Leadership at Nissan - Strategies Undertaken to Improve Efficiency, Adaptation, and Human Relations - Case Study Example

Leadership at Nissan Strategies undertaken to improve efficiency, adaptation, and human relations Nissan was going through a lean phase from the mid of 1990s, but the scenario further worsened in 1999. The sales figures hit record low and the company was literally on the verge of bankruptcy. The company lost all its money and was finding extreme difficulties to operate in the market place. However, timely interference by Renault saved the Japanese company from being liquidated (Smith and Munn, 2006). Carlos Ghosn then took the charge of Nissan with the aim of taking the company out of this debacle and turning the company towards profitability. Yet there were doubts over the fact whether Carlos Ghosn, being a person who is not Japan-born individual could steer the company towards stability. Nevertheless, as soon as he took the charge the scenario started to change for the company. There were transformations in every domain of the company starting from the research and development to the human resource management. The aim was to improve efficiency, adaptation, and human relations in Nissan. Within the first three months of joining, the newly appointed CEO unearthed the root causes of the company’s failure and took steps accordingly. However, at the same time, the CEO understood that bringing drastic changes in the company would eventually impact the company negatively as it would go against the company’s culture. However, considering all these adversities, the strategies implemented for the purpose of improving efficiency, adaptation, and human relations were closure of five production factories in order to reduce the operational cost (Coombs and Hull, 1998). The company also tried to reduce the purchasing cost by considering bulk purchases from the suppliers and reducing the number of suppliers. Bulk purchase helped the company to receive discount and also allowed the company to realise the economies of scale. Apart from that the company also hired an innovation manager, who was liable to bring creativity and innovation in the car’s design (Lillis, 2008). With innovative design coupled with efficiency, the company tried to make a mass appeal. The management of the firm was also improved and simultaneously reduced the number of company owned dealerships. Major changes were also brought in the human resource department of the firm as well. For example, the promotion scheme was changed. In order to get promotion, an employed had to showcase his/her performance i.e. the growth and development of an employee was made directly correlated to the performance. Apart from that various incentive schemes were introduced in order to motivate the employees. The potential trade-offs as a result of introducing these changes were transformation of the company’s culture and damaged relationship with the suppliers (Afuah, 1998). However, these things were handled very intelligently by the company. First of all, in order to make sure that the employees do not retaliate to the management’s decision, the company publicized it and along with that the benefits of the change were also disclosed. In addition, to deal with suppliers the company took the firm decision of cutting number of suppliers with the aim of reducing cost. The strategies adopted by the firm paid off to a large as the company succeeded in reviving from the poor financial situation. Why Changes Were Effective at Nissan Change is a constant process in the organization. As the business world is becoming increasingly complex and also interrelated, it seems that changes are hardly affecting us. However, this is not true from context because some changes require participation of the employees as well as other stakeholders. Such changes are generally large transformation or radically shift organizations from one particular position to the other. The continuous urge to grow can be adjudged as the biggest driver of change. As a result of that change sometime seems to appear recurrently and at times it seems to occur randomly. The incredible amount of changes taking place in an organization has compelled organizations and individuals to realise ‘the bigger picture’ and become aware of how one particular event affects the other one. Hence organizations must be cognizant of the way their members are affecting each other and also of their holistic nature. A number of scholars have emphasized on the fact that the progress of an organization halts if it fails to bring the necessary changes in the organization. Change in an organization comes in two forms either a planned change or an unplanned change. The planned change is those changes where the management takes diligent and conscious efforts to implement a change whereas an unplanned change is the necessity for complying with the environmental needs. It should be also noted that the necessity of change is equal in every industry, but the intensity and frequency of change differs from one industry to the other. For example, an industry which is driven by technology, the frequency of change is too high as technology is changing day by day. On the other hand, a company involved in servicing, the rate of change is slow. In the similar way, in this portion of the study, the analysis will be done about the changes taken place in Nissan and why those changes turned successful for the company. The changes undertaken by the firm were mostly operational and majority of the changes implemented by the company at that time were necessities and had probably saved the company from getting bankrupt. One of the key reasons for which the change made by the company were effective was that the changes were planned and is coupled with rigorous background research. Apart from that another major reasons for the effectiveness of the changes was that the newly appointed CEO never wanted to dictate the change, rather he asked for a collaborative effort and this strategy paid off for the company. The leadership style pursued by the Carlos Ghosn also acted as a key towards the effectiveness of the planned changes. In regards to this scenario, authors such as Aguinis and Kraiger (2009) stated that the success of a company as well as the effectiveness of a change is greatly dependent upon the leadership style of the manager and the overall organizational culture. Echoing the same Appelbaum and Fewster (2003) enumerates that before embarking on a change initiative, it is necessary to carefully plan the strategies and also anticipate the possible changes in the organization. Against the backdrop of robust technological development, shifting of the work practices and increasing knowledge-workforces are turning into integral part of organizations. Although various organizations appreciate the need to change but only a few of the companies actually fulfils the real intentions of a change. Burke (2010) and Christensen, Firat and Torp (2008) states that ‘planned approaches’ to change is one of the best ways by which organizations can implement a new strategy successfully. Hence, the theory of organizational change also states that planned change can be effective. Another form of change i.e. the change in human resource department was also effective. This is because a performance based promotion scheme is obviously to drive the employees for better performance. According to Davidson (2005), performance promotion is really helpful for a company as it directly links the promotion of a staff member with his/her performance. Echoing the same Gronroos (2004) .states that performance based promotion can also act as a motivator for the employees to perform well. However, another set of scholars such as King and Anderson (2002) enumerates that performance based promotion is likely to demoralize senior employees as they will feel their loyalty towards the company did not helped their career. In the similar way, a sudden shift in the promotional policy can negatively impact the internal environment and can even result in political issues. The author further states that the changes in policy can result positively if implemented efficiently and the company addresses the need for change to the stakeholders. In the context of Nissan, the CEO took strategic steps before finally implementing the procedural and policy changes. Therefore from an overall point of view, it can be stated that the changes was successful in Nissan was due to efficient leadership of the CEO and planned approach. Traits and skills can help to explain the successful strategic leadership by Ghosn The traits and skills of an individual are responsible for the development of one’s leadership skills. In general, the traits and skills of a leader differ but there are some attributes that makes a great leader. ONeill (2010) states that assembling a great team and a great idea is the first step towards a successful venture and for taking these steps the role of leadership is extremely important. Some of the key traits that make a great leader are honesty, ability to delegate, good sense of humour, ability to motivate, confidence and commitment. The author believes that in order to be successful in the market place, a leader needs to be honest and function ethically. The principals and values of a company are reflected through the level of honesty ethical approaches of the manager. In the similar way, a manager needs to have the ability to delegate. In the case of Ghosn, he had strong abilities of delegating task among the team members. For example, as soon as he took the charge of the company, he divided the responsibilities and made the employees aware of their duties. The case reflects that after taking the charge as the CEO, Ghosn “created nine cross-functional teams and gave them responsibility for determining what needed to be done to revive the company”. Such concepts and teams have never been used in the company for the purpose of business welfare. Another important trait that should be mentioned for Ghosn is his ability to analyse and interpret data. The case made it evident that after taking the charge of Nissan; Ghosn collected the financial and sales data and tried to interpret the results. After the analysis, he found that the company incurring huge production cost and at the same time the company is lacking innovation in terms of product design. On the basis of the findings, he took decisions and that had positive impact on the company. Hence, it is obvious that Ghosn had strong analytical skills which helped him to become a good leader. Although, the ability to analyse is not present every leader but this trait plays a crucial role in distinguishing a good leader and a bad leader. There are numerous examples of leaders where their success was driven by innovativeness and great analytical skills. For example, eminent leaders such as Steve Jobs and Bill Gates have been successful due to their ability to analyse the situation and at the same time make relevant decisions. Similar is the case with Ghosn. He portrayed a transformational leadership skills and this approach helped the company to achieve the goals. Apart from that his ability to make decisions at the right time and capability to understand the pulse of the target audience and the employees, he made strategies that will help in the development process of both company as well as its stakeholders. Experience is another key factor that helps a leader to get success in the market place. Carlos Ghosn had enough experience to take the charge of Nissan and steer the company towards profitability. He has been prolific in the success of Renault and with years of experience in the automobile sector, he had that ability to transform Nissan into a big player. According to Fisher (2000), experience gathered by an individual during the entry level of the career, really assists him/her when functioning in the management department. His/her success as a leader is strongly related with the relevant industry experience. Therefore, it is evident that relevant industry experience is also a vital element of an individual to gain success as a leader. Hence, the ability to delegate tasks, motivate people, relevant industry experience and also transformational leadership skills coupled with high level of intelligence can be dubbed as the key factors that led Ghosn to success. Leadership styles best describes Ghosn’s leadership approach In this turbulent phase of business, it is very much important for a company to have set of skilled employees and obviously a leader who can lead them from the front and guide the employees towards the objectives of the company. Research studies have shown that there are numerous companies in the world that succeeded to become renowned players are due to strong leaderships (Inyang and Akpama, 2002). The case of Apple, Microsoft, IBM, Samsung, Google etc exemplifies the significance of leadership in the success of a business (Inyang, 2007). However, the styles of leadership differ from one person to the other and usually every leader has their own way of leading. From the point of view of bringing changes in an organization, leadership styles can be classified as transformational, change-oriented or empowering leadership. Both the aforementioned forms of leadership differ according to the context. Transformational leadership can be defined as the type of leadership where the leader principally focuses on the enhancement of motivation levels, morale, performance levels of the motivation through various mechanisms. Transformational leadership encompasses connection with the follower’s sense of identity, collective identity of the firm and obviously with the project undertaken. Oh and Lewis (2009) enumerates that being a role model for the followers is the most essential task to become or to be called as a transformational leader. Apart from that some of the other key requirements for being adjudges as a transformational leader, one need to have the ability of assessing the strengths and weaknesses of the followers and should identify the areas of expertise of the followers. It brings positive changes to the followers. Sinha (1995) also states that these leaders are generally enthusiastic in nature and highly energetic. Rather than focusing on the group as a whole, these leaders generally looks after the concern of each individual members. On the other hand, a leader who can be dubbed as change oriented or empowering can be characterized with transformational nature. These leaders usually try to explore the new things and attempts in fulfilling the organizational activities in a new and innovative way. Apart from that these leaders also have the knack of uncovering the hidden potentials of the candidates. These people generally try to initiate changes on the basis of the expectation and learn from experimentation. As a result of that some of the activities undertaken by them, succeeds and some initiatives fails (Zhou and Martoechio, 2002). Some of the examples are entrepreneurs, consultants, leaders who are brought from the other industries for improving the current situation of the company and also changing the culture of the organization. The leadership styles of Carlos Ghosn can be best describes as a change oriented leadership. Rather than trying to build good relationship with the employees, the focus was directly on the exploration of new techniques and strategies that will allow Nissan to succeed. Apart from that, he was also brought from another company and the activities undertaken was mostly according to the need of the situation and in the form of experimentation, but luckily his decisions turned positive and that changed the fate of the company. Furthermore, delegation is one of the key requirements of topics of leadership empowerments and the case has shown that this has been does very efficiently by Carlos Ghosn. Therefore it can be stated that a changed oriented leadership style best describes Ghosn’s leadership approach. Cross- cultural considerations would Ghosn have had to consider when implementing change at Nissan Being an employee of Renault, it was obvious that Ghosn will have to face some of kind of issues pertaining to the cross cultural differences between the two organizations. Moreover, Renault is French company and Nissan is a Japanese company, the difference between the national cultures is also sure to take place (Zhang, Yang and Zhang, 2002). Moreover, Ghosn was not Japanese and as a result of that it is really difficult for him to understand the Japanese culture and styles of management. Knowing that there will be large differences in the cross cultural context, Ghosn devised the strategies according to the requirements. In the initial stages, there were doubts over the capability of Mr. Ghosn on whether he will be able to transform the company. The apprehensions increased only because of the fact that there are large cross cultural differences between the two companies and same styles of management in both the company will not help in serving the purpose. However, the leader had other plans and his focus was on the transformation of the company. The leader at first identified the core issues that are causing the problem for the company. In doing so, he not only considered the technical aspect but also emphasized on the management aspect. His analysis reflected that Nissan is also facing issues in the field of human resource management. The problems identified in the human resource department was related with the pay structure and the benefits provided by the company. It has been analysed by the CEO that the benefits offered by the company is actually affecting the company’s overall productivity in a negative way. There are large cultural differences between Japanese and French people and the benefits offered by the company are highly justified (Pillania, 2006). Yet, forced changes were brought by the CEO with the aim of steering the company towards profitability. The case also made it evident that the CEO had done his homework before taking the charge and this had been reflected with his activities. For example, the way MR. Ghosn addressed the employees about the need to change policies and procedures of the company reflect his awareness about the cross cultural differences of the two companies. Reference List Afuah, A. 1998. Innovation management: strategies, implementation and profits. Oxford: Oxford University Press. Aguinis, H. and Kraiger, K., 2009. Benefits of Training and Development for Individuals and Teams, Organizations, and Society. 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