It is evident that every organization goes through various changes, including periods of successful growth and expansion as well as decline and downturn. These periods occur infrequently, but they have an immense positive or negative impact on the further development of any given company. It is evident that the periods of decline usually indicate significant problems in the existing business system. Therefore, the implementation of specific strategies is needed in such situations. This paper aims to study the case, which is related to the topic of strategic leadership and change management, with the purpose of analyzing the implemented practices.
First of all, it is essential to provide the background for the case since it is significant for the further understanding of it. This case is written by Yukl (2013); however, it is based on real events, unlike the previously analyzed cases. In the piece under discussion, it is briefly described how Nissan company has come to a state of decline and how it was able to overcome this period of the downturn due to the implementation of successful change management and strategic leadership.
In general, it is evident that Nissan was in a significant decline in 1999 because in the past eight years, excluding one year, the company was losing money (Yukl, 2013). Every particular reason for this decline will be discussed in the following section; however, it could be hardly doubted that the firm was in significant need of change. Renault decided to absolve a part of Nissan’s debt, and thus the Japanese company was saved from going bankrupt (Yukl, 2013). One of the core aspects of this deal was to appoint Carlos Ghosn to become a chief operating officer in Nissan (Yukl, 2013). Numerous people were skeptical about this decision since they assumed that the manager from the French automobile company could not succeed as an effective leader in the Japanese firm.
Identification of Problems and Implemented Changes
First of all, it should be mentioned that Ghosn conducted preliminary research by meeting with hundreds of people from Nissan, “including employees, union officials, suppliers, and customers, to learn more about the company and its strengths and weaknesses” (Yukl, 2013, p. 306). He held these meetings for three months before assuming the position of chief operating officer (COO), aiming to gather the maximum amount of information about the company’s issues and detect possible ways of improvement. One of the most important conclusions that Ghosn retrieved from this research was that “major changes would not be successful if they were dictated by him and the experts he brought with him from Renault” (Yukl, 2013, p. 306).
Identification of the Problems
After assuming his position of COO in June 1999, Carlos Ghosn established nine cross-functional teams, comprising the employees of Nissan, since he understood the initiative for change should primarily come from managers and workers of the company. These teams examined various aspects of the company’s operations to retrieve possible solutions for the improvement. The propositions were presented for Ghosn, and, in general, they coincided with the initial impressions of the newly assumed COO (Yukl, 2013). The insufficient financial performance was mostly caused by “declining sales and excessive costs,” while the management wing of the company was considered weak to implement successful policies for change since it lacked a coherent strategy (Yukl, 2013, p. 306).
Further, it is possible to describe the policies, which were implemented by Ghosn to improve the overall performance of the Japanese company. First of all, Ghosn closed five factories and eliminated 21 000 jobs with the purpose to decrease the cost since Nissan only used their current factories’ capacities (Yukl, 2013). He also simplified the production operations on the remaining factories, and he took several steps to minimize the adverse effect of staff reduction. The second major issue was the relationships with suppliers, which were set according to the Japanese tradition of establishing personal relations. As a result, the company purchased small orders from numerous supply companies, and Ghosn decided to reduce the number of suppliers to buy more substantial orders and, accordingly, decrease the costs (Yukl, 2013).
Two other major problems were Nissan’s lack of adaptation for the current global market and specific human resource practices, which were profoundly embedded into the corporate culture. The research, conducted by Ghosn, revealed that customers were not satisfied with the majority of the company’s product range. Thus, it was decided to hire Shiro Nakamura, an innovative Japanese designer, whose participation resulted in the more appealing design of new cars.
The human resource practices were arguably the most challenging aspect for Ghosn to change since the company’s culture was based on such elements as “guaranteed lifetime employment and pay and promotion based on seniority” (Yukl, 2013, p. 308). However, Ghosn was able to implement such policies as the huge bonuses and promotion for effective performance, which were introduced gradually to minimize the possible negative reactions. Additionally, it is possible to observe that the primary trade-offs for Ghosn to handle were the changes of traditional corporate culture and practices in favor of higher efficiency.
Change Management Practices and Strategic Leadership Traits
Finally, it is possible to observe the described policies in the context of change management practices and strategic leadership. According to the study by Kuipers et al. (2014), there are first, second, and third-order stages of change management. It is possible to notice that Ghosn effectively implemented the second-order changes, which are related to a reorganization of the whole company. The authors mention such aspects as “organisational culture, climate, and other behavioural factors,” which were significantly influenced and thus improved by Ghosn’s policies (Kuipers et al., 2014, p. 18). Yukl (2013) also argues that the change of organizational culture is of immense importance for the improvement of performance and overcoming the periods of decline.
Additionally, it should be noted that Carlos Ghosn is an example of a leader with highly developed strategic skills. Among his traits, which has an evident impact on the success of his policies in Nissan, it is possible to mention his strong communication skills shown in his meetings with Nissan workers and commitment to the company since Ghosn claimed that he would resign if Nissan did not make a profit within a year) (Yukl, 2013; Strand, 2014). Also, it is possible to mention that Ghosn was innovative in his decisions, and he aimed to reorganize the company on the principle of collaboration (Strand, 2014).
In conclusion, it is possible to state that the case under analysis is an example of successfully implemented strategic leadership and change management. Given Nissan’s poor performance and overall adverse condition, Carlos Ghosn was able to reorganize the company in a significantly short amount of time; additionally, his decisions have set a foundation for further development of the company. It is also worth mentioning that Ghosn was able to change the company’s organizational culture in a very prudent manner.
Kuipers, B. S., Higgs, M., Kickert, W., Tummers, L., Grandia, J., & Van der Voet, J. (2014). The management of change in public organizations: A literature review. Public Administration, 92(1), 1-45.
Strand, R. (2014). Strategic leadership of corporate sustainability. Journal of Business Ethics, 123(4), 687-706.
Yukl, G. A. (2013). Leadership in organizations (8th ed.). New York, NY: Pearson.