Analysis Of Nissan Case Study
In 1999 Nissan knew that there were changes to be made, however, making the correct ones would mean it would be very crucial to the company’s success. Seven out of the eight years, Nissan, a Japanese company, suffered such a decline and lost all of their money, there were no improvements that had been made on moving forward. There was only one way that the company did not have to file for bankruptcy was because Renault undertook part of the debt Nissan had. However, as part of that deal, it meant that Carlos Ghosn would take on the role as Nissan’s operating officer. In order for Ghosn to be able to put a plan in motion that would be successful, he had to learn and research about the company, as well as what their strength and weaknesses are. Ghosn would have the chance over the next three months leading up to the expectation of the new position he will hold, to start analyzing what could be going on within Nissan. As he needed to understand that changes needed to be put in place, here is where the turnaround assignments began. Ghosn positioned a number of cross-functional teams in place to investigate the company as an entirety and determine all the areas of the company that needed to show an improvement in performance, as well as what changes will need to be put in place.
When Ghosn showed his plans and his changes, he also offered to show how important this was to him, and how he truly felt that this was the path that could turn around the company and show improvement. He was even willing to step down if Nissan was not showing a profit come the end of the following year. Ghosn not only showed and improvement, but in the beginning of 2001, he had recorded the highest profit ever. Soon after this achievement, he became CEO of not only Nissan, but Renault’s as well. The association between Nissan and Renault was under question. What was even more under question was, how is it that Ghosn, who is in fact not Japanese, can successfully and effectively lead Nissan and make a huge turn around. With this turnaround, Ghosn would not only have to make the changes to show the leadership how to analyze and discover issues, and also how to instruct these proper changes. These would be the changes that would keep the company from years of financial loss and failure, to help turnaround the company and it being able to show in return, a profit. Ghosn had some first impressions on what he felt might be issues within, his cross-functional teams were able to identify some of the same issues Ghosn had felt. These issues were poor finances that were brought on due to declining sales and expensive costs. Since there was a weak management that was not able to find a solution to the issues, the problems remain which resulted in failure. With too many platforms and there were closures that would have needed to be visited. Nissan made an agreement that all the many suppliers were to be kept as suppliers because it was their job to keep these relationships. Even if it was demonstrated to be damaging to the company. The motivation and the performance of the employees continued to drop and Nissan failed at having loyal, returning customers.
Without change, there was not a way to avoid filing for bankruptcy. Nissan proved that they have a number of forces for change. with Carlos Ghosn being placed in the leadership position, change was predicted. There was a continuous decline in sales, Nissan’s distribution network was weak and there was no relationship with the customers that resulted in returning customers. Employees only thought of themselves and not the company, which started resulting in customers not having loyalty and returning. The management became more concerned with themselves and with their retirement nearing and not with the company’s future. Management was lacking in several places, one being the coherent strategy, resulting in resistance to change. In Ghosn’s leadership role, he had positional power. Ghosn was placed in the position as an operating officer, by the organization, due to the fact that Nissan was in debt and Renault undertook part of it. With Ghosn having positional power, he had the ability to make changes within the company. Ghosn had the ability to change salaries, procedures, employment procedures, and so much more. He had expert power. Ghosn had full access with Nissan. With this kind of leadership power, he was able to make the decision to sell and or close 10% of the company-owned dealerships. Ghosn was able to implement management improvements at the dealerships that were still open, as well as the procedures and human resource policies. Having these means would help provide the needed resources to shape the ones that remained open. These would be the most challenging changes he would endure because he did not want to cause hatred of Nissan’s current employees.
Before Ghosn was placed in this role of leadership, there was a strong presence of privilege within the employees. There were employees who were getting paid because of their seniority and their position. These employees were not working effectively for what they were getting paid. Nissan did not have a reward or punishment program for effective or failing performance. Ghosn noticed that so many of the employees were the age for retirement and that they were not motivated to do their job effectively to help the future success of Nissan. These employees had not felt the pressure they needed to meet certain criteria for rewards or even raises, so to Ghosn, he saw their job as more of a social level job. These senior employees knew they had seniority pay, so they basically contributed to the declining sales, due to lack of motivation to work. It was very important to Ghosn and the success plan that everybody knew that they were held accountable. High performers would be replaced with successors that would show a definite improved performance. There would be new guidelines such as, rewards, certain goals being established, effective performance measurements, new bonuses, and a portion of their salary by effectively performing. Ghosn was providing incentive for the motivation and productivity, thus using the transactional leadership theory here. Ghosn saw tradeoffs to be very easy. He was not a fan of dropping or presenting surprises to members at Nissan. As an alternative, Ghosn would define his strategy, hen making it clear and easier to see to better understand what exactly would be taking place and how it would be beneficial to the company. Members at Nissan saw this to be a much easier approach. He was aware of the fact that the changes he was implementing needed to be presented straight from Ghosn, and the team from Renault that he brought over and placed in the positions at Nissan. Ghosn thought by making tradeoffs clear, members at Nissan would be able to see, and better understand, what he would be putting in place of what. In order to provide more successful resources for the facilities that were still open and give them that successful opportunity, Ghosn closed and/or sold 10% of the company-owned facilities. Ghosn had a plan when closing/ selling the five facilities. Yes, he was eliminating 21,000 jobs, but the remaining open locations were becoming more efficient. Although, in this plan, there were other opportunities for the employees, including part-time positions at the other facilities and early retirement. He had no intentions on just going in and eliminating all the employees.
Nissan was using so many suppliers, they put themselves in a bad position because they were not receiving the benefit of reducing the cost on large orders. By entering into a number of purchasing agreements with suppliers, they were causing so much a strain on Nissan, financially. By choosing to cut a majority of their suppliers and raising the sales from the remaining suppliers, Nissan was finally able to lower their purchasing costs. Within three years, Ghosn met his goal of reducing purchasing cost by 20%, due to all the changes he made. Nissan had lost a huge part of their buying excitement. One change he wanted to implement was getting that excitement back. The excitement was lost due to engineering not paying attention to the customers wants, likes, and needs. The engineers were in charge of the new models and since this was the main issue contributing to the failure of Nissan, Ghosn did what needed to be done and gave permission to the designer to have more control than the engineer. Shiro Nakamura, a new employee, took on this role. Ghosn knew that the position he was going to be placed in was not going to be easy by any means, but he knew he would be capable of turning Nissan around. He relates to the trait theory. He is an example of a leader who is born a leader, he doesn’t have to be taught; it is almost as if he has inherited these skills. He was born with the traits, he never had to be trained or walked through how to be a leader, it was something that came so naturally for him. Ghosn never had a negative attitude about his new position. He believed that he had what was needed to make a difference and he proved his success. He took this chance so that the employees could see that he too believed that these changes could work. None of the employees were ever asked to do something that would be defined as too difficult to be successful. Ghosn simply stated that if his changes were not successful enough for a turnaround, he would step down. In 1999 Ghosn guaranteed a turnaround by 2000 and not only did he fulfill that, but also returned record high earnings at the beginning of 2001. In 2005, Ghosn became the chief executive officer of, not only Renault, but Nissan too. The fact that Ghosn was willing to step down from this position if his plan was not successful, showed how much he truly believed his plan would work. Ghosn had the mechanisms of an effective leader. This helped him establish changes and implement those in the workplace for better procedures. He never looked for someone else to make the decisions for him. He understood the importance of the role he was in.
Creating a reward system was helpful in the employees’ success. Ghosn did everything he could to put a strategy together and present it without causing a disturbance to the structure or leadership of the company. He had all the right people for all the right jobs, which people to place in leadership roles to help him in the success of the company. He had a role model, who was there to not only make the company look like a company that worked together, but also as a family that needed one another to help guide them in making decisions. Nobody knew how the members of Nissan were going to react when they were told about the new leadership, nor did they know if the employees were going to be able to believe in what changes Ghosn would be trying to implement. Ghosn proved his leadership role when he took on this position, not knowing if the employees were going to accept him. He gave them his strategy, took on a leadership role, offered to step down from his position if his plan was ever to be unsuccessful and he showed that he would not be the correct leader for the job at Nissan. He proved that he was the right one for the leadership position.
