Carlos Ghosn – A successful Nissan turnaround

Introduction

Nissan has been successfully competing in the automobile industry through decades, but in

the early nineties they reached a critical point with severe losses and debt. The Nissan brand

was loosing its value, and a turnover was urgent for the company to survive. Nissan got an

alliance opportunity with Renault, which resulted in Carlos Ghosn taking over, as the first

non-Japanese Chief Operating Officer in Nissans history. The task at hand for Ghosn was not

easy, but he came to Japan with a vital revival plan hoping to succeed. After three years of

aggressively restructuring, Nissan showed impressive growth and profitability. Ghosn knew

he had to go back to Renault, so the question was now could the accomplishments continue

also in the future.

Overall, Carlos Ghosn’s approach to turning Nissan around is evaluated as being a success.

One aspect of this is the turnaround he made with the impressive growth and profitability.

Another aspect, which is not that explicit in the case, is the actual turnaround that has been

made in the Nissan employer’s mindset. Due to the Japanese culture and different way of

thinking this latter point is identified to be critical in the success of the turnaround. The shortterm

turnover is obviously a success, but the question is if the restructuring is sustainable also

in the long-term. Nissan needed a change desperately, but will the cultural differences

backfire Ghosn and Nissan in the end? I therefore disagree in elements of the strategy

approach Ghosn has chosen when seeing it in a more long-term and sustainable perspective.

This will be evaluated upon in the paper.

To be able to evaluate upon Carlos Ghosn’s approach in turning Nissan around, I will focus

on Ghosn’s style of leadership, culture and resistance to change. It is obvious to highlight

Nissans mindset and culture, and how it is permeated by both the national and organizational

culture of Japan. Further, this criterion will be evaluated in the context of Ghosn style of

leadership and his cultural approach. This will highlight the potential advantages or

disadvantages in implementing a western way of structuring business opposite to the

bureaucratic and complex business culture of Japan. In the context of culture and

management, it is also important to evaluate upon resistance to change. The success of the

turnaround seems explicit in the case, but the Nissan organizational culture seems to have an

inevitable resistance to change. An interesting dimension will therefore be to evaluate how the

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Nissan employees embrace the restructuring. This latter criterion is critical to evaluate,

because it is only the employees and their potentially new way of thinking that can carry on

with the strategic changes when Ghosn departs. The three criteria will create basis for my

evaluation of Ghosn’s approach to turning Nissan around, and make me able to state to what

extent the strategy execution was good or bad.

Culture with resistance to change

The Japanese model of doing business has a long and severe history of bureaucratic Keiretsus,

which have lead to stagnation in the economy due to little motivation for change and dramatic

restructuring (Thomsen, 2008). This inevitable resistance to change can be identified in

Nissan, due to the company allowing it self to incur losses for almost a decade, without doing

something radical. As a result of the Nissan managements focus on short-term market share

rather than profitability and long-term achievements, only four out of the company’s 43

models gained profit. Instead of paying attention to costumer’s preferences, Nissan focused

on keeping up with the wisdom of Japan and the custom of Keiretsu investments. Further, the

awareness of conscientiousness lead to an organization where they pointed fingers and

avoided responsibility. When a problem occurred in Nissan the different departments always

blamed another department, believing their section functioned perfectly. With this in mind

Nissan can be identified to suffer severe under the disadvantages of inevitable resistance to

change. The employees in Nissan avoided any behavior that could cause dissonance, because

this could hurt their personal career growth and promotion opportunities. The corporate

culture ended up creating disadvantages like delaying the company’s decision-making, and

hinder risk-taking at all levels. Education level, age and experience were factors that

determined the employees career path in the company, which obviously don’t foster a focus

on new talent and fresh thinking. Although, this created a critical situation for Nissan, the

need for change was not urgent, due to potential bailout by the government of Japan if

something should go wrong. Under normal circumstances, management is left to its own

devices, but in times of crisis the government of Japan steps in and leads a rescue operation

and takes charge of the restructuring (ibid.). This illustrates how both the organizational and

national culture in Japan became a disadvantage and created resistance to change in Nissan.

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West meets east

An essential aspect of Carlos Ghosn approach was his awareness of the differences between

the Japanese ways of doing business opposite to the western style of doing business. Ghosn

came to Japan without knowing much about the country, which made him approach his new

environment with an open mind, accepting and building on the strengths of the two cultures.

His style was to learn about the culture by listening to the employees, and thereby he didn’t

appear pre-judicial towards the culture. Ghosn was well aware about the danger of imposing

his western culture on to the employees. Therefore he started to personally communicate with

the different layers in the organization, which left the employees feeling heard and respected.

A management style with attention to the opinions and voices of the employees was

something the Nissan employees never had experienced before. This was far away from the

their tall bureaucratic organizational structure, with little communication between the layers.

Ghosn brought with him three management principles, which created focus on new elements

in Nissans organization. With the need for an urgent change and a gained respect between the

western and the Japanese culture they therefore embraced Ghosn’s new management

principles.

Approaching with respect

Based on the above-mentioned factors Ghosn’s leadership style therefore became one of his

greatest advantages. He managed to give an impression of him being a fellow employee

instead of a manager on the top of the hierarchy (Nohria et.al., 2003). Ghosn’s focus was to

build a relationship with employees from all layers in the organization, and through this

approach he managed to see problems and opportunities early in the process. Measured by the

speed of the acceptance and participation of the employees to the change, this shows how

Ghosn managed to enlist support from all levels at an early stage. I also see it as a clear

confirmation of trust, due to the importance of trust in the Japanese culture as an element for

cooperation. The focus on engagement is evaluated to be an advantageous way to approach

the resistance to change in the organization. Ghosn certainly did something right from the

very beginning by interviewing the different layers of the organization as a basis for his

turnaround of the company. It was an advantageous move to put the employees and their

opinions in focus, and thereby creating an in-house foundation for change.

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Nissans restructuring

In the context of success, one essential aspect to his support within the organization was the

Japanese cultures respect towards leadership. Ghosn states in the case, “the Japanese are so

organized and know how to make the best of things” (Exam case, 2010, p.5), which illustrates

how the culture actually became a helper and a great advantage in the implementation of the

new strategy. This “making the best of things” mentality and great respect towards leadership

is evaluated to have helped Ghosn to effectively start implementing the new reforms. The

disadvantageous of the culture in Nissan, with the lack of communication and transparency,

can also be seen as a reason for why the employees embraced the new system as they did.

With the new structure they now got before unknown knowledge and information, so they

could understand the company and its processes. They got a chance to actively be engaged in

the company, which they probably never had experienced before.

It is clear to see how Ghosn’s type of leadership made an advantageous connection between

the cultural differences and Nissans inevitable cultural resistance to change. Although the

cultural differences between Ghosn and the Nissan organization were severe, his leadership

style and approach to the process became crucial for the success of the restructuring. With the

structuring of the cross-functional teams Ghosn got the powerful people on his side, and this

helped Ghosn overcome the resistance that could have occurred when he introduced the new

strategy plan (Slides class 6). The cross-functional teams were an advantage in the sense that

they broke the organization into manageable pieces, so that it ensured that roles and

responsibility for making and executing critical decisions where clear (Blenko et.al., 2010).

The new matrix structure is seen as advantage for the managers, because it helped them think

in new ways and challenged their existing practices. Further, the structure learned the middle

managers to see the business from a birds-perspective, which lead them to feel positively

engaged and really enjoy the transformation process. In other words, the engaging

management tools were obviously effective for getting the higher-level employees

acceptance. Thus, Ghosn overcame the potentially resistance to his new and more flat

organizational structure by implementing it with respect for the Japanese organizational

culture. Further, the narrow and centralized decision-making process made it advantageous

for Ghosn to see rapid positive results, due to his more flat-structure focusing on efficiency.

The cross-functional teams created a more flexible and efficient vertical communication, and

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lead to Nissan speeding up their respond to a complex shifting global environment (Slides

class 3). With the above-mentioned new changes for the higher-level employees, I believe

that this contributes to them seeing Ghosn as s skilled and respected manager, due to his

knowledge and engaging management abilities.

Although his implementation of the new strategy was a success, I believe he made an

unfavorable decision when he chose not to use the newfound understanding of the problems

from the plant employee’s interviews in the revival plan. Ghosn chose to focus on the higher

levels of the organization. Although the power of the organization lies in the management to

distribute the changes vertically in the organization, the lack of communication experience in

Nissan could lead to the plant employees feeling overseen in the process. This could

potentially be a source of resistance to change, and is not beneficial for a turnaround needing

buy-in from all layers in an organization.

Successful execution?

The implementation process of the new strategy is in fact a success story, but the question is

weather this would have been a success also at an earlier stage. An argument that supports the

fact that Ghosn might have succeeded earlier is the importance of efficient decision-making

for Nissan as a global competitor. A turnaround would probably turn out to be critical for

Nissans future growth and profitability no matter what. The Japanese way of organizing

business is some how a hinder for companies in keeping up with the global competition, and

undermine the company’s competitiveness. The implemented efficient decision-making

approach could therefore be an essential element in Nissans long-term sustainability, due to

its strategy execution becoming more professional in a challenging and highly shifting global

market. However, the timing of the new strategy implementation could not have been better.

With the Asian crisis blooming, and the government of Japan not bailing out a major Japanese

institution, the Nissan organizations resistance to change got a real eye-opener. I therefore

believe that the high motivation for change in Nissans organizational culture would not have

existed before this incident occurred. This explains the surprisingly quick acceptance and

participation in the change process that Ghosn introduced. The question, which then arises, is

weather the success of Ghosn actually was based on his great ability to approach the problems

with the right leader style, or if it was just a lucky strike?

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It is clear that the restructuring improved the communication and transparency. Nissans focus

on costumer’s satisfaction was also a great accomplishment for the company. Although, if we

look closer at the reforms in full swing, there are identified some new reforms that potentially

could backfire on Ghosn due to them being conflicting with the Japanese organizational

culture. With the urgent need for change Ghosn knew that the employees of Nissan were in

desperately need for a transformation. This could have given him too much confidence in his

strategy execution, and made him eager for the change to be done as fast as possible. Some of

the new reforms, e.g. promotions where no longer based on age and experience, were a

drastically change for the Nissan culture, and made some cooperation problems. Ghosn’s

focus on remaining sensitivity towards the organizational culture suddenly appeared reduced.

It is therefore obvious that these initiatives could create foundation for resistance to change.

With the conflicting new reforms, the sustainability of the new strategy is questioned. What

happens when Ghosn need to go back to Renault? With Nissan back on track again, will

Nissan hire a new foreigner to continue Ghosn’s work, or will they go back to a Japanese

manager?

Further qualifications and concluding remarks

Seen in a short-term perspective the strategy execution lead by Ghosn can only be

characterized as a success. Ghosn has illustrated that what really works to become a winner is

to create a structure that reduces bureaucracy, having a culture that inspire the workers to do

their best, and constructing a operational execution that deliver products that satisfy

customers (Nohria et.al., 2003). Although, if we look at the strategy success in a more longterm

perspective, Ghosn’s advantageous leadership style don’t seem that sustainable when it

comes to the longer-serving employees. When looking at the evaluation criteria culture, style

of leadership and resistance to change Ghosn have managed to make them advantageous on a

short-term basis. But with the new reforms in swing there are grounds for doubting Ghosn’s

sustained commitment to the cultural respect. The promotion of younger leaders over longerserving

employees is a potential source of resistance to change. Ghosn saw the new reform as

a great opportunity for the younger leaders to get some experience, but oversaw the

cooperation difficulties that the older employees had with this matter. Knowing that most of

the top management with power in Nissan is longer-serving employees, this is a crucial

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element in the decision-making when executing a reform so culturally conflicting. The

potential of having higher-level managers turning their back against Ghosn is not optimal for

the sustainability of the strategy. In this context, the resistance to change can again appear as a

powerful mechanism in the future of the company. For the turnaround to succeed in the long

run Ghosn needs buy-in from all employees in the organization. I therefore see it as essential

to use the cooperation problems as an advantageous feedback to also focus on serving the

interest of the longer-serving leaders. Ghosn should therefore implement a knowledge-team

with the longer-serving skilled leaders, for the younger-serving leaders to seek inspiration

from in challenging tasks. Thereby the older leaders in Nissan will still feel respected and

valuable, and their important knowledge concerning Nissan will still be in focus.

In this context, the pace of the change also becomes an important element. The aggressively

restructuring has already caused radical changes for the Nissan organization with the new

matrix structure, so changing some of the cultural founded reforms is evaluated to come at a

too sensitive stage. These changes are fundamental changes, which potentially could need

more time to mature. Instead of completing all of the new elements of the strategy, e.g. the

new age system, one year before schedule, these more sensitive changes should come when

the new structure and new situation in the company have matured more. This way the

employees can adjust to the new changes step by step, so that they have a more open mindset

towards the more severe cultural changes. Therefore Ghosn should build on the gained respect

from his achievements, and continue with creating a culture based on trust in his managerial

skills to get this strategy to be sustainable also in the future.

Based on this I state that the pace and the cultural conflicting reform of the execution is partly

a bad decision, because it could potentially backfire Ghosn in a more long-term perspective.

Even though, Ghosn’s overall leadership style and approach to the strategy execution is

evaluated as a success.

Lisa Bjørnstad, 040687-3862, 48-hours exam Strategy Execution

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