Leading Change – Carlos Ghosn at Renault and Nissan

Ghosn’s philosophy of change leadership was already developed at Michelin based on three principles: “assume nothing (find answers within the company); work fast; and earn trust and respect with strong results. ” He diagnosed the complications that Nissan had as internal. His initial analysis was that the “company culture emphasized narrow, functionality based thinking at the expense of a larger strategic view. ” Based on this analysis he formed cross functional teams bringing executives from all statuses and geographical locations to brainstorm and recommend solutions within three months.

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The plan was clear and straightforward: reduce procurement costs; reduce debt; and close plants that weren’t viable and introducing new models. These decisions went against the beliefs and traditions of the Japanese industry. It challenged the keiretsu system as the choice to sell associate companies to raise cash and clear debt was never done in Japan. While Ghosn challenges the Japanese business tradition, he also acts with quickness to put the plan into action. Ghosn’s ability to be so direct and confident in what he believes needs to be done, results in dramatic improvement in Nissan’s bottom line.

According to Spector, there are five core tasks that lie at the heart of effective change leadership: 1) Develop and Communicate Purpose; 2) Establish Demanding Performance Goals; 3) Enable Upward Communication; 4) Forge an Emotional Bond between Employees and the Organization; and 5) Develop Future Leaders. In order to be a successful and effective leader, you should be willing to uphold your organization and exercise these tasks. This story of Ghosn’s shows how he utilized these tasks to be successful leader.

Develop and Communicate Purpose: “Ghosn’s main organizational purpose was to cut costs and do everything in his power to bring Nissan back to profitability at the earliest date possible. He created cross company teams to look at all opportunities for synergistic effort and see how they may work if an alliance was formed, which allowed him to have a head start at what needed to be done at Nissan (Ref. 1). ” These teams would need to learn all aspects of the company from product planning, to vehicle engineering, to power trains and purchasing, which would create all around knowledge.

Establish Demanding Performance Goals: “Ghosn removed a number of key executives for failure to meet performance targets within two years of his arrival. Accountability, he repeated, over and over must start at the top. Teams were given three months to review the company’s operations and make recommendations. These teams had to abide by three rules: 1) Nothing is off limits to discuss and explored. Teams are not to be hindered by traditions or avoid sensitive corporate issues. 2) Teams had no decision making power.

That was left to the executive committee. 3) Only one issue is non-negotiable: the return to profit. ” Ghosn’s constant implementation of stretch goals allows for focus to be dedicated to outstanding performance all times. Enable Upward Communication: ““Mr. Ghosn is always challenging us to make higher commitments and targets. We constantly talk about challenge and stretch,” said an executive. Another executive goes on to say, “I have never worked for anyone who is so demanding. ” By allowing all employee from different levels of status to contribute to decisions made (not make decisions), you put employees in a situation where someone in a higher position may have to act on a suggestion from someone in a lower position. It is no longer about suggestions being derived from upper management only. Forge an Emotional Bond between Employees and the Organization: “Success is not simply a matter of making fundamental changes to a company’s organization and operations. You also have to protect the company’s identity and the self-esteem of its people.

Those two goals – making change and safeguarding identity – can easily come into conflict; pursuing them both entails a difficult and sometimes precarious balancing act. ” Also, emotional bonds get created throughout the cross functional teams because they are no longer dealing with employees from just their departments. You learn from and about employees from all different levels and statuses. Develop Future Leaders: “As long as you perform, you are good. Your management is as good as your performance. As long as a manager continues to uplift and encourage growth amongst their employees, as well as demand high expectations they will develop future leaders. ReflectionCurrently, I am not a CEO of a multinational company, but I might be one day so I know the importance of being able to incorporate the lessons of Carlos Ghosn’s career into my own. Having a simple and shared vision, strategy and plan appropriate for strategic, operational and tactical levels of operation is extremely important. Even more important is having leadership on top of all of that leading by example.

When I do become a CEO, I will implement the following core tasks as did Ghosn on a consistent basis. Below is how and why I would do so (speaking as a CEO). Lead by Example: All duties and requirements that I set into practice will need to be followed thoroughly by myself if I expect my employees to do the same. Ghosn states, “Top management is highly visible. What we think, what we say, and what we do must be the same. Discrepancies between words and actions could spell disaster. ” What I do as CEO sets the examples and culture of what is acceptable in my company.

Develop Future Change Leaders: I will not be selfish with any knowledge that I deem is worthy of being public. For the sake of my company and employees I must share this information so that employees may grow within themselves and for the growth of my company. By sharing knowledge with my employees, they will feel comfortable doing the same which will produce successful leaders. Develop and Communicate Purpose: This task will be consistent in my company as change occurs often and everyone should be aware of the current purpose.

By communicating purpose, I will “support decentralized decision making, enhanced independence and coordination” throughout my company. Enable Upward Communication: Throughout my life I’ve always heard that everyone is a teacher and you can learn something from anyone. Never underestimate the power of knowledge as no one person has all the answers, CEO or not. Therefore, at my company I have an open door policy where employees of all levels feel comfortable communicating suggestions for a better company. Employees have local knowledge about customers, competitors, and how the products and services of the organization meet the shifting needs of the marketplace that need to be communicated upward in an organization. ” This will also generate a partnership relationship between my employees and the company. Forge an Emotional Bond between Employees and Organization: By doing this my employees will become more of a partner with the organization, which in turn will create the same feeling amongst my multiple stakeholders. We take care of one another for the sake of success.

Establish Demanding Performance Goals: While I may take care of my employees at all costs, I will always be stern and demanding in regards to performance because the jobs need to get done accurately and efficiently. I will always expect stretch goals from my employees so that they are focused on company goals while continuously stimulating their thought processes. Amongst the leadership skills that Ghosn used in his turnaround is the need to be a good listener, being transparent, be a good team player and establish trust and respect. That’s what I plan on striving to constantly do as a CEO.

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