Theories of Management: Nissan and Stakis PLC - Essay Example

?Theories of management Reflections from Case studies: Nissan & Stakis PLC Summer Introduction Oxford Dictionary defines management as “the process of dealing with or controlling things or people” (Oxford). Since centuries, different people and organizations have used different processes to deal with or control people in order to create business. Since strong management skills are the foundations of every industry, scientists and researchers have spent considerable time in building models for effective management. This paper describes a number of such theories of management and focusses on their application to two cases – Nissan and Stakis PLC. The first case study deals with the revival of Nissan from losing millions to making millions under the leadership of Carlos Ghosn. The second case study describes the leadership style of Andros Stakis, group-managing director of Stakis PLC, who almost put the entire company in risk. Case Study I - Nissan Nissan Motor Co., a Japanese automaker has been one of the largest car manufacturers in the world (Daily Markets). The company started losing its market share to another Japanese competitor Toyota since late 1970s and was suffering continuous losses since 1997 (INSEAD). In March 1999, Nissan had an alliance with French carmaker company Renault in order to bail out of their mountainous debt (Renault). In terms of strategy, it was a good M&A deal. Renault’s geographical market strengths were in Europe and Latin America where Nissan was weak. Similarly in case of organizational capabilities, upon the merger, Renault would gain access to Nissan’s engineering and manufacturing know-how, while Nissan would profit from Renault’s marketing and design abilities (NY Times). Cultural clashes, different organizational behaviors and financial conditions of Nissan posed huge risks to the anticipated synergies from the merger. The casestudy reflects on the leadership style of the new COO Carlos Ghosn (le cost cutter) who made a clear agenda of the change that Nissan would go through in the years 1999-2001. In the first week itself, Ghosn made a number of significant changes such as incentive plans for his executive officers, new language policies and a committment to quit if profits were not achieved by FY 2001 (HBS). Ghosn’s leadership style in the case is called as dramatic, sel-sustaining, effective charismatic and focused. The company returned to profit by FY 2000 and had an operational profit of 4.5% by FY 2002. Case Study II – Stakis PLC The second casestudy discussed in the paper is that of Stakis PLC, a group of hotel and casino chains in UK. Headquartered in Glasglow, the company was owned and run by Reo Stakis who turned a lace business to a hotel and casino empire. Prior to the appointment decision of Andros Stakis as the new CEO, Reo led the diversification of group into casinos, pubs, hotels and restaurants. In early 80s, the hotel tycoon passed on his business to his son Andros when the company was in a transitionary landscape of the unstable external environment and mis-guided strategic direction. The company’s strategic and financial position was exposed to the downturn in economic climate of 1991. Despite induction of two established leaders, Sir Lewis Robertson and David Michels as Chairman and CEO respectively, the company started having debts as high as ?15I Mn in 1991. Upon a number of cost-cutting measures, divestures, new partnerships and ouster of Andros Stakis, the group had its first pre-tax profits in 1993. Hilton PLC bought the group in 1999 for ?1.2Bn (The Independent). Theories of Management – An Overview This section provides an overview of varios theories of management designed over the period of years to make effective judgements on business and processes: 1. Scientific Management Theory (1890-1940): From the need to increase productivity, Fedrick Taylor divised a body of principles that scientifically selected workers so that each each worker would be given the responsibility best suited for his skill-sets. Workers were given economic incentives to raise their productivities. The contributions of this theory include modern assembly line, efficiency techniques in fast-food industry and training of surgeons (Wren). 2. Bureaucratic Management Theory (1930-1950): Max Weber in 1930s devised the Bureaucratic Management Theory that advocated for legalized formal and hierarchical structures and processes in organizations (Olum). The bureaucracy was envisaged as a large machine for attaining goals of the company in the most efficient manner possible. The contributions of the theory can be seen in successes of GE and Xerox (Thenmozhi). 3. Administrative Management Theory (1841-1925): Henry Fuyol, who is considered as the founder of the classical management school, developed this theory. He introduced 14 principles of management that the “manager” layer in Weber’s heirarchical model should follow. These principles included division of labor, authority, discipline, unity of command, unity of direction, subordination of individual interest to the common good, remuneration, centralization, the hierarchy, order, equity, stability of staff, initiative and team spirit (Robert Grant). 4. Human Relations Movement (1868-1933): The Human Relations Movement signifies the works of Mary Follett, Elton Mayo and other behavioral scholars who used HR as a term to describe ways in which managers interacted with their sub-ordinates. The movement supported the notion that productivity can, not only be increased by science but has other human aspects to it. 5. The System Approach (1950-1990): The system approach is a contemporary theory that views the organization as a unified, purposeful system composed of collectively exhaustive parts. This approach also considers the organization a part of a bigger picture or environment of the industry or world as a whole. Interpretations of Management Theories to Case studies and their respective sectors There are a number of management theories that can be applied to Nissan’s U-turn scenario in 1999 and Stakis PLC in 1991 in different perspectives. It is expected that these theories overlap in order to give a composite strategy of Carlos or Andros. Application to Nissan Case Study: The following points are indicative of the management theories applied to Nissan’s case: Scientific Management Theory There are three specific aspects of the scientific theory that have been applied in Nissan’s case. (1) Breakdown of Tasks into concrete sub-tasks (stating clear goals, deadlines and rules of Cross-functional teams) (2) Incentivizing employees (incentive plan for 30 executive officers) (3) Ghosn links incentives to profitability (Taylor). Bureaucratic Management Theory Carlos Ghosn created a clear organizational structure to implement and complete his plan, depicting the application of Bureaucratic Management Theory. He created cross-functional teams with his best 20 employees being the head of those teams. Management style was top-to-bottom and focused. Administrative Management Theory The Administrative Management theory is the best-applied theory in case of Nissan. Almost all of Fuyol’s 14 principles applied to the leadership style of Carlos Ghosn and management of Nissan. He divided his labour into teams, gave himself and his executives authority to command change in a subdued Japenese culture, he created discipline and a unity of command and direction. With his change management plan, he kept his own individual interests above that of the company. The System Approach Finally, management of Nissan can also be described in an open systems model, with each department within Nissan working as a separate entity, however interacting with each other in forms of CFTs. The company is also shown as a part of a broader context. i.e. the automobile industry (Thornton). Application to Stakis Case Study: The following points are indicative of the management theories applied to Stakis’ case: Bureaucratic Management Theory Bureaucratic management theory is applicable to family businesses such as Stakis. Andros, Michels and Sir Lewis drew lines of authority and responsibility that were clearly communicated from the start (J). The System Approach The System Approach is the best-applied theory in case of Stakis PLC. The overall economic environment had a huge impact on the management and profitability of the country. The company had various teams and functions such as real estate, marketing, sales, finance, human resources etc. There were overlapping functions under the umbrella of a cyclical economy, globalization vs. localization, political bureaucracy, competition and high cost of borrowing. Applying Management Theories in Automobile & Leisure industries: 1. How effective are the theories of management you have looked at for your sector? There are two industries represented in this study – Automobile and Leisure (including hotels). Both of these represent very different models of doing busines, hardcore industrial and family business respectively. Therefore, the effectiveness of the theories of management is different in each case. In case of Automobiles, the theories of management are more important and effective because of the industrial nature of the production of cars. The assembly-line nature of manufacturing, need of obtaining efficiency and cost-reduction in processes makes it a good example for application of theories of management (12Manage). The success of these management theories is clearly evident from the quick turnaround that Nissan made under Carlos Ghosn leadership, just by following management theories. On the other hand, the theories of management have not been that effective in family businesses such as hotel empire set-up by Reo Stakis. The primary reasons are cyclical nature of the industry, dependence on national economy and inflexible management style of the family operating the business. 2. Where do the theories fail and what were the repercussions of failure? Different theories fail in different cases and at different times of the performance of the industry. For example, the human relations movement theory would not work in the Nissan like scenario in 1999 because self-governance and collective work in the Japanese organization would have been very slow progress and unnecessary challenges of bureaucracy (Y). The time required a more strict approach. Similarly, the repurcussions of scientific management theory are conflicts with labor unions, little or no attention to soft factors, mechanistic and has no room for individual incentives (Kerns Analysis). Theories also fail if circumstances beyond the control of the management got haywire i.e. external factors such as economic crisis, demand of the product etc. Other repurcussions of the failure of these theories are inefficient sector environment and scope of more research in the industry. 3. What is the preferred management style in your sector if there is one and why is this so? Usually, it is not the sector that decides the management style, but it is the condition and nature of the company in the sector that makes a particular management style preferable. For example, in case of a distressed company like Nissar where the external environment is not changing but the internal environment has changed, an autocratic leadership style would be the most preferred one. It implies quick decision-making, setting up of objectives, allocating tasks and keeping the control to bring the compant back into a leadership position (RPI). This was the style used by Carlos Ghosn. In cases where the external environment is changing while there is not much change internally, a more collaborative or consultive management style is required (Changing Minds). These are managers that are change inducers inside the organization and help prepare it to the changing landscape of the sector or industry. An example of this case will be typical family business as Stakis in hotel and leisure industry (Senior). The environment of the industry was susceptible to changes while Andros was working in an autocratic manner, hence the strategy failed. 4. How has the recent financial crisis affected the way companies work in your sector? Yes, the recent financial crisis has affected the way companies work in both sectors that I am considering. In case of automobiles, there has been a lot of government intervention for bailouts; vertical integration and a number of mergers and acquisitions have taken place due to the crisis. Extensive cost-cutting measures were taken by the auto industry throughout the world such as laying-off employees and cutting budgets in marketing etc. The financial crisis also hit the hotel and leisure industry in a number of ways such as decrease in retail and real estate prices and reduced demand. Most of the hotel chains as Stakis focused on cost-effective management procedures and avoided any redundancies. References: 1. 12Manage. Scientific Management (Taylorism). 11 May 2011 . 2. Changing Minds. Styles of Change. 11 May 2011 . 3. Daily Markets. Analyst Interviews: Auto Industry Outlook And Review. 11 May 2011. . 4. INSEAD. Redesigning Nissan (A): Carlos Ghosn Takes Charge . casestudy. Fontainebleau,: INSEAD, 2003. 5. HBS. Implementing the Nissan Renewal Plan . Boston: Harvard Business School Press, 2003. 6. J, Webster. The Reo Stakis Story. B&W Publishing, 1999. 7. Kerns Analysis. Management Theories. 11 May 2011 . 8. NY Times. Nissan-Renault alliance still going strong, Ghosn says. 28 Feb 2008. 11 May 2011 . 9. Oxford. management. 11 May 2011 . 10. Olum, Yasin. MODERN MANAGEMENT THEORIES AND PRACTICES. KAMPALA: Makerere University, 2004. 11. Senior, B. Organizational Change. FT Prentice Hall, 2002. 12. Renault. The Renault-Nissan alliance. 11 May 2011 . 13. Robert Grant, Rami Shani, R. Krishnan. "TQM's Challenge to Management Theory and Practice." Sloan Management Review 1994. 14. RPI. Management Styles. 11 May 2011 . 15. Taylor, A. "Nissans Turnaround Artist." Fortune Magazine 18 Feb 2002. 16. The Independent. Ladbroke buys Stakis chain for pounds 1.2bn. 9 Feb 1999. 11 May 2011 . 17. Thenmozhi, M. Evolution of Management Theory. Chennai: Indian Institute of Technology Madras, 2007. 18. Thornton, E. "Remaking Nissan." Business Week 15 November 1999. 19. Wren, Daniel A. The Evolution of Management Thought. Ed. 2nd. Oklahoma: John Wiley and Sons, 2004. 20. Y, Tiberghien. "The Nissan Shock & the Transformation of the Japanese Political Economy." UBC 2003. Read More