Nissan Leadership: Carlos Ghosn Management Strategy

Introduction

Nissan Motor Company is a private limited entity, which was established in 1933. Since its inception, the firm has managed to establish a global market presence. Moreover, the firm has positioned itself optimally in the global market courtesy of investment in advanced engineering and technology, quality management, and plant productivity. However, the firm had experienced a substandard financial performance for over 7years.

The firm’s management team implemented different strategies in an effort to stimulate the company to turnaround. Some of the strategies adopted included downsizing and introducing an accountability policy. However, not much was achieved from these strategies (Hughes et al., 2003a). In 2002, the firm appointed Carlos Ghosn as its Chief Operating Officer (COO). Ghosn assumed the responsibility of gearing the firm towards financial profitability within 3 years failure to which the company would go under. The objective of this paper is to illustrate the external environment and strategic challenges that Ghosn faced, the strategic vision adopted to deal with the situation, and the leadership style adopted coupled with how he managed to lead the firm’s employees.

Nissan External Environment Challenges

Ghosn faced a myriad of leadership challenges upon joining Nissan. One of the sources of the challenge arose from the existence of differences in organisational culture between Nissan and Renault. Bolden and Gosling (2006) note that differences in organisational and national culture have a remarkable impact on an organisation’s performance. Nissan had entered into a strategic alliance agreement with Renault (a French based company) in 1999. The alliance aimed at aiding Nissan to gain financial stability, hence moving out of the ‘junk’ status of credit rating. However, the firm had not attained its objectives from the alliance.

Secondly, Ghosn experienced a major challenge due to the existence of resistance to change amongst the firm’s employees. According to Bower and Gilbert (2007), resistance to change is a common phenomenon experienced by organisational leaders in their quest to implement a particular strategic change. The resistance to change may lead to inability of an organisation to achieve the desired objective, which underscores the importance of effective managerial leadership (Walker, 2011). Ghosn experienced resistance to change due to the leadership differences between France and Japan. The Japanese culture emphasises on bureaucratic leadership style and social harmony. Moreover, the firm’s management team had not communicated effectively regarding the intended change. Ghosn revealed that Nissan had not integrated an effective communication system.

Communication across the various functional areas, hierarchical lines, and borders were ineffective. The firm’s top management did not understand what the lower level managers and the employees were doing nor did the lower level managers and employees understand what the management was doing. Ghosn further noted that employees were not communicating with each other (Hughes et al., 2003a). Information and knowledge sharing amongst employees was limited. Most employees were unaware of the alliance and its objective, hence increasing the level of employee resistance. Consequently, most employees suffered from lack of focus and shared vision. The communication failure in Nissan caused employees to lack a sense of direction. Furthermore, lack of accountability was another major challenge that Ghosn faced. Employees from various departments did not take responsibility of the organisation’s failure. As a result, the company was characterised by a culture of blame.

Despite the noted challenges, Ghosn focused towards helping Nissan to recover from its financial loss. In a bid to attain this objective, Ghosn suggested to restructure Nissan’s closed communication system by incorporating an open communication system. According to Ford and Ford (2009), the open communication approach is very effective in solving organisational leadership. Open communication enables organisational managers to develop a clear understanding of an organisation’s ‘big picture’. Therefore, the managers are in a position to focus on specific problematic areas. Moreover, adopting an open communication system is critical in maintaining feedback amongst various organisational departments. In addition to open communication, Ghosn suggested that Nissan should shift from its horizontal to a vertical communication system.

The objective was to ensure that employees from different departments interact with one another (Hughes et al., 2003a). Horizontal communication enabled the employees to develop a sense of accountability as they were now in a position to understand that the organisation’s performance was dependent on the input of all employees (Kaplan & Norton, 2006). In addition to the above strategies, Ghosn was guided by three main philosophies of management, which include transparency, communication, and emphasis on task execution.

Carlos Ghosn’s Strategic Vision

Carlos Ghosn was committed at stimulating Nissan to achieve financial recovery. In order to achieve this goal, Ghosn relied on a number of strategic visions, which include:

Improving the employees’ performance

Ghosn focused at ensuring that the employees’ activities contribute towards improvement in the firm’s value. In order to achieve this goal, the firm motivated employees to be productive and focused towards ensuring that the customers achieve a high level of satisfaction. Therefore, the decision to improve the employees’ productivity was informed by the recognition of the contribution of employees’ productivity in enhancing organisational performance (Hughes et al., 2003a).

Transparency and building trust

Ghosn also intended to nurture a high level of transparency and trust amongst employees. Nissan’s internal organisational environment was characterised by lack of transparency. Ghosn’s decision to enhance organisational transparency was also motivated by the need to promote and establish a foundation for operational control and nurturing organisational learning. By nurturing transparency, Ghosn intended to enhance knowledge transfer amongst the employees. Furthermore, transparency would also enable the firm to promote shared understanding amongst the employees (Hughes et al., 2003a).

Implementing performance based promotion

In line with his commitment to promote organisational performance; Ghosn intended to ensure that the employees are satisfied. Consequently, he focused on ensuring that the employees were recognised and rewarded according to their performance and to achieve this goal, he aligned the employees’ appraisal strategy with their performance. The performance based promotion strategy aimed at ensuring that employees who portray optimal performance are rewarded greatly. Furthermore, this strategy aimed at developing a high level of employee commitment.

Promoting the development of a strong organisational culture

Ghosn identified lack of a weak organisational culture and shared vision as one of the major challenges that limited the firm’s ability to reposition itself in the global market. The firm’s organisational culture needed reformation in order to develop a strong sense of organisational identification. In order to achieve this goal, Ghosn ensured that employees understand the problems that the firm faced and the need to reposition the firm.

Nissan Leadership Style

According to Sims (2002), effective managerial leadership is critical in the success of an organisation. One of the aspects of effective leadership entails building a unifying and cordial relationship amongst the various organisational stakeholders. Adopting a flexible leadership style is imperative in the modern business environment. Managerial leadership is comprised of three main components, which include leadership range and flexibility, leadership style, and leadership adaptability. Sims (2002) defines leadership style as “the pattern of behaviour of managers while trying to influence the activities of others” (p.77).

An organisation can adopt different leadership styles. Some of these styles include transactional leadership, transformational leadership, autocratic leadership, charismatic leadership, bureaucratic leadership, charismatic leadership, people-oriented leadership, task-oriented leadership, and servant leadership. Ghosn recognised that stimulating the firm to turnaround would depend on the effectiveness with which effective leadership is adopted and thus he adopted transformational leadership style. According to Schminke (2010), transformational leadership refers to a style of leadership whereby organisational leaders influence their followers’ level of motivation and morality.

Transformational leaders are also characterised by a high degree of charisma, which means that they do not coerce their followers. In the course of executing their duties, transformational leaders are mostly considered as champion by their followers, for example employees. Some of the main elements of transformational leadership include idealised influence, personalised considerations, intellectual stimulation, and inspirational motivation (Woods, 2005).

Intellectual stimulation entails the process through which organisational managers challenge the employees’ normal views and beliefs and motivate employees to be creative and innovative. Upon being appointed the COO of Nissan, Ghosn introduced a new language policy. All the firm’s employees were challenged to undertake an intensive English language course. Ghosn directed that failure to learn the English language would lead to the employees being sacked.

Moreover, all organisational meetings and reports would be conducted and produced in English respectively. The direction for employees to learn English language was informed by the view that the employees misunderstood some Japanese and French words. Ghosn also developed a mixed team comprised of Nissan and Renault employees. The team was charged with the responsibility of developing a dictionary comprised of essential terms. Ghosn was of the objective that the dictionary would play a fundamental role in eliminating the existence of mixed messages amongst employees (Hughes et al., 2003b).

For a considerable duration, Nissan employees held the perception that they did not have the capacity to turnaround the company’s poor financial performance. However, Ghosn helped the employees to develop the belief that they had the capacity to not only do so, but also position Nissan as a major rival to Toyota and Honda, which were the core competitors to Nissan, with regard to growth and level of profitability.

Ghosn’s transformational leadership is also illustrated by his commitment towards ensuring that employees understood and were involved in the firm’s operations. He ensured that employees understood that the success of the firm was dependent on their input. In his capacity as the organisational leader, Ghosn also listened to the issues and concerns raised by the employees. In the course of executing his duties, Ghosn occasionally visited the employees at their workstation in an effort to engage them and understand their working conditions. Ghosn greeted employees, hence establishing a bond. In his quest to sustain open communication between the lower and the top management, Ghosn introduced the use of emails. Previously, the firm had not integrated the use of emails (Hughes et al., 2003b).

In addition to transformational leadership, Ghosn also integrated democratic leadership style. Ghosn provided employees with the discretion to undertake the assigned tasks by adopting the concept of teamwork. After accepting the job at Nissan, Ghosn designed nine (9) cross-functional teams (CFTs). The teams were charged with the responsibility of generating recommendations and ideas on how to implement the intended organisational change. Some of the recommendations that the teams were required to make relate to how to reduce the firm’s cost of operation coupled with improving business. The CFTs were comprised of employees from different departments and divisions. Ghosn’s decision to integrate the CFTs hinged on the view that Nissan was characterised by a highly compartmentalised culture.

Transformational Leadership Advantages & Disadvantages

A number of benefits and challenges characterise transformational leadership. First, transformational leadership is very essential in helping employees to develop a sense of vision. This style enables organisational leaders to develop a comprehensive understanding of the prevailing organisational situation, which gives the leader insight on how to guide a firm towards the desired level of improvement and growth. By adopting transformational leadership style, Ghosn was in a position to identify the leadership challenges in Nissan. Moreover, transformational leadership style helps managers to instil shared vision amongst employees. Employees focus towards ensuring that their actions align with the set organisational objectives.

Developing a shared vision amongst employees is fundamental in assisting them to deal with situations that emerge. Upon joining Nissan, Ghosn revealed that the firm was characterised by blame culture, as employees did not take responsibility of their actions (Hughes et al., 2003b).

Transformational leadership style is very effective in inspiring and motivating employees to be committed towards their duties (Schminke, 2010). Ghosn was very enthusiastic and passionate towards helping Nissan to turnaround. However, he was cognisant of the fact that the firm’s ability to achieve positive financial performance was dependent on the effort of all employees. Transformational leadership style enabled Ghosn to communicate his passion and vision for the organisation to employees. Moreover, the firm was in a position to integrate the concept of teamwork. Ghosn was capable of helping employees to appreciate the contribution of every organisational member, which led to the development of a strong degree of organisational identification amongst the employees.

Despite the aforementioned benefits, transformational leadership is characterised by a number of challenges. First transformational leadership is time consuming. In a bid to influence the employees positively, transformational leaders have to develop a comprehensive understanding of the employees’ behaviour. Thus, the leaders utilise a substantial amount of time interacting with employees in order to develop trust amongst the employees and convince them to develop a shared vision. Failure to convince employees to work towards a common goal may frustrate the leader.

Carlos Ghosn’s Perception by Employees

Respect for national and organisational culture

The leadership acumen portrayed by Ghosn led to the development of diverse feelings amongst the employees. First, the employees developed a perception that the leader is very effective in respecting other people’s culture. Prior to the Renault-Nissan alliance, Renault had agreed that its employees would appreciate Nissan’s culture. On joining Nissan, Ghosn was committed to respecting the agreement as well illustrated by the fact that he formed a cross functional team that was comprised of Renault managers whose attitude depicted that they would respect the Japanese culture. By establishing the CFTs, Ghosn was in a position to initiate a process for establishing a new organisational culture (Hughes et al., 2003a).

Career development

As illustrated above, Ghosn implemented a language policy whereby all employees were required to learn English in order to remain within Nissan. Ghosn introduced a performance-oriented compensation plan. The plan stipulated that stock options and bonuses would be issued to employees based on their performance. Ghosn also introduced performance-based career advancement. Through these policies, Ghosn was in a position to motivate employees to achieve their career goals.

Appreciation

The firm’s employees developed a feeling that their contribution to the firm was being appreciated. Ghosn developed CFTs whereby the team members were required to communicate their opinions and ideas on how the firm should implement change. Involving employees in the decision making process by soliciting their opinions leads to the development of a sense of organisational identification. Consequently, the employees’ attitude and behaviours align effectively with the set organisational gaols. The transformational leadership style adopted made most employees in developing a sense that their ideas are being embraced. Therefore, Ghosn was able to dispel a sense of personal interest amongst the employees.

Carlos Ghosn’s Leadership Influence

Ghosn influenced Nissan’s employees through his expert power in leadership. In the course of executing his duties, Ghosn was in a position to articulate an effective strategic vision for the organisation. Furthermore, he influenced the employees to be conscious of the organisational vision. Through his expert power, Ghosn enabled the employees to establish a link between the firm’s past, present, and future. As a result, employees understood the intended growth and performance path (Hughes et al., 2003a). Ghosn also influenced the workforce by nurturing a strong relationship amongst employees. Therefore, the transformational leadership style adopted increased the rate of interaction amongst employees belonging to various organisational departments. Consequently, the leader was in a position to eliminate compartmentalisation, which was a major hindrance in the development of a strong organisational culture (Hughes et al., 2003b).

Moreover, Ghosn also influenced the firm’s employees through his management acumen. Ghosn appreciated the importance of ensuring an efficient information flow within an organisation. Consequently, he used his informational power to help the firm turnaround by ensuring that all employees were adequately informed of the firm’s performance and other issues that affect the firm. Upon joining the firm, Ghosn reorganised the firm’s operation by introducing a comprehensive restructuring plan.

One of the issues that he addressed relates to communication. Ghosn introduced horizontal communication system, which further enhanced interaction amongst employees. Furthermore, Ghosn’s leadership strategy led to the development of a new set of organisational values, which employees were required to follow. In addition to the above aspects, Ghosn influenced employees by adopting HR practices based on reward power. He ensured that the employees were rewarded in accordance to their performance, which led to an increment in the level of employee commitment towards their duties and responsibilities.

Conclusion

This paper depicts Carlos Ghosn as an effective leader. Upon joining Nissan, Carlos Ghosn faced a myriad of challenges, which emanated from the internal business environment. Initially, Nissan had not been in a position to establish a successful strategic alliance with Renault despite the agreement formed. This limitation emanated from the fact that the firm’s employees were resistant to change. Existence of cultural differences between the two firms hindered the formation of the strategic alliance. In addition to this aspect, Nissan was characterised by substandard financial performance, which hindered its competitiveness. Carlos Ghosn expertise in leadership enabled Nissan to reposition itself on a profitability trend. Moreover, the firm regained its competitiveness in the global automobile industry.

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