In its early years, Nissan quickly rose to become Japan's second largest carmaker, second only to Toyota. Its fame continued as it became one of the largest exporters to the Unites States. However, in the late 1980s, its position began to weaken and it began to lose ground. Competition from rivals, in addition to an appreciation in the yen contributed to Nissan's fall from grace. In 1987, Nissan made moves to double production capacity in response to a booming Japanese economy. However, in order to do this, they incurred more than $22 bn (IBS Center for Management Research, 2003). This move might have signaled the beginning of the end for Nissan, had it not been for a manager who was known for his ability to turn failing companies around.
In 1999, when Renault bought Nissan, the company was in bad shape. High production costs, poor investments, and a weakening economy were all connected to the near failure of the former giant. Purchasing Nissan was a big risk for Renault. If they could not turn the failing automaker around, it could jeopardize their own position drastically. Due to the high stakes involved, Renault hired Carlos Ghosn to pull them out of financial ruin.
How Did Ghosn Accomplish Change?
Carlos Ghosn came to Nissan with a reputation. He was known as the "cost killer." In the past, he had a reputation for making drastic cuts, which had a positive effect on the bottom line, but that created unemployment and other unwanted conditions in the area. The Japanese were apprehensive of the changes that would come. However, much to their surprise, this time Ghosn's plan included a major restructuring of the supply chain. His plan included centralizing purchasing activity, including services as well as goods in the global purchasing strategy, and decreasing the number of suppliers. The plan worked and soon the company was back to profitability, and almost a year ahead of schedule.
. In an interview with CNN, Ghosn attributes his success to the ability to instill a sense of vision in the employees (Benjamin, 2005). He also added, in the same interview, that failing to connect with their people is the number one mistake that managers make. Ghosn recognized that not only had Nissan lost its connection with its employees, it had lost connection with its customers. He began a plan to launch new products in order to reestablish the brand in the minds of the public (Nissan, 2010). Ghosn did not focus on short-term goals as much as he concentrated on long-term goals and sustainability (Capgemini, 2007).
One the key obstacles that Ghosn faced was bridging the cultural gap between himself and Nissan's Japanese workforce. Ghosn embraces differences in others and uses these differences to try to learn something. Ghosn's background prepared him for life in the global marketplace. He was born in Brazil, then moved to Lebanon and France. His move to Japan was not the first time that he had been plunged into unfamiliar territory (Bloomberg, 2004). These life experiences prepared him for the experience.
However, that is not to say that Ghosn was not aware of the imposition that he would make on traditional Japanese management styles. He immediately fired all Japanese management so that they could not give the impression of being unsupportive of the managers who had just invaded their space and were changing traditional Japanese management style (Keller, 2003). He knew that he had to eliminate any attitudes that would not be conducive to the change.
Ghosn and Change Models
Let us now look at how Ghosn accomplished change using several popular change models. The first model that we will explore is the model suggested by Kurt Lewin. In this model, one can view the company as a block of ice. If you wanted to change the shape of the ice, one would first have to melt it and then pour it into a mold and reshape it (Ritchie, 2006). This is what Ghosn did. He saw the flaws in Nissan's structure and made the change plan. He then tore down the old structure and reformed it so that it was more streamlined and efficient.
Ghosn's method of change can also be explored using Kotter's 8-Step Change Model. In this model, step one: create urgency, was already in place. Ghosn was brought on board in an atmosphere of urgency. If he could not turn the company around quickly, it was soon to fail. Ghosn was already a part of a powerful coalition at Renault, but when he fired the Japanese managers, he did so because he knew they would not be on board with his plans. Step three was the Ghosn's key tool for creating change. Ghosn created and instilled a clear company vision in his employees. He communicated it to every member of the staff. Removing the Japanese managers was a way to remove obstacles to his success. Bringing the company to profitability was one of Ghosn's short-term wins. Ghosn worked to build on the change and to anchor the changes in corporate culture by focusing on new products and building a new brand. Kotter's model offers an easy organization of the steps that Ghosn used to achieve change.
Renault and Nissan both managed to extend their global reach through the combination of their companies (FAO, 1997). Understanding the factors that lead to global success is one of the most important elements to the launch of a multinational corporation (Osland and Osland, 2005). Ghosn understood the concepts of Perlmutter's EPG model, and used these principles, whether he formally stated it or not. In this case, the ethnocentric view was not a factor in this case. Ghosn's firing of the Japanese managers was not done for ethnocentric reasons. It was done to eliminate a risk to the success of the plan. Ghosn kept Japanese employees, which would be similar to a polycentric approach. However, firing the Japanese managers was not a polycentric move.
Ghosn's approach to change management took a geocentric approach, which does not equate success with nationality. This approach was more likely the result of Ghosn's multinational upbringing. He moved in and saw the problems, regardless of the nationalities involved. He was able to bring the goals of two international corporations together in a way that resulted in the strengthening of both organizations. In an international organization, management has to focus on similarities, rather than differences. This was the attitude that Ghosn brought to Nissan and one of the keys to his ability to turn the failing company around.
The story of how Carlos Ghosn rescued Nissan from the brink of disaster teaches us a lot about the keys to a successful change. A key factor to Ghosn's success was the ability to see the importance of vision and common ground in the workforce. Ghosn's financial strategy and cost killing plan were only part of the big picture. Ghosn placed more emphasis on the human elements of the change. He knew that the employees had to be on board with the strategy or they would not be able to save Nissan.
Ghosn used his knowledge of humans, as much, if not more than his knowledge of budgeting and finance. This concept is not only behind his ability to bring about successful change at Nissan, but to build a corporate culture that will allow Nissan to remain a serious competitor on the global marketplace. The story of Nissan is one of the most amazing turnaround stories. It demonstrates the importance of the people factor in the ability to achieve and maintain change within an organization.
Benjamin, T. 2005. Carlos Ghosn: Nissan's Turnaround artist. June 6, 2005. CNN.com. [online].
http://edition.cnn.com/2005/Business/04/20/boardroom.ghosn/index.html[Accessed January 14, 2011].
Bloomberg. 2004. A Spin with Carlos Ghosn. Bloomberg Businessweek. [online].
http://www.businessweek.com/magazine/content/04_40/b3902020.htm [Accessed January 14, 2011].
Capgemini. 2007. Nissan: Success Story of a Dramatic Turnaround. May 29, 2007. [online].
http://www.capgemini.com/insights-and-resources/by-success-story/nissan / [Accessed January 14, 2011].
Carter, S. 1997. Chapter 1: Introduction to Global Marketing. Food and Agriculture Organization of the United Nations [online]. http://www.fao.org/docrep/W5973E/w5973e02.htm [Accessed January 14, 2011].
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http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy1/BSTR073.htm [Accessed January 14, 2011].
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Keller, M. 2003. What makes Nissan unique? Automotive Industries. July 2003. [online].
http://findarticles.com/p/articles/mi_m3012/is_7_183/ai_105659473 / [Accessed January 14, 2011].
Nissan. 2010. The Nissan Revival Plan. [online].http://costkiller.net/actu/Actu-nissan.revival.0504.htm [Accessed January 14, 2011].
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Ritchie, B. 2006. Lewin's Change Management Model: Understanding the Three Stages of Change. [online]. http://www.consultpivotal.com/lewin%27s.htm [Accessed January 14, 2011].
The Nissan Cultural Web
Source: Johnson & Scholes, 2002
Changes in the Cultural Web
Prior to Change
Authoritarian -- Japanese managers had complete control, workers had no input into organization