Saving the Business without Losing the Company - Case Study Example

Saving the Business without Losing the Company Table of Contents Introduction 3 Cross Functional and Cross Company Teams 4 Issues in Nissan Motor Company 5 Ghosn’s Strategies for Nissan Revival 7 Conclusion and Recommendation 9 Reference 11 Introduction Globalization has lead to the blurring of boundaries and internationalisation of trade and business. This has resulted in an incredible change in the nature of business with complexities having increased manifold. Such colossal change can be attributed to the increasing competition and the urge for increasing profitability. In order to find new profitable market and cheap resources, the companies are extending their tentacles to different countries. In the process, they have to encounter many issues pertaining to different organisational and local culture. The companies often find it difficult to survive in the alien culture. With time, the operational activities of organisations have increased and for handling them, companies have segmented their operations into the different departments like sales & marketing, general & administrative, finance & cost, research & development etc. The primary objective of these departments is to help the organisations meet their long term goal. This is known as the cross functional team where experts from different functional areas work together for a company. A strong cross functional team is one of the most vital internal strength of a company. On the flip side companies have to bear huge losses due to the lack of cooperation among these functional departments. This paper will attempt to analyse the issues pertaining to the cross functional strategies of a company with the help of a relevant case study. This case study is based on a real incident of Japan based Nissan Motor Company. The incident is narrated by Carlos Ghosn, President and CEO of Nissan. In this case study, he has explained the various reasons for the failure of Nissan, the strategies framed to help it recuperate and its implementation processes. It will start with a brief description of cross functional and cross company teams before discussing the background and issues pertaining to Nissan Motor Company. It will be followed by a discussion on Ghosn’s strategies that helped Nissan to develop cooperation among different departments. The inferred information will be discussed in the concluding section and some relevant recommendations will also be made. Cross Functional and Cross Company Teams Before discussing the factors that weakened Nissan’s position and its condition during 2000, it will be important to understand the cross functional and cross company teams and their importance in ensuring the sustainability of the company. The dynamic business world has lead to the birth of diverse operational activities. For example, the modern businesses have shifted to ‘teamwork’ from ‘individualism’ and to ‘cross functional team’ from ‘functional teams’. Emphasis has shifted to ‘two way internal communication’ system. According to Parker, “Cross-functional teams seem to be most effective in companies with fast-changing market, such as the computer, telecommunications, pharmaceuticals, and similar industries that value adaptability, speed, and an intense focus on responding to customer needs” (Parker, 2003. p.6). The ‘cross company team’ is a broader concept that has been applied chiefly to multinational companies. In a cross company team different units of a business work together as a team to achieve the same goal for the multinational company. For example the business unit in Europe can focus on R&D and the China’s business unit can focus of manufacturing and logistics. Therefore, they can share and help each other with the specific expertise they have gained in that particular functional area. However, multinational companies often face many hurdles due to lack of proper communication among different functional areas and regional business units. There are three important basic problems with cross company and cross functional teams. Firstly, different regional business units and functional teams fail to sub-optimize at its project levels. Secondly, there is lack of coordination among various departments. Lastly, they fail to share the specific expertise among themselves. The next section includes some these issues that arise while incorporating the cross functional and cross company teams in Nissan Motor Company. Issues in Nissan Motor Company The case study ‘Saving the Business without Losing the Company’ told by Carlos Ghosn, the President and CEO of Nissan deals with some of serious issues that challenged the sustainability of Nissan during late 1990s. In 1999, Carlos Ghosn joined Nissan as the chief operating officer and in 2000 he became the President of Nissan. This case study is devoted to the issues that rocked Nissan which he observed as a top level manager. Ghosn joined Nissan after the much talked about alliance between Renault and Nissan. To his surprise he found that the giant Japanese automobile company has been in duress since last 8 years. It had failed to increase its profitability as the profit margins had reduced manifold. The primary reason for its lower profit was attributed to its higher production cost. The purchasing cost of Nissan was around 15% to 25% higher as compared to Renault. The other expenses of the company were unnecessarily high and hence the overall burden of the company increased significantly. Apparently, the company was under huge financial debt. Renault helped Nissan to reduce the debt burden by investing in it. Despite it, the debt still amounted to around $11 billion. In such a situation, Ghosn was sent to Tokyo by the CEO of Renault Group in an attempt to improve the condition of Nissan. Being an expatriate manager, Ghosn faced many hurdles during the course of his action. Since he was non-Nissan, outsider and non-Japanese; he had to confront the scepticism of the other top level management and employees. The traditional organisational structure and managerial practises of Nissan were its chief drawbacks. The company was stuck to the old product line which was not in vogue. On the other hand, the major competitors of Nissan like Toyota, Suzuki etc kept introducing the latest entry levels cars in market. His studies revealed that the main reason behind the lack of funds on product development was because to money was directed towards other unnecessary expenses. During that period, Nissan possessed sufficient capital that could have been very well used for product development but it was unnecessarily locked up since the then management of Nissan invested these funds in real estate. The company had also invested more than $4 billion in its partner companies for promoting the operation and loyalty. However, Ghosn realized that the financial crisis was not the only problem. Cultural aspects too had its share. The incentive and promotion policies were based on traditional Japanese method and the company considered the age tenure of the employees instead of their actual performance while conducting the promotions and salary hike (Ghosn, 2002). Ghosn’s Strategies for Nissan Revival The story of Nissan’s turnaround is told by Carlos Ghosn. In this case study, he explained that how he bettered the situation in Nissan by developing cross functional teams. He was able to balance between the organisational culture and local Japanese culture. He concentrated on nurturing the strong corporate culture that led to the productive aspect of Japanese culture. The necessary plans for Nissan’s revival taken by Ghosn have been discussed below. The foremost task for Ghosn was to understand the traditional business culture of Japanese organisation and it was not an easy job for him. Being an expatriate manager, at first, he figured out the difference between the compensation & promotional polices of Japan and Western countries. In this respect, Ghosn’s first step was to remove the prevailing seniority rule in Nissan. The performers were promoted without considering their age and tenure in the company. Unlike the Japanese method, the compensation system was restructured based on the performances of particular employees. Another major culture problem observed by him was the tendency of blaming each other without realising the given responsibilities. The cross functional teams used to blame other functional department and Tokyo business unit used to blame European business unit. He realised that the major causes for such problems were the lack of “well-defined areas of responsibility” within the management group (Ghosn, 2002). However, to resolve these issues, he redefined the role and areas of responsibilities of all the management levels. From his previous experience in Renault, he found the cross functional teams (CFT) as a powerful management tool that helps the departmental managers to realize their responsibilities beyond functional areas and regional boundaries. He developed nine CFTs that aimed to work together by sharing their expertise with each other. Table 1 depicts cross functional teams of Nissan and defines their areas of responsibilities. Table 1: Nissans Cross-Functional Teams (Source: Ghosn, 2002) In order to control and evaluate the CFT’s activities, he assigned ten people from middle level management who ensured the decent pace of teams’ performances. However, after sometime he realized that merely ten people were not able to cover the entire issues of nine CFTs and hence, sub-teams of ten members were formed in each CFT. There were also two leaders in each CFT team who were responsible for driving the work schedule, issues and discussions. Ghosn was experienced enough to understand the importance of trust and transparency while forming Nissan’s cross functional teams. He made all the processes transparent and important decisions were disclosed to other levels of management. All the functional departments were informed about other department’s strategies, responsibilities and achievements. He disclosed his revival plans for Nissan to all the employees. He used similar strategies for resolving the issues relating to Nissan-Renault alliance. Cross functional teamwork was the root of success for Nissan and hence, for the success of Nissan-Renault alliance he introduced cross company teamwork between both the companies. Due to legal barriers, he suggested the informal cross company teamwork where different teams of the two companies will focus on specific manufacturing and operational aspects and they will share each others’ expertises. The managers of both companies were put together to realise the immediate synergies. Conclusion and Recommendation The overall discussion using the case study of Nissan’s revival plan is great evidence that explains the importance of cross functional and cross company teamwork for an organisation. Prior to the joining of Carlos Ghosn, Nissan was a sick organisation due its mismanagement. However, after implementing cross functional teams, Nissan was successful to regain its market share. Ghosn was able to develop cross functional teams by winning the trust of managers and employees. However, initially his revival plans were seemed to be unacceptable to the Nissan’s employees but ultimately he gained their faith and cooperation as he showed respect to them as well as to their culture. Regular and healthy interactions among the all functional departments are very important to ensure higher levels of productivity. To enhance the interaction among cross functional teams some of the recommendations have been suggested. The common goal of the organisation must be conveyed clearly to the cross functional departments The top level management must motivate CFT to be creative and to share strategies with other teams. During the course of teamwork, the internal communication must be a two way process. The CFT must be rewarded for their successful teamwork efforts. Necessary resources should be available that helps to enhance the teamwork. Try to involve CFT for decision making processes. The top level management must resolve team problems immediately. Reference Ghosn, C. 2002. Saving the Business without Losing the Company. [Pdf] Available at: http://www1.lsbu.ac.uk/bus-intranet/students/referred-assignments/0910/MKS_M_BPO_Nissan_Case_study.pdf. [Accessed on August 20, 2010]. Parker, G.M. 2003. Cross-functional teams: working with allies, enemies, and other strangers. 2nd Edition. John Wiley and Sons. Read More