In 1999, the Nissan was suffering under a decade of decline and un-profitability, in fact the company was on the verge of bankruptcy, with continuous loses for the past eight years resulting in debts of approx. $22billion. Lack of market knowledge, innovation, customer needs, quality management and competition consideration as well the devaluation of Yen against the US dollar have dramatically impacted Nissan performance. Also both formal and informal internal procedural Nissan norms, as well as Japanese cultural norms were holding the company back.Through keiretsu investments Nissan management believed would foster loyalty and cooperation between members of the value chain, hence they invested in real estate and suppliers’ companies.
When French auto manufacturer Renault acquired Nissan, president Hanawa of Nissan requested Carlos Ghosn to engineer the failing company’s turnaround. The Brazilian-born, French-educated son of Lebanese parents, Ghosn first learned the management principles and practices while rising through the ranks at Michelin and Renault. His globalized background designated him as an appropriate choice to lead the turnaround of the Japanese company.Renaissance Upon his arrival at Nissan, Ghosn began his new position by embarking on a three-month intensive examination of every aspect of the business Although Nissan had technologically superior products, Ghosn found there was a distinct absence of vision and leadership. Ghosn organized cross-functional teams to develop a new corporate culture using the best elements of the Japanese national culture. By October 1999 Ghosn was ready to announce his strategy to turn the company around with the Nissan Revival Plan (NRP).The NRP become a highly successful cultural intersection that created the most dramatic turnaround in automotive history.
It was designed to address the company’s severe short-term problems and stop the years of declining performances. In the plan, through the Cross-Functional teams organized, Ghosn consistently challenged the tradition-bound thinking and practices of Japanese business that inhibited Nissan’s effectiveness. Ghosn closed plants, laid off workers, broke up long-standing supply networks, and sold off marginal assets to focus on the company’s core business.Nissan was now breaking the cultural norms of keiretsu investments. Cutting down costs was just the first step in Nissan’s recovery. Actually changes were introduced in every corner of the company, from manufacturing and engineering to marketing and sales: update of Nissan’s car and truck lineup; introducing new, dynamic designs; quality improvement. These strategies quickly polished Nissan’s image in the marketplace, and re-established the company in the minds of consumers as a leader in innovation and engineering.
His so-called Nissan Revival seems to be working. But Ghosn is definitely an iconoclast. He defies Japanese business etiquette and shakes hands with every employee he meets, not just top managers. But his radical moves have made him Public Enemy No. 1 to Japanese traditionalists. Eighteen months later, Nissan was back in the black, and within several more years it had become the most profitable large automobile company in the world. Ghosn transformed Nissan once again into a powerful global automotive manufacturer.
NRP returned the company to profitability, achieving 7. 9% operating margin and $2. 5 billion profit in 2001. Management Lessons from Ghosn? Ghosn has a results-oriented approach in which he holds people clearly accountable. Therefore, he enthuses and directs, and then leaves them to get on with it and can check back later if they have delivered. In spite of the media’s attempts to blow Ghosn up into demi-god status, the far wiser assessment comes from Garel Rhys of the Cardiff University Center for Automotive Industry Research in Wales.He tells Fortune: “[Ghosn] is not a superman, only a human being, but he gets results.
He sets goals and holds people accountable. ” Leadership the Carlos Ghosn way Some of the most interesting revelations in one of Forbes articles May 22 2006 relate to Ghosn’s personal management style, which is tough, demanding and straightforward. In one of the his interviews with CNN he describes himself as people motivator and inspiring which lead to people beleiving in the company and increased level of commitment. Trans-cultural LeaderThe Raoul de Vitry d’Avaucourt Clinical Professor of Leadership Development Manfred Kets de Vries; Research Project Manager Elizabeth Florent-Treacy and case writers Mark Mildon and Antoine Ting illustrate Ghosn’s success in bridging such yawning cultural differences. The authors detail Ghosn’s somewhat unorthodox managerial philosophy, including a far more hands-on approach and absolute insistence on maintaining what he considered a healthy work/home life balance. And while Ghosn was careful to avoid being disrespectful of Japanese cultural norms, he never “did things the Japanese way”.He also proved himself a savvy exploiter of the local media, gaining invaluable exposure while allowing him to polish Nissan’s quite tarnished image.
The key success factors of the Nissan turnaround were vision, strategy, and people commitment to the turnaround. For sure the changes were not easy to implement, but the clear vision brought that people were motivated to bring to life, and the results that showed off rapidly, gave Ghosn credibility, making people feel safe about the company.
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