people abilities, helped Nissan make adjustments. By doing all these, power was gained.
Utilizing Power
Ghosn leveraged four of the five sources of power highlighted by French and Raven’s work. First, he utilized his legitimate authority to form cross-functional teams, close five factories in Japan, banishing 21,000 jobs. He aimed at streamlining the production operations and the factories that had remained. By being named COO, he gained genuine power; one particularly unique application of his legal authority was that he could be patient and determine which changes would take longer to materialize, such as manufacturing twelve new car models (Kovach, 2020). Ghosn also used incentive power. He gained this power as a result of his rightful authority. He had the authority to amend the advancement policy and make pay modifications. He implemented a merit-based pay and promotion system rather than one based solely on service time and age.
Additionally, Ghosn, hired an expert specifically to assist Nissan with its designs. The move was a good way of gaining even more expert authority by doing so. While Ghosn had a notion about Nissan’s critical difficulties, he and his team spoke with Nissan employees three months before he arrived. Thus, Ghosn was not required to utilize fear tactics or coercion power since his referent power was so effective in this situation.
Management Practices
Ghosn used various change management techniques, including forming cross-functional groups to focus on departments isolated from others. These included addressing the status of quality, expense, and customer satisfaction and ensuring that transparency and communication were in place across Nissan at all levels of staff and departments. The establishment of cross-sectional teams changed the company’s culture, and he used change management procedures. Employees were able to understand the operations of other departments and assist one another in reaching goals as a result of these activities (Kovach, 2020). These procedures also helped staff learn from their mistakes, which had a negative influence on Nissan. Employees then honed their skills and worked hard to get the benefits and incentives that Ghosn had promised.
Ghosn discouraged using electronic media in the communication process, preferring instead to communicate face to face. He decided against implementing a rejuvenation procedure based on his improved understanding of Nissan’s problems. Instead, Ghosn gathered current Nissan executives in the first month and formed Cross-Functional Teams (CFTs), which were nine in total, each comprising ten members. Areas of responsibility for these groups were business and innovation, logistics and manufacturing, purchasing, development, and research. They also included administrative and general, sales and marketing, cost and finance, the transition of products and parts complexity administration, and management.
Mechanisms used to Change the Culture
Ghosn empowered the firm by using these CFTs to develop an improved corporate culture based on the best aspects of Japanese social culture. He realized that the CFTs would be the most effective means of persuading employees to look beyond the operational constraints that defined their immediate responsibilities. The Nissan-Renault merger posed numerous hurdles for the company’s employees and shareholders as they had different cultures. Ghosn taught his employees to understand and respect the differences in their beliefs (Yukl, 2012). Ghosn authorized English as the company’s official language to improve communication throughout the company. This technique helped to break down barriers across languages and civilizations. The issue in Japan was that employees in different departments were less likely to ask themselves as many challenging questions as they should. Working in CFTs allowed staff members to think in new and inventive ways while also challenging established methods.
Conclusion
Ultimately, I have discovered that Ghosn used three primary ideas to improve organizational behavior and leadership techniques at Nissan. I have discovered that an organization can only create desirable results if the followers believe that the leaders’ thoughts, words, and actions are consistent with their actual thoughts, terms, and activities. The execution and strategy principle is the second principle; Ghosn believes execution accounts for 95% of the job, whereas strategy accounts for only 5%. I discovered that improving quality, prices, and customer happiness are all linked to organizational, and economic well-being. Ghosn’s final and most important premise is communication; the only way to achieve an undeniable cohesive effort is to communicate the company’s direction and priorities. Overall, Ghosn is an extraordinary leader from whom many businesses can learn a great deal about change.
References
Kovach, M. (2020). Leader influence: A research review of French & Raven’s (1959) power dynamics. The Journal of Values-Based Leadership, 13(2), 15.
Pretorius, S., Steyn, H., & Bond-Barnard, T. J. (2018). Leadership styles in projects: Current trends and future opportunities. South African Journal of Industrial Engineering, 29(3), 161-172.
Yukl, G. A. (2012). Leadership in organizations (8th ed.). Albany, NY: Pearson.