Theory and Practice of Leadership: Ghosn's Leadership Qualities as a CEO of Nissan - Essay Example

Theory and practice of Leadership Table of Contents Answer 1 2 Answer 2 3 Answer 3 6 Answer 4 8 Answer 5 10 Summary 11 References 13 Answer 1 This study is based on the theme of Nissan’s turnaround story and the contribution of Carlos Ghosn in such case. He joined Nissan in 2001, as a CEO, and has led the company through its most difficult times to its prosperity. He was also appointed as the CEO of Renault in the year 2005. He receives the highest pay in Nissan and the second highest pay in Japanese automobile industry. He ran Renault in France before taking over the rein of Nissan Motor Company. Dominique Thormann, the senior vice-president at Nissan Europe revealed that, “To people who don’t accept that performance is what is at stake, he can be ruthless” (Bloomberg, 2004). This is enough to describe Ghosn’s attitude towards his work. Renault was a sustainable company and it came forward to save Nissan, only with the condition of appointing Ghosn as the Chief operating officer. Ghosn conducted an extensive research on the existing condition of the various resources available with Nissan. He analysed the strengths and weaknesses of Nissan, and decided his course of action even before assuming his position in Nissan. This signifies two things; firstly Renault and its management had the confidence that Ghosn was capable enough to handle such situation efficiently. Secondly, Ghosn was assuming the position of a COO, but even then he did his homework before his subordinates did. In this study, the initial section will include an analysis of the approaches that Ghosn undertook, and strategies implemented, to not only improve Nissan’s existing condition, but also take it towards its sustainability. Further the discussion would be extended towards evaluation of the skills and traits of Ghosn that made him such a successful leader. Proper argument would be put forward to support the discussed traits of Ghosn, by scrutinizing different leadership styles or approaches. Finally the cross-cultural consideration made by Ghosn and its implications would be discussed keeping in mind the impact that this initiative had really made on Nissan Motor Company. Answer 2 This section of the study will include a comprehensive analysis of the changes that Ghosn made after assuming his duties in Nissan as a COO. This would be explained with the help of appropriate theories available on the type of change which Ghosn undertook, its positive effect, criticism if any, and the alternative change approach that Ghosn could have utilised. Change is the approach of transiting from the present condition to a desired condition. The goal of change is to maximize the benefits of the organization and eliminate the barriers (Paton, and McCalman, 2000). There are enormous differences between different kinds of change that the organizations make or face. Among them certain changes are substantial, while others are incremental, and some are even transformational. Apart from these some form of change are strategic, while others are tactical or operational (Clegg, Kornberger, and Pitsis, 2005). In the case of Nissan, Ghosn followed the planned change approach to bring about a revolutionary change in Nissan. This he initiated right before officially taking charge of Nissan. However, before moving on to discuss Ghosn’s change strategies, a discussion on the theoretical approaches stated by various analysts and researcher would be presented. While discussing planned change in organisation, it becomes essential to consider the three-phase change process developed by Kurt Lewin. The three stages of change are unfreezing, change and refreezing or freezing (Bauer, 2011). Unfreezing is the stage, when the employees should be prepared for change because they are the ones who resist change within the organisation. Apart from this, the initial planning should be done to bring about the change (Oreg, 2003). The second stage is called change, which signifies actual implementation of the actions that have been planned and teams should be formed to assist in the change process. The employees at every level in the organisation should be involved to bring about the change, so that they welcome change rather than resisting it. Refreezing or Freezing is the stage after the changes have been implemented. It is important to retain the changes and succeed in reaping the benefits from such transformation. The results should be shared with the employees and in case of success; they should be motivated or encouraged for their good work or contribution in changing the strategic or operational functions in the organisation. If Ghosn’s approach is compared to Lewin’s planned change approach, then a major portion of his strategies would fit into this approach. This is because Ghosn studied the existing status of Nissan and did not follow the existing management framework to start his work. He unfreezed Nissan’s existing management framework, and brought about the actual change in the form of formation of cross-functional teams, and asked them to identify the problem areas before getting into solutions. Finally refreezing led to implementation of strategies like downsizing, improving sales, making more models available in them market, recruiting excellent car designing, reducing cost of production and purchasing cost, and so on (Armenakis, and Harris, 2009). If Kotter’s eight step model is discussed to analyse Ghosn’s strategies and change process, similarities can be identified. John Kotter has also presented an eight step model to analyse the process of planned change. It begins with creation of urgency that change is require, which further leads to development of teams and allocation of leaders for guidance. Specific visions are developed and supporting strategies are formulated. The objectives and vision are communicated to the change members, so that the specified change in undertaken. In this regard empowerment of the employees is necessary for prompt action, and it also assist in achieving short-term goals (Barry, 1997). Moreover, assistance in anchoring the changes to the organisational culture is achieved through Kotter’s planned change approach. Katz and Kahn, on the other hand emphasised on the link between the organisational effectiveness, systematic models that are articulated by the leadership functions, and leadership attributes, for effective change in organisation. However, this model does not focus on the training the leaders, and improvement of the organisational functions. Ghosn created urgency for change in Nissan and this was only possible because he did his homework well. He created cross-functional teams to identify the problems because he knew that if he identified them, then due to the prevailing Japanese culture in the company, they would consider him to be a dictator, which would not be good for the company. Teams were formed, problems were identified, strategies were developed, and implemented, and finally success was achieved. However, Ghosn did not consider the external environmental factors, which might have affected Nissan badly and the strategies planned by him would not have been of any use. Like the present economic scenario, if Japan had also faced economic crisis during that time, there was no back-up plan with Ghosn to deal with it. This was because he only considered the internal problems of the company and ignored the external business environment (Petrick, and Quinn, 2000). In this context it can be said that Ghosn should have considered features of emergent change. In case of emergent change managers take decisions based on the existing situation, and it is not pre-decided or planned. Assumptions are considered for unpredictable environment and the change period is decided on the basis of situations that unfold suddenly. Occurrences like financial crunch though develop over a period but affect organisations suddenly, so Nissan being already in a miserable financial condition could have completely dissolved in such a case. In such a situation, Ghosn should have had some emergent change plans to deal with financial crisis and its effect on Nissan in such case. Answer 3 This section of the study would be analysing the skills and traits of Ghosn that he has utilised for Nissan’s development. The theories evaluating skills and traits of leadership would be discussed in order to support the propositions put forward for Ghosn. In this context the theory stated by Mumford and his colleagues, Hunter, Friedrich, and Davis would be discussed, which is also called capability model. They introduced a new model which described the skills that leaders should have. There are five components in this model such as attribute of the individual, outcomes of leadership, environmental influence, competencies, and experience from career (Yammarino, and Dansereau, 2009). Attribute of the individual can be explained through its four components such as common cognitive ability, such as reasoning skill, thinking capabilities, personality means the characteristics to handle complex organisational problems, motivation means willingness and ability to tackles intricacies in the organisation, and crystallized cognitive capability, which signifies intellectual ability (Petrick, and Quinn, 2001). These features clearly explain all the skills that Ghosn have due to which he could competently handle wretched condition in Nissan. Effective leadership skills assist in solving problem effectively. Leaders need to have logical, unique and effective solutions that will affect the performance of the organisation. Ghosn had leadership skills of an efficient leader, which can be understood from the way he studied the whole scenario before joining and analysed the situation. This was done by him to avoid wastage of time in understanding the present scenario (Popper, and Lipshitz, 1993). He had knew what was required to be done, but he allowed the employees to analyse the situation themselves first, so that they understand his strategies and support his decisions. Ghosn competency including social-judgement or problem solving skill was evident from his decision he took, and the way he looked for employment solution for those employees who were laid off. It is his competency which took him from the COO of Nissan to the CEO of Nissan and then Renault. Leadership traits are the personal characteristics that an individual have, that differentiates him/ her from the others. Ghosn is said to have a very magnetic or charismatic personality, which grabs people’s attention. Charismatic leaders draw attention because of their personality and skill. They are preferred by their followers because they are considered as role models. Ghosn too has a sophisticated and intelligent approach in public, and his subordinates, colleagues appreciate this trait of Ghosn. However, he strongly prefers a round the clock ethic at work, which is strongly attached to targets and benchmarks. This proves that he has strong control over his visions, and strategies formulated to reach those visions. He displays several leadership traits which also include maturity, responsibility, high energy, and empathy for his employees (Alas, Tafel, and Tuulik, 2007). This was revealed when Ghosn tried to look out for various employment options for his employees such as part-time work in other companies, etc. Ghosn is in his late 50s, yet one of the highest paid CEOs in Japan, and he still has the enthusiasm of an entrepreneur who struggles to set up his firm and strives to take it towards its growth and prosperity. Though Ghosn is leading one of the major automobile companies, yet considers the planned approaches that he considered for Nissan during contingency. Leadership skills develop with the accumulation of specific traits in an individual. The discussed skills that can be identified with respect to Ghosn, is supported by the following leadership traits discussed above. Answer 4 Leadership style signifies the behaviour of the leader. The leadership style focuses mainly on the activities and the ways of approaching them. It includes not only the nature like the traits but also the actions of the leaders and their followers. Researchers have studied that there are various styles of leadership. The curiosity in human being at workplace is encouraged by the researchers of human resource management, and adopted by social psychologists, guided rationally to an interest in the leadership as facet of actions at the workplace. Since 1950s, several leadership style theories have been put forward, such as authoritarian style, democratic style, transformational style, charismatic style, Laissez-faire or free-rein style, bureaucratic style, task-oriented leadership style, transactional style, relationship oriented style, etc. In this section of the study, the leadership style of Ghosn would be discussed, by taking into consideration the traits and skills that Ghosn has shown in reviving Nissan and achieving profit in 2011 (Scheerens, 2012). There are many leadership styles that can be considered in case of Ghosn, such as Charismatic leadership, democratic leadership, transformational leadership, transactional leadership, or task-oriented leadership. The leader who motivates, and boosts the morale of the followers for enhancing their performance is a transformational leader. As the name suggests one who has the ability to bring about a transformation or revolutionary change is a transformational leader. Transformational leaders can connect to the follower and the project easily and act as the role model for their followers. Transformational leadership comes from the word transformation, one who has the ability to change. Ghosn possess many leadership traits and skill, but what he is known for is his ability to transform Nissan from an ailing company to a profitable organisation. Transformational leadership has four major components, such as individualised consideration, inspirational motivation, intellectual stimulation and idealized influence. Ghosn has all these four components embedded in his leadership style because he understands the need of his company as well as of his employees. He would listen to his cross-functional team and respected their decisions. He is intellectual and after individual study, he has already understood the problems, and framed their solutions, but wanted the employees to identify them and bring solutions. Ghosn inspires a work culture of round the clock, which means he motivates them to achieve the vision that was planned out for Nissan. Finally, as said earlier he has a charismatic personality which attracted people. Ghosn’s leadership style also resembles other styles such as charismatic leadership, or task-oriented leadership styles. In case of charismatic leadership, the leader possesses specific personality which is attractive and the followers get drawn towards it. They consider these leaders as idols, and follow their activities and style, try to incorporate the traits and skill that they possess, and be like them. Ghosn has a contagious energy level, and personality, which was smooth, sophisticated, yet tough, and efficient. The employees got highly motivated because of this personality of Ghosn. On the other hand if Ghosn’s leadership style is considered to be task-oriented then also it is appropriate because when Ghosn developed strategies to pull up Nissan he decided to downsize the human resource first. Though it can be said that he tried for their employment, but his logical steps and strategies in case of Nissan proved that he is strictly a task oriented leader. Secondly Ghosn’s preference for benchmarks, strict targets, round the clock work ethics prove that he possesses task-oriented leadership skills. Answer 5 Ghosn stated studying Nissan’s condition and causes three months prior to actually assuming his role as a COO. He understood the fact that if he and his experts from Renault dictated around in the company, they would not receive the co-operation of the employees in the change process. This is the reason why he formed cross-functional teams and ask them to identify the causes of such situation and solutions for revival. This cross-functional team identified many related problems, such as the declining sales in the company was the result of high cost and feeble management practices (Northouse, 2009). The management of the company was not customer focused and profit oriented. There was no urgency for change at Nissan, and the sluggish attitude of the human resource was an added disadvantage. Ghosn firstly, minimised the car platforms and powertrain combinations. He also dismissed around 21000 employees, which was a drastically negative step. He identified that the purchase cost comprised of 60 percent of operating cost, and compared it with Renault. It was found that Nissan had to incur 25 percent higher purchasing cost than Renault. He understood that since the order size of Nissan was less, so they had to pay a high price. Ghosn in this case reduced the number of suppliers, so that fewer suppliers will have bigger orders and Nissan will get raw materials at low price. Ghosn also noticed that the sales of Nissan were low because the models which Nissan produced were not actually available in the showrooms. Moreover the company officials managing the dealership shores had a social relationship with the dealers rather than a business relationship, so 10 percent of the company owned stores were closed, and the remaining were improved. Ghosn also studied that in Japan, there exist a culture of Keiretsu, which means Group. It is also called alliance or partnership. In every industry Keiretsu exists and relationships are given importance on personal or social front, than just profit or business perspective (Steers, Sanchez-Runde, and Nardon, 2010). This is the reason why there exists a strong bond of brand loyalty among the customers and also among the companies for their suppliers. In such a case, looking out for few global suppliers than the old suppliers of Nissan was going against the tide, but Ghosn did that too. Nissan offered guarantee of tenure just like government jobs, and the performance appraisal was done on seniority basis. He developed a merit plan, according to which the performance of the employee will ascertain his/ her position and promotion, and not seniority. He presented a challenge for the work-force which they would want to reach. Ghosn also recruited new designer to design cars at Nissan, and the designers got more authority to innovate rather than just copy the competitors. Summary The study mainly focused on Ghosn and his leadership qualities, which transformed Nissan’s financial condition drastically. Ghosn studied the existing scenario of Nissan and planned a change framework that he implemented one by one with the co-operation of the employees at Nissan. However, Ghosn is often criticized for the not considering the external environmental conditions, due to which he might have faced problems if Japan suddenly suffered from financial crisis. Ghosn possess charismatic personality, because of which he is a role model for the employees, but he believes in continuous improvement and 24/7 work culture. There are many leadership styles that Ghosn resembles because of the skills he possess. However, due to his mature, responsible, and competitive nature, and excellent knowledge, he can be called a transformational leader. References Alas, R., Tafel, K. and Tuulik, K., 2007. Leadership style during transition in society: Case of Estonia. Problems and perspectives in management, 5(1), p. 50-60. Armenakis, A. and Harris, S., 2009. Reflections: Our journey in organizational change research and practice, Journal of change management, 9(2), pp. 127–142. Barry, D., 1997. Telling changes: From native family therapy to organizational change and development. Journal of organizational change management, 10(1), pp. 30-46. Bauer, T., 2011. Organizational change. [Online] Available at: [Accessed 10 April 2013]. Bloomberg, 2004. Nissan's boss. [Online] Available at: [Accessed 10 April 2013]. Clegg, S., Kornberger, M., and Pitsis, T., 2005. Managing and organizations: An introduction to Theory and Practice. California: SAGE. Northouse, P. G., 2009. Leadership: Theory and practice. 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