The Turnaround at Nissan Carlos Ghosn and Transformational Leadership Case Study

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When Carlos Ghosn was appointed chief operating officer of Nissan in 1999 in an effort to turn the company’s fortunes around, he was face with several significant problems, including a weak distribution network, declining sales, inefficient production methods, inordinately high purchase costs and poor design decisions, all of which combined to create a complex situation that demanded complex solutions. To determine how Ghosn succeeded where his predecessors had failed, this paper provides a review of the relevant literature concerning the successful turnaround at Nissan that was engineered by Ghosn followed by a summary of the research and important findings about the organizational behavior and leadership practices necessary to implement changes in the conclusion.

An overview of the case

Despite manufacturing well-performing vehicles, Nissan was faced with bankruptcy in 1999 following 8 successive years of declining sales and profits. This situation was the cumulative result of several suboptimal practices, including paying higher prices for its purchases than the industry average, unused production capacity, poor vehicle design, and a weak distribution network. Moreover, Nissan’s executive leadership team had failed to address these issues, allowing them to become actual threats to the viability of the company.

Describe the conditions that led to merger with Renault

In response to Nissan’s predicament, Renault’s management team agreed to step in and help Nissan resolve the numerous problems that were adversely affecting its ability to compete by assigning Carlos Ghosn as Nissan’s chief operating officer.

Identify and discuss the driving and resisting forces for change at Nissan in 1999

The overarching sources for the resistance to change at Nissan were the Japanese cultural forces at work that influenced Nissan’s human resource practices as well as the manner in which the company sourced its purchasing needs and its distribution network as discussed further below.

Describe were the cultural challenges Ghosn faced

With a Brazilian-Lebanese-French heritage, Ghosn was clearly out of his cultural element when he assumed the chief operating officer position at Nissan in 1999. For instance, Gold and Hirano (2001) point out that

The former Michelin and Renault executive, best known for his cost-cutting skills, is trying to do more than restructure a respected but money-losing industrial giant. He is doing so in Japan, where social convention limits his flexibility in making big, fast cost reductions. Moreover, he is a foreigner, one of the few to lead a Japanese company” (p. 95)

Not surprisingly, Ghosn assignment to Nissan was initially met with skepticism and derision by many stakeholders, including most especially Nissan employees who viewed the new corporate leader as an outsider who could not comprehend the subtleties of Japanese society. By 2003, though, those attitudes had changed due to the consistency of Ghosn leadership and his success in turning Nissan around.

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As Pesek (2003) points out, “In 1999, the Brazil-born Frenchman of Lebanese descent was derided as an evil foreigner destined to destroy Japan's No3 automaker. Now, Ghosn is a bona fide celebrity. He's even a comic-book hero” (p. 4). It is to his credit that Ghosn recognized the fundamental cross-cultural issues that would be involved in effecting meaningful changes at Nissan as discussed below.

Identify the steps taken by Ghosn to bring Nissan to profitability

Because he recognized that the Japanese employees at Nissan would be resistant to any changes that were unilaterally dictated by him and the expert team he brought with him from Renault, Ghosn meet with various stakeholders prior to assuming his position as chief operating officer and then formed cross-functional teams which were tasked with identifying opportunities to reduce costs and to improve efficiency and vehicle design and distribution.

Discuss the motivational and organizational behaviors that were fundamental to Nissan's poor performance

As noted above, Nissan’s human resource practices that guaranteed life employment and pay and promotion based on seniority rather than performance as well as the company’s entrenched dealer network that was headed primarily by Nissan executives nearing retirement prevented the company from capitalizing on the few vehicles that remained profitable.

Identify and discuss Ghosn's leadership style(s)

The case study suggests that Ghosn primarily used a transformative leadership style (Spitzer, 2007) to achieve the successful turnaround at Nissan as exemplified by the leadership actions described below.

Describe leadership actions that were taken

By ensuring that all stakeholders in Nissan’s operations were kept apprised of the rationale behind his leadership actions, Ghosn helped to ensure that the steps that he took to address the number problems plaguing Nissan, including most especially downsizing the workforce, would be more readily accepted. In addition, Ghosn took pains to ensure that waste was eliminated from the supply chain and focused on more innovative designs that would appeal to consumers. Finally, Ghosn also changed the human resource practices to include merit based pay rather than automatic promotion for tenure only.

Describe leadership theories that Ghosn embraced

Based on his demonstrated behaviors, it is reasonable to suggest that Ghosn embraced transformational leadership theory as the foundation for his turnaround efforts at Nissan. For instance, as the term implies, transformational leaders seeks to “transform” their organizations (Wolfram & Mohr, 2009). The case study makes it clear that Ghosn succeeded in transforming Nissan from a “Japanese also-ran to one of the most successful and innovative companies in the world” (Spitzer, 2007, p. 136). Furthermore, Ghosn would go on to apply the same transformational leadership practices as president….....

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