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The Global Control of Carlos Ghosn at Nissan

SUMMARY

In 1999, after incurring deficits in seven of the last eight years, Nissan inserted a relationship with Renault. With the demand of the Nissan chief executive Hanawa, Carlos Ghosn was appointed COO of Nissan. His quest was to turn around the finances and re-establish self-assurance of the suppliers and financiers. Carlos Ghosn promised to resign if Nissan did not show a income after 2 yrs, but only after eighteen weeks under his control Nissan began to use profitably.

EVALUATION

A decisive factor to the successful turnaround of Nissan was that Carlos Ghosn's was the right man for the work, since he was able to do things the proper way and with the right strategy.

I think his way was successful because he handled resistance to improve, adapted technique to the organizational culture and hereby enlisted different parts of the business, used the best from the nationwide cultures and last but not least the timing was right coupled with a great stroke of good luck.

RESISTANCE TO CHANGE

People do not avoid change as such1, that i think manifest itself in the Nissan case. The bankruptcy of the major financial house in Japan, Yamaichi, that was not bailed out by the government, made the Nissan employees realize, that in relation to the financial situation, Nissan was at desperately need for a big change. Therefore I assume that the amount of resistance in Nissan was caused by some of the consequences the change may bring and not the change alone.

Some of the root factors behind the amount of resistance are fear of the unknown, concern with poor benefits and concern with taking the full responsibility.

Was resistance unavoidable?

I assume that the level of resistance was inescapable, since there will always can be found some form of resistance induced by fear of the anonymous or concern with poor outcomes. It might not be easy for everyone to fulfill the basic man needs such as food, shelter and so forth for themselves and their family without their job, wherefore concern with burning off their job is a essential cause of amount of resistance.

Though I think the amount of resistance can be drastically reduced by fast communication. 141182-1710 3

Underlying factors behind the resistance

Until the entrance of Carlos Ghosn, advertising is definitely based on seniority and education, which will be the traditional determinants of upgrading the profession ladder in Japan. Carlos Ghosn transformed the determinants of the well-known employee growth system so a advertising was no more limited to years, amount of service or educational level but also based on abilities to perform challenging or challenging tasks. In my own opinion this offered rise to a concern with the unknown since the new determinants was so different from what japan employees was used to and moreover the transparency of who gets advertised and why was no more as clear as before. Recently everyone was certain to get promoted once in a while, given the fact that they get older and the go up of length in service. This is no longer the truth.

The resistance resistant to the new promotion system, where more youthful leaders could easily get promoted over old was portrayed by insufficient cooperation. In my own opinion the level of resistance is brought on by the fundamental hierarchical composition which is so inserted in japan society, where era and amount of service is vital to the get ranking in the hierarchy, that it was hard for the employee not to have some form of amount of resistance if a more youthful colleague gets marketed instead of yourself, just because a situation like this is so anonymous in Japan.

Another huge change after the arrival of Carlos Ghosn was the reorganization and the fundamental results. Beside from more responsibility, the employees were urged risk-taking behavior and personal accountability, and were disciplined a lot more strongly for inaccurate or poor data than misjudgment. I assume that the employees find it a bit terrifying to take the full responsibility since they are used to the consensus principle where no person can be identified for originating a faulty position since the decision machine has decided to the consensus.

A further root cause of amount of resistance was worries of an unhealthy outcome. Because the change was needed to re-establish the finances the employees understood that Carlos must look very critical at all costs, hereunder labor costs, and cut off all unnecessary cost. I think that all employees have their matter about whether their job is considered value adding enough or whether their position would be trim out and the staff hereby manages to lose his job. 141182-1710 4

I believe Carlos Ghosn treated the situation perfectly by using two of the most effective ways to address resistance, namely involvement and communication. 2

When he first arrived to Nissan Carlos Ghosn made a great honor out of experiencing a non arrogant methodology and strolled around the entire company to shake hands with every employee. I think the actual fact that he came out trustworthy, that he did not come with a new strategy on the first day but got his time and that he previously long discussions with managers about their ideas for turning Nissan around, tackled the fear of poor effects. With his approach he were able to engage the employees and elicit ideas from managers by affecting them in the change process.

Besides from relating to the employees Carlos Ghosn also created a matrix firm for higher level staff to be able to boost transparency and communication. By adding more target into communication I assume that the resistance triggered by fear of the unknown is reduced, because the employees could easily get answers to their concerns and explanations on "how, why, who, what and where" questions about the change.

ORGANIZATIONAL CULTURE

Before the tactical alliance, Renault possessed made a committed action to remain hypersensitive to Nissan's culture at all times, which also was indicated in the methodology Carlos Ghosn's had to the company. I believe his accommodating and respectful habit toward the organizational culture and every worker regardless job position is the reason why he was quickly very well-liked.

Enlisting the support of the employees

To enlist support from the employees, I think a shared perspective and a specific strategy is key success factors. 3 One of the fundamental problems when Carlos Ghosn arrived at Nissan was the lack of vision from management. By a restructuring in the business and the grouping of Combination Functional Groups, I believe that the explaining and communication sharing, hereunder common vision, across the complete company was increased.

Next step was the formulation of the new strategy. When formulating a technique it is vital to choose a strategy that works with with the organizational culture. 4 It really is my judgment that Carlos Ghosn succeeds with the adaption of strategy into organizational composition, by permitting the employees in the CFT's create the strategy themselves, or at least be a large area of the strategy creation. To be able to achieve a powerful strategy execution you need 141182-1710 5

to adapt the culture to the picked strategy. 5 By attaining to conclusions of place closures and staff reductions, I think that the CFT's were able to adjust the culture to the determined strategy.

Overall Carlos Ghosn experienced a determination of the Nissan employees in any way levels to improve their frame of mind and adopt new ideas.

In my judgment Carlos succeeded in enlisting different parts of the organization, because he created and communicated a shared vision and included many of the employees in the new strategy and the fundamental process. The employees in the Combination Functional Teams and sub-teams were very keen on becoming more impact, which created proposal, motivation and self confidence on the list of employees. Furthermore I think that the employees also recognized the leadership of Carlos Ghosn, because the results demonstrated off speedily, which made the employees feel safe about the company and strengthen Carlos Ghosn's trustworthiness.

NATIONAL CULTURE

Instead of viewing cultural variances, between Japanese and himself, as road blocks Carlos Ghosn's acquired a positive approach to the cultural variances. He thought that cultural conflicts, if paced and channeled effectively, could provide opportunity for rapid innovation. I think this approach is essential for the success of turning Nissan around, since it showed respect which is a keyword in Japan. Furthermore I do not imagine, that imposing a different culture on the employees from day one would have business lead to other things but level of resistance.

Pronounced ethnic differences

A cultural difference was the Kairetsu purchases, where Nissan put retained earnings into equity of others and real-estate investment funds under the assumption that it could foster commitment and assistance between customers of the Kairetsu. However the investments were not shown in the purchasing costs. Also, the Asian financial crisis worsened the Kairetsu investment funds with the devaluation of the yen. I find the Kairetsu investments a pronounced cultural difference since the European design of fostering co-operation is quite different. Here, manufacturers use their size and other advantages to obtain least expensive price with little respect for provider financial viability. The methodology adds more assistance to the total amount, primarily because the modified split of duties makes this unavoidable. 141182-1710 6

Carlos Ghosn managed to break from the traditional Keiretsu investment funds without sacrificing the customer-supplier relationship with the previous Keiretsu associates and hereby I believe he maintained the best from the two cultures.

Another pronounced ethnic difference, for me, is the worker progress system. In Japan marketing promotions are usually based on age, length of service, or educational level, where in Europe promotions are definitely more depended on skills and capabilities to perform the required tasks. Carlos Ghosn transformed the progression system so a promotion no longer solely depends on time, educational level and number of years of service to the business but also on skills and abilities to perform the mandatory tasks. The brand new promotion system triggered some problems regarding insufficient assistance, but Carlos Ghosn just seen the cultural differences as a rise opportunity for the young managers.

A third pronounced cultural difference was the consensus centered society system. JAPAN thought that the key elements to keep up functional efficiency and group harmony were conscientiousness and assistance. As opposed to Japans collectivism Carlos Ghosn was an advocate of individualism. 6 Despite the fact that Carlos Ghosn prompted risk-taking habit and personal accountability he did not exclude the consensus principle completely. He used the consensus rule in the Mix Functional Groups even though the teams possessed no decision making ability and excluded the concept it in the decision making process were the consensus theory previously had led to delays. I hereby believe that he managed to keep the best from both cultures by using the concept in another connection.

Was culture a helper or a hindrance?

Whether culture was a helper or a hindrance is dependent on the approach to the cultures and the knowledge of a hindrance. In my view a hindrance can be an obstacle that will eliminate the procedure. Surely Carlos Ghosn does meet some unwillingness regarding the advertising system, but I really do not think it was a hindrance since Carlos Ghosn's approach to the task was to make the best out of the situation. In my judgment his very positive method of the cultural distinctions and focus on using the best from the two civilizations made culture a aiding element in the changing process instead of a hindrance. 141182-1710 7

LUCK AND TIMING

It is my thoughts and opinions that Carlos Ghosn and his Mix Functional Clubs' success in turning Nissan around were helped combined with the right timing and a great heart stroke of success.

In 1999 Nissan's Keiretsu opportunities became catastrophic due to the devaluation of the yen because of this of the Asian financial crisis. I really believe it was a blend of the financial meltdown and the announcement that Nissan's credit history proceeded to go from "investment class" to "junk" from both Moody's and Standard and Poor's, that pressured Nissan into looking for a proper partner.

Almost at the same time Renault was searching for a partner that could improve their global position to keep up with the increased competition after the merger of Daimler and Chrysler. Based on the above-mentioned situation for both companies, I do not consider the timing could have been more simply perfect for the alliance between Renault and Nissan.

Besides from timing Carlos Ghosn was also struck with a great stroke of luck. Previously large troubled companies would always be bailed out by japan administration, wherefore employees didn't worry about commercial problems. In my opinion the bankruptcy of the major financial house, Yamaichi, brought on a greater determination among the list of employees in Nissan, since they suddenly were required to worry about commercial problems.

I believe that Carlos Ghosn and his Cross Functional Teams could have been able to make the same changes a couple of years earlier even though it may have been more challenging. If they could have made the same changes a couple of years earlier a few of the challenges would have been finding a strategic spouse and convincing the employees about the importance of commercial problems. As the changes were some years before 1999, the financial situation would not be as critical, since we have not reached the Asian financial crisis. Therefore Nissan wouldn't normally be in such a hurry, just as 1999, to discover a new strategic spouse, which is one of the reasons why I think it is possible. The other problem was to influence the employees about the importance of corporate problems, given that they in those days would not hold the Yamaichi example to relate with. I think it would be possible but take longer time and energy to create the determination behind the realization of the value of corporate and business problems. 141182-1710 8

1 Course 5, slide 12

2 Category 5, glide18

3 Class 3, glide 25

4 Course 3, slide 32

5 Class 3, slide 32

6 Class 7, slide 18

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