Carlos Ghosn Leading Change at Nissan

Subject: Case Studies
Pages: 6
Words: 1720
Reading time:
7 min
Study level: PhD

Introduction

The transformations that took place in Nissan in the late 1990s and early 2000s can be regarded as an illustration of effective change management. Carlos Ghosn, who became Nissan’s CEO in 1999, managed to turn the carmaker to profitability within five years (Stahl & Brannen, 2013). It is noteworthy that the transformations have been in the spotlight, and many Japanese people feared that a Westerner would be unable to lead a Japanese company with a well-established corporate culture (Spector, 2013). However, Ghosn was able to shape the corporate culture and make it more global-oriented, which enabled Nissan to retain its leading position in the market for a certain period. Spector (2013) notes that effective change leadership core tasks help leaders to implement the change. It is possible to note that Ghosn’s change leadership was successful as almost all the core tasks were addressed though the CEO paid little attention to the development of the emotional bond between the organization and employees, which posed certain threats in the long run. The purpose of this paper is to evaluate Ghosn’s leadership with a focus on the way he addressed the core tasks of change leadership. This paper includes an analysis of strengths and weaknesses of the leadership style, a brief description of change leadership core tasks and the way Ghosn addressed them, as well as some recommendations.

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Strengths and Weaknesses of Ghosn’s Leadership

One of the major strengths of Carlos Ghosn’s approach to leadership is the focus on motivation, transparency, and collaboration. Thomas, Smith, and Diez (2013) stress that the development of cross-functional teams was one of the most effective strategies that facilitated the change. Ghosn made people who worked in different departments operate in teams and identify major issues and ways to address them. Importantly, these people had different perspectives, which enabled them to analyze the situation from different angles. One of the rules that governed the teams’ operations was as follows: “Nothing is off-limits to discuss and explore” (Spector, 2013, p. 170). This openness to different views and approaches proved to be efficient. Another significant strength of his approach was his ability to align his actions with his claims.

Another strength was his ability to develop a new culture. Some of the aspects of the culture were changed, and the changes positively affected the development of the organization. For instance, the collaboration with keiretsu suppliers was replaced by bidding, which made the company’s operation more efficient. Keiretsu suppliers were the companies that had collaborated with Nissan for prolonged periods, and trustful relationships were developed (Thomas et al., 2013). This approach ensured the high quality of products and services Nissan obtained, but it was also associated with high costs and some losses in time (Spector, 2013). The “orientation towards seniority versus meritocracy in rewards” was also abandoned (Thomas et al., 2013, p. 10). A Japanese value of lifetime employment was associated with rewarding people due to the years they worked for the company without the evaluation of their performance. Ghosn replaced that practice with a western (and globally accepted) approach to reward high-achievers. On the one hand, the change was beneficial for cutting costs and motivating employees. On the other hand, the change was rather dramatic for the employees.

This is closely connected with the major weakness of the approach Ghosn employed at Nissan. The CEO excessively concentrated on profit and performance. He paid certain attention to the employees’ morale, but he tended to pay insufficient attention to the cultural peculiarities (Spector, 2013). He was a very demanding leader, which helped the organization achieve the goals set, but it could also result in the lack of employees’ commitment to the approach and culture that were developed. Spector (2013) notes that demanding leaders do not always manage to implement the change successfully. Ghosn tried to transform the Japanese company into a truly global one, but this effort was not very successful. The decrease in sales after a short period (in the 2010s) shows that the new culture was not fully embraced (Thomas et al., 2013). Cameron and Green (2015) stress that change management should involve the stage of the new culture adoption, which will ensure the real and lasting use of the new principles, approaches, and cultures.

Core Tasks of Change Leadership

To evaluate change leadership used at Nissan, it is possible to use core tasks of change leadership. Spector (2013) describes five major tasks that involve the articulation of a “clear and consistent sense of purpose and direction,” the establishment of demanding expectations, the use of upward communication, the creation of “an emotional bond between employees and the organization” and development of future change leaders (p. 154). It is possible to note that Ghosn managed to address almost all of these core tasks, which made his approach successful within a limited period.

Ghosn developed and articulated the sense of purpose at once. He communicated his messages to the employees as well as the entire Japanese society (Spector, 2013). This transparency was an effective strategy as people understood that changes were needed and saw the direction the organization would choose. Ghosn also made his performance demands clear from the start. He revealed his commitment to very ambitious goals. The CEO communicated with hundreds of people to understand the issues to be addressed and ways to achieve the goals set. He encouraged upward communication and was open to discussing various approaches. It is noteworthy that the implementation of the core tasks mentioned above was facilitated by the use of effective human resource information systems (Gupta & Benerjee, 2013). The development of future change agents was also quite successful. This core task was mainly implemented through the use of cross-functional teams where employees could share ideas and contribute to the development of the organization (Thomas et al., 2013).

Nevertheless, Ghosn failed to “forge an emotional bond” between the organization and employees (Spector, 2013, p. 154). The leader’s ignorance of many cultural peculiarities of employees could not facilitate the creation of such bonds. On the contrary, many people stressed that the work with Ghosn was a challenge as the leader set demanding goals. The replacement of some practices deeply rooted in the Japanese culture (for example, keiretsu suppliers and lifelong employment rewarding system) could not make Japanese employees committed to the new culture easily. It is possible to assume that Ghosn’s inability to forge these bonds made the results rather short-lived, and the organization faced new problems in the 2010s.

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Ghosn Walked the Talk

As has been mentioned above, Carlos Ghosn walked his talk, which was one of the strengths of his leadership approach. First, this style enabled the CEO to address such core tasks as the development and articulation of the direction and the establishment of performance expectations. He overtly stated that he would be a demanding leader and would bring about a lot of changes that might be quite drastic (Spector, 2013). Therefore, people were prepared for substantial changes and the leadership style used. Importantly, Ghosn stressed that the company needed those changes to survive and retain its leading position in the market. It is noteworthy that Ghosn promised to reach certain performance goals, and he managed to keep his word. However, the results turned out to be short-lived as the company’s performance was less successful in the 2010s.

Irrespective of this, it is possible to note that this approach is successful. Those under such a leader can learn a lot of valuable lessons from this behavior. Nissan managers could use the same leadership style with their subordinates. Ghosn’s successful alignment of words with actions contributed to transparency and the development of trustful relationships. Employees could have different views on the goals and ways to achieve them, but they knew what to expect and what direction to move in. This clarity contributed greatly to the organization’s success.

Conclusion

On balance, it is possible to note that Carlos Ghosn managed to implement the change quite successfully as he addressed almost all core tasks of change leadership. He created and articulated a sense of purpose and direction, established performance expectations, ensured upward communication, and contributed to the development of future change agents. The major strengths of his leadership style were his ability to align his words with actions, his transparency, and his focus on effective collaboration. The use of cross-functional teams can be regarded as one of his most successful strategies. At the same time, Ghosn failed to facilitate the creation and maintenance of the emotional bond between the organization and employees, which was the major weakness of his approach. The CEO concentrated on the use of western strategies and practices and ignored Japanese cultural peculiarities with their focus on collectivity, quality, and trust. This ignorance was one of the factors that prevented employees from accepting the change fully, which, in its turn, led to performance issues in the 2010s.

Lessons Learned and Recommendations

One of the major lessons learned is the value of transparency and the facilitation of effective collaboration. An effective leader should develop and articulate clear goals as well as strategies to achieve them. Ghosn’s use of cross-functional teams is remarkable as it helped employees analyze existing issues and come up with efficient strategies to address them. It is also noteworthy that the case of Nissan shows that adherence to the core tasks of change leadership can help leaders implement the change successfully. The case also reveals the importance of the cultural component as the ignorance of cultural peculiarities can compromise the effectiveness of change management.

Some may note that a foreign leader can hardly facilitate organizational growth and help the company address the issues it faces. However, the case shows that the statement is false as Carlos Ghosn managed to make Nissan profitable after years of financial losses. Moreover, Ikegami, Maznevski, and Ota (2016) stress that a foreigner can bring about a fresh perspective that will help the organization transform. However, it is essential to remember some points. It is possible to recommend addressing foreign leaders who will be able to implement the change effectively. Nonetheless, these leaders should balance between the use of global practices and values associated with the local culture. It is essential to pay sufficient attention to the cultural peculiarities of employees, as it will ensure their commitment to the goals set and the new culture.

References

Cameron, E., & Green, M. (2015). Making sense of change management. Philadelphia, PA: Kogan Page Publishers.

Gupta, R., & Banerjee, P. (2013). HRIS at Nissan: A new era in human resource management. International Journal of Teaching and Case Studies, 4(2), 95-114.

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Ikegami, J., Maznevski, M. L., & Ota, M. (2016). How do MNEs leverage foreignness as an asset? A field study of Nissan’s leadership. Journal of Applied Psychology, 87(14), 611-618.

Spector, B. (2013). Implementing organizational change. Boston, MA: Pearson.

Stahl, G., & Brannen, M. (2013). Building cross-cultural leadership competence: An Interview with Carlos Ghosn. Academy of Management Learning & Education, 12(3), 494-502.

Thomas, H., Smith, R. R., & Diez, F. (2013). Human capital and global business strategy. New York, NY: Cambridge University Press.