Back on track! Successful management techniques to get a company out of debt pile [1 ed.] 9783954896752, 9783954891757

Citation preview

Copyright © 2014. Diplomica Verlag. All rights reserved.

Olga Bieck

Back on track! Successful management techniques to get a company out of debt pile Anchor Academic Publishing disseminate knowledge

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

Bieck, Olga: Back on track! Successful management techniques to get a company out of debt pile. Hamburg, Anchor Academic Publishing 2014 Buch-ISBN: 978-3-95489-175-7 PDF-eBook-ISBN: 978-3-95489-675-2 Druck/Herstellung: Anchor Academic Publishing, Hamburg, 2014 Bibliografische Information der Deutschen Nationalbibliothek: Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über http://dnb.d-nb.de abrufbar. Bibliographical Information of the German National Library: The German National Library lists this publication in the German National Bibliography. Detailed bibliographic data can be found at: http://dnb.d-nb.de Coverbild: Cover-Design & Illustration: www.burnheads.de

All rights reserved. This publication may not be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publishers.

Das Werk einschließlich aller seiner Teile ist urheberrechtlich geschützt. Jede Verwertung außerhalb der Grenzen des Urheberrechtsgesetzes ist ohne Zustimmung des Verlages unzulässig und strafbar. Dies gilt insbesondere für Vervielfältigungen, Übersetzungen, Mikroverfilmungen und die Einspeicherung und Bearbeitung in elektronischen Systemen.

Copyright © 2014. Diplomica Verlag. All rights reserved.

Die Wiedergabe von Gebrauchsnamen, Handelsnamen, Warenbezeichnungen usw. in diesem Werk berechtigt auch ohne besondere Kennzeichnung nicht zu der Annahme, dass solche Namen im Sinne der Warenzeichen- und Markenschutz-Gesetzgebung als frei zu betrachten wären und daher von jedermann benutzt werden dürften. Die Informationen in diesem Werk wurden mit Sorgfalt erarbeitet. Dennoch können Fehler nicht vollständig ausgeschlossen werden und die Diplomica Verlag GmbH, die Autoren oder Übersetzer übernehmen keine juristische Verantwortung oder irgendeine Haftung für evtl. verbliebene fehlerhafte Angaben und deren Folgen. Alle Rechte vorbehalten © Anchor Academic Publishing, Imprint der Diplomica Verlag GmbH Hermannstal 119k, 22119 Hamburg http://www.diplomica-verlag.de, Hamburg 2014 Printed in Germany

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

I. Contents 1. Objectives ..................................................................................................... 9 1.1 Structure and methodology .................................................................... 9 1.2 Research ............................................................................................. 10 2. The overview of leadership approaches ............................................... 11 2.1 Major characteristics of a leader ............................................................. 13 2.2 Leadership styles and roles .................................................................... 16 2.2.1

Goleman’s six leadership styles .................................................. 16

2.2.2

Situational leadership .................................................................. 17

2.2.3

Transactional leadership ............................................................. 18

2.2.4

Transformational leadership ........................................................ 19

3. Reasons for strategic change ................................................................ 19

4.

3.1

Transactional change .................................................................. 20

3.2

Transformational change ............................................................. 21

Different levels of change in organisation ............................................ 22 4.1

Individual change: reasons for resistance ................................... 22

4.2

Team change: the role of teams in a change .................................. management process .................................................................. 24

Copyright © 2014. Diplomica Verlag. All rights reserved.

4.3 Organisational change: organisation metaphors ......................... 27 4.3.1

Three models of organisational change ...................................... 28

4.3.2

Change of organisational culture ................................................. 31

4.3.3

“New” approach for conducting organisational change ............... 36

5. Nissan’s U-turn: 1999-2001 .................................................................... 37 5.1 Overview of Nissan’s economic situation in 1999 ................................ 39 5.2 Carlos Ghosn: the European leader versus the Japanese tradition ..... 40 5.2.1

Different leadership styles implemented by Carlos Ghosn .......... 42

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

5.2.2

The U-turn of communication in Nissan ...................................... 43

5.2.3

Cultural U-turn of Nissan with Carlos Ghosn ............................... 46

5.3 Leading change: the secret of Carlos Ghosn success as a leader ...... 49 5.3.1

Character .................................................................................... 50

5.3.2

Competence ................................................................................ 55

5.4 Transformational change of Nissan according to 8 Steps to New Organisation Approach ........................................................................ 57

Copyright © 2014. Diplomica Verlag. All rights reserved.

6. Conclusion............................................................................................... 69

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

II. List of tables Table 1: Six leadership styles according to Goleman ....................................... 17 Table 2: Nine team roles according to Belbin ................................................... 25 Table 3: Kotter’s and Kanter’s leading change models .................................... 30

III. List of figures Figure 1: Leadership styles model of Hersey and Blanchard ........................... 18 Figure 2: Credibility .......................................................................................... 49 Figure 3: Inspiring leadership ........................................................................... 50

Copyright © 2014. Diplomica Verlag. All rights reserved.

Literature..........................................................................................................72

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

Acknowledgements I wish to thank my dear mother who supported me, taught me, and loved me. To her I dedicate this book.

Copyright © 2014. Diplomica Verlag. All rights reserved.

Thank you!

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

1. Objectives In times of globalisation, more and more enterprises try to strengthen their market position through acquisition or alliance with new partners, so that the problem of uniting two companies and establishing a globally effective organisation gets on weight. Statistics on transformational change is not very positive though, only around 30 percent is reported to be successful.1 Nevertheless, some positive examples of the past and present show that transformational change indeed can succeed - if done correctly. What are the factors that define whether a change will succeed or fail? The main objective of this study will be to analyse the success criteria of transformational change and the leader’s role in it on example of a Japanese car maker. Nissan’s turnaround in 1999 was initially criticised by industry insiders, but two years after the beginning of the transformation it was widely discussed in the international media and claimed as “sensational” because of its prompt and astonishing results. One man behind this change was Carlos Ghosn, who had a double function at that time as COO, both of Nissan and Renault, and could bring the heavy in-debt Japanese car maker into the black again. 1.1

Structure and methodology

The focus of the work is predominantly on leadership and on change management. At first, leadership styles and roles will be presented, followed by the reasons for strategic change as well as different types of change such as individual, team, organisational change and transformation of organisational Copyright © 2014. Diplomica Verlag. All rights reserved.

culture. After the introduction of known models on organisational and cultural transformation, a “new” model of organisational transformation will be worked out to provide the framework for analyzing Nissan’s successful turnaround. The 1

Baumgärtner, Stephanie; Horz, Claudia; Klein, Uwe: Transformationsmanagement. Rennstrategien für erfolgreiche Veränderungen, in: Zeitschrift Führung+Organization, 82. Jahrgang, 1/2013, p. 54

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

9

model can be adopted for analysis of transformational changes in general or for planning one. In the practical part, the turnaround of Nissan will be analysed according to the “new” model and Carlos Ghosn leadership as well as reasons for his success will be examined. 1.2

Research

There is plenty of literature on research of leadership and change management. One type of literature provides the overview of theories and research results, the next one deals with case studies and is aimed at developing leadership skills, the third type of literature on leadership unites both features. The following overview illustrates the most important works on leadership and change management. The “gurus” of leadership such as Bernard Bass provided theoretical models on leadership as well as new insights from cognitive social psychology, communication, political and social studies. John Kotter, known for his eight steps change management process, gave valuable information on leading change from the experience he gathered in long years of consulting. Andrew DuBrin, along with descriptions of leadership styles and behaviours, offered leadership skills development techniques as he believes that leadership can be trained. John Maxwell gathered practical experience of leading different churches as a pastor and wrote more than 60 books on leadership, mainly dealing with improving leadership qualities. Esther Green and Mike Cameron provided a detailed and deep overview of change management models as well

Copyright © 2014. Diplomica Verlag. All rights reserved.

as leadership approaches and came up with their own comparative analysis of examined models. After years of research on organisational behaviour Stephen Robbins showed how to approach organisational transformation from the individual, group and organisational point of view and gave a solid theoretical basis on understanding organisational behaviour. Posner and Kouzes conducted hundreds of interviews with business and non profit organisations leaders and provided a view on leadership as a critical aspect of human

10

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

organisation, answering the question what leaders shall do in order that they are followed. 2. The overview of leadership approaches Since the 1950s, leadership has been subject of numerous studies, theories and approaches all around the world. Barnhard Bass, for example, demonstrated the increasing interest in leadership with the following example: “By 1948 Stodgill was able to locate 128 studies of leadership. There were 124 articles, books, and abstracts on leadership published in England and 4 in Germany up to 1947. In contrast, 188 articles on leadership appeared in just one journal Leadership Quarterly btw. 1990 and 1999.“2 In their researches scholars wanted to answer the questions „Can leadership be learned? Or is it the destiny of the chosen ones?” Two approaches appeared and were supposed to answer this question: the trait and the process approach. The trait approach is the oldest one and is backed up by one hundred years of research.3 The trait approach sees leadership as a number of traits that a leader must have in order to lead his followers. The trait approach is intuitively appealing because we get used to view leaders as people with extraordinary abilities who do extraordinary things.4 If leadership at first was connected with definite traits and qualities, the next step in leadership theory was a shift in leadership paradigm and it was viewed as a phenomenon that resides in the context of the interaction between leaders and followers and makes leadership available to everyone. This process Copyright © 2014. Diplomica Verlag. All rights reserved.

approach claims that as a process leadership can be observed in leader behaviours and can be learned.5

2

Bass, Bernhard M.; Bass, Ruth: The Bass Handbook of Leadership: Theory, Research, and Managerial Applications. 2008, p. 6 3 Compare to Bass, B.; Bass R. 2008, p. 6 4 Northhouse, Peter: Leadership: Theory and Practice. 2010, p. 26 5 Compare to Northhouse, P. 2010, p. 5

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

11

Sadler divides a leadership process into several distinct areas6: 1. The processes involved are: influence, exemplary behaviour and persuasion. 2. Interaction between actors who are leader and followers. 3. Nature of interaction is influenced by the situation. For example, commander and troops on the battlefield is different from interaction between a team leader and group of scientists. 4. Process has various outcomes, economic success is just one way to measure leadership, but there are other goals that can be achieved through efficient leadership such as commitment of personnel, change of the organisational culture and team cohesion.7 In the 1970s, the empirical research on leadership turned its attention to situation and context in which leadership takes place.8 After the trait, process and situation approach on leadership the last known shift in leadership theory took place in the early 1980s. Since that time there is a rising interest on charismatic, visionary, and transformational leadership and a perspective that both personal traits and situations are important in determine the emergence, success and effectiveness of leadership.9 There are further approaches on leadership such as emerged versus assigned10 as well as leadership as a role in organisation, but those are not going to be viewed in detail here. As there are many definitions of leadership, the understanding of leadership as

Copyright © 2014. Diplomica Verlag. All rights reserved.

influence on people’s way of thinking, emotions and feelings according to John Maxwell will be applied here.11

6

Compare to Sadler, Philip: Leadership. 2003, p. 5 Compare to Sadler, P. 2003, p. 5 8 Compare to Bass, B. 2008, p. 6 9 Compare to Bass, B. 2008, p. 6 10 Compare to Northhouse, P. 2010, p. 4 11 Compare to Maxwell, John: Developing a Leader Within You. 1993, p. 2 7

12

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

Another quite important distinction shall be made between leaders and managers. Managing focuses on planning, organizing, staffing, and controlling, whereas leadership emphasizes the general influence process.12 2.1 Major characteristics of a leader According to the trait approach traits can be divided into general qualities and task accomplishment qualities that a leader needs to have. ”The general traits are: self-confidence, humility, core self-evaluation, trustworthiness, authenticity, extraversion,

assertiveness,

enthusiasm,

optimism,

warmth,

sense

of

humour“.13 These qualities help to build good relationship with employees as well as to persuade, to influence and to lead. With his self-confidence a leader gives strength to his followers, provides a secure atmosphere and encourages employees to be involved in the process. ”Task accomplishment traits are the following: passion for the work and people, courage, internal locus of control.“14 Emotional intelligence that consists of four major parts - self-awareness, selfmanagement, social awareness and social skills - was emphasized as very important characteristics by Goleman.15 Goleman studied 181 management competence models drawn from 121 organisations worldwide and indicated that 67 % of abilities deemed essential for management competence. The heart of emotional intelligence for him was self-awareness.“16 Because leaders can settle behaviour patterns acting in a special way, it is important that a leader is optimistic, confident and goal oriented. ”As moods are contagious the moods of a leader can influence the whole team till the last bottom-line worker”, wrote John Welsh in his book Wining (2005) where he emphasized that leaders Copyright © 2014. Diplomica Verlag. All rights reserved.

should exude positive energy, energize others, reward and teach followers. He

12

Compare to Northhouse, P. 2010, p. 6 Compare to Du Brin, Andrew J.: Research, Findings, Practice and Skills. 2012, p. 38 14 Du Brin, A. 2012, p. 63 15 Compare to Cameron, Eather; Green, Mike: Making Sense of Change Management. 2009, p.165 16 Compare to Cameron, E.; Green, M. 2009, p.165 13

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

13

also believed that leaders should invent future, instead of focusing on what has been done in the past.“17 Katz suggested the Three Basic Personal Skills approach for effective leadership and insisted on differentiation between skills and traits because skills can be accomplished whereas traits are what the leaders are.18 Thus, he defined skills as the ability to use one’s knowledge and competencies to accomplish a set of goals or objectives. Katz‘ Three Basic Skills approach included: technical skills, human skills and conceptual skills. Zenger, Folkman and Edinger offered a model for analyzing the inspiring leadership which is quite close to Katz’ approach and consists out of three elements such as attributes, behaviours and emotions. Attributes address such set of qualities as role model, change champion and initiative. Six most typical behaviours of inspiring leaders are defined as: stretch goals, clear vision, communication, developing people, teamwork and innovation. Emotions address leader’s ability to connect with people.19 This model seems to have the attributes of both Katz’ and Goleman’s approach because it unites the inborn characteristics, emotional intelligence and acquired skills. Conceptual skills play a significant role for leadership as they help a leader to create a vision, to make a strategic plan for organisation. The higher the managers’ position the greater the meaning of both human and conceptual skills for him.20 When a leader has charisma - it is an additional advantage, but not every leader has it. A visionary leader shares his vision with followers and can motivate them to move towards his vision that finally becomes theirs. In order to do so, a visionary or a charismatic leader has the ability to connect Copyright © 2014. Diplomica Verlag. All rights reserved.

with people. This ability, argue some scholars, cannot be learned, whereas others say it can be learned. To connect means to inspire people to go new 17

Shriberg, Arthur; Shriberg, David: Practicing Leadership Principles and Applications. 2010, p. 71 18 Compare to Northhouse, P. 2010, p. 40 19 Compare to Zenger, J.; Folkman, J.; Edinger, S.: Unlocking the Mystery of Inspiring Leadership, in: The ASTD Leadership Handbook. 2010, p. 260-262 20 Northhouse, P. 2010, p. 41

14

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

ways. In their article on inspiring leadership, Zenger, Folkman and Edinger presented six types of inspiring leaders as well as features that each type of these leaders has in order to create emotional connection.21 The classification was made after analysis of 1,000 most inspiring and motivating leaders out of 10,000 candidates. Six types of highly inspiring leaders are: x The enhancers x The enthusiasts x The experts x The visionaries x The principled x The drivers This approach suggests that using not only one, but different approaches will highly increase a leader’s ability to be inspiring for the followers and make emotional connection.22 It seems though that a leader doesn’t make a rational choice which approach to apply. He rather acts intuitively according to his character and temperament and can display qualities of different types of inspiring leader. Being the driver a leader can also be the enthusiast, if motivation and enthusiasm is what his followers need at the moment. To sum up characteristics that are important for a leader, two main areas must be mentioned: emotional intelligence and conceptual or visionary skills. At the top is credibility. In a study of Kouzes and Posner with thirty thousand leaders

Copyright © 2014. Diplomica Verlag. All rights reserved.

was figured out that leader’s most important quality is credibility.23 If someone wants to be a leader in a team, his or her actions must be consistent with his or her words.

21

Zenger, J.; Folkman, J.; Edinger, S. 2010, p. 262 Zenger, J.; Folkman, J.; Edinger, S. 2010, p. 263 23 Huszczo, Gregory E.: Tools for Team Leadership: Delivering the X-Factor in Team Excellence. 2010, p. 42 22

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

15

2.2 Leadership styles and roles The role of a leader in the change process was studied in depth, and, as a result, several major theories with different perspectives appeared. Green and Cameron offer a detailed overview of different theories on leader’s roles in the change process, including O’Neill’s four key roles, that are advocate, change agent, implementer and sponsor, as well as Senge’ three types of leaders, that are local line, executive and network.24 The idea to have different types of leaders seems to be very helpful in a complex change process, and if a leader can provide strong types of leaders in different parts of the organization the change has a much better chance to succeed. Also Senge provides the valuable awareness that a change can’t succeed if done top down, it should take place within the organisation.

25

His view on leader’s role warns about

depending on a hero leader. “It means that there is a vicious circle because a search for a new CEO starts with a crisis, then a new CEO comes that makes some short term changes in cost reduction and productivity improvement. The employees start to please a new CEO and start to comply rather than work on challenging the status quo and thus a new crisis occurs.”26 He argues that one or two people at the top of organisation can’t tackle the enormous range of problems. Senge introduced three types of leader: local line, executive and network leaders. Senge recognised the necessity of interaction between all three types, but in reality communication between three types of leaders often fails which makes a change process fail. 2.2.1 Goleman’s six leadership styles Depending on the situation, a leader can apply different leadership styles. The

Copyright © 2014. Diplomica Verlag. All rights reserved.

issue of leadership styles was thoroughly studied by Goleman, he classified the leadership styles into six groups.27

24

Compare to Cameron, E.; Green, M. 2009, p. 153 Compare to Cameron, E.; Green, M. 2009, p. 154 f. 26 Compare to Cameron, E.; Green, M. 2009, p. 153 27 Compare to Cameron, E.; Green, M. 2009, p. 160 25

16

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

Table 1: Six leadership styles according to Goleman 1. Coercive

Used only when crisis arises

2. Authoritative style

Applied when a turnaround is required and a leader is energetic and enthusiastic.

3. Affiliative

Helps to repair broken relationship and establish trust especially when e.g. the change process is tough

4. Democratic

Used when a team knows more about the situation than a leader. A leader operates as a facilitator.

5. Pacesetting

Used with a competent team, which knows what to do and which direction to go

6. Coaching

Appropriate when individuals need knowledge as part of changes being made

To choose an appropriate style isn’t easy and often leaders are not even aware of different styles and use only one or two styles. As a consequence, their leading effectiveness is stiff and they can’t lead to their full potential. 2.2.2 Situational leadership Kenneth Blanchard and Paul Hersey suggested that there is no ideal leadership style, and that leaders must adapt their style depending on the situation. Their model dates back to late 1960s and lets to analyze the needs of the situation and suggests an appropriate leadership style according to the development level of the "follower". This model is considered to be the most applied one in a business world because it is easy to use. According to Blanchard & Hersey

Copyright © 2014. Diplomica Verlag. All rights reserved.

leaders can vary their emphasis according to task, what is in contrast to Fiedler’s theory of situational leadership that says that leadership style is hard to change.28 The model of Blanchard and Hersey will later be used for analysis of Carlos Ghosn leadership style during the Nissan’s U-turn.

28

Leadership. A Leader Lives in Each of Us. Internet: http://higheredbcs.wiley.com/legacy/college/schermerhorn/0471734608/module16/module16.pd f, 19.04.2013

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

17

The matrix of Hersey and Blanchard below shows the dependence between the leadership style and followers maturity. According to follower’s readiness, a leader can choose the style he uses. The four styles are: Participating, Selling, Delegating and Telling.29

Figure 1: Leadership styles model of Hersey and Blanchard30 2.2.3 Transactional leadership Leader’s influence on organisational culture can be defined either through the transactional or through the transformational leadership. Transactional leadership satisfies follower’s needs by entering into a relationship of mutual dependence in which both sides are recognised and rewarded.31 This leadership is based on setting objectives for employees and

Copyright © 2014. Diplomica Verlag. All rights reserved.

delegating the tasks. There are two types of objectives that are discussed: the qualitative and the quantitative ones. The positive side of this leadership is partner-like relationships between leader and followers, employees have

29

Schermerhorn, John R.: Introduction to Management. 2011, p. 320 Schermerhorn, J. 2011, p. 320 31 Schriberg A; Schriberg, D. 2010, p. 78 30

18

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

sovereignty in taking decisions, and management has more room in taking care of operative business solutions.32 2.2.4 Transformational leadership Unlike the transactional leadership the transformational leadership goes beyond the notification of exchange, and according to Burns it has two major elements: it is relational and produces real change.33 ”Transformational leadership occurs when one or more persons engaged with others in such a way that leaders and followers raise one another to higher levels of self and morality.“34 Burns emphasizes that the ultimate test of this approach is the realization of change in people’s lives, attitudes, behaviours and in their institutions. Mhatma Ghandi could be probably the best example of this leadership style because of his nonviolent and egalitarian values that exposed changed people and institutions in India. A distinct feature of a transformational leader according to Jim Burns is that he is not only charismatic, inspiring, morally uplifting, but his focus lies on developing followers into leaders.35 Nearly the same aspect of transformational leadership was stressed by Mary Follet in her book The Creative Experience: ”....The most essential work of a leader is to create more leaders.”36 Transformational leadership thus is a process of creating real change and developing leaders of the future. 3. Reasons for strategic change The nature of change is versatile and because of that it is influenced by various factors. And thus the reason for change may have different objectives, the main

Copyright © 2014. Diplomica Verlag. All rights reserved.

one is though nearly always to make a company more effective and profitable, to gain market share, which may lead to creating new organizational structures, 32

Compare to Franken, Swetlana: Verhaltensorientierte Führung. Handeln, Lernen und Ethik in Unternehmen. 2010, p. 271 33 Compare to Schriberg A.; Schriberg, D. 2010, p. 78 34 Compare to Schriberg A.; Schriberg, D. 2010, p. 78 35 Compare to Avolio, Bruce J.: Pursuing Authentic Leadership Development, in: Handbook of Leadership Theory and Practice. Nohria N.,Khurana, R. (Edit.). Harvard Business Press. 2010, p. 742 36 Compare to Avolio, B. 2010, p. 741

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

19

strategy, set of systems, resources and company’s culture. Strategic change takes place within the contexts of external, competitive, economic and social environment and the organisation’s internal resources, capabilities, culture.37 Tichy has figured out four main reasons for strategic change and they are: 38 x Environment - new regulations of the government or major political or social events x People - who may bring new ideas to the organisation, innovative and strategic thinking x Technology – new advance technologies that influence company’s products or organisation x Business relationship The success of change depends on how well the strategic planning was done. It means that the organisation must have the ability to evaluate the environment it operates in as well as to know where it wants to get and how to get there. A leader plays a major role in defining all these strategic and operational issues. 3.1 Transactional change This kind of change includes the alteration of ways in which the organisation does business and how people interact with one another on a day-to-day basis. As Jack Welsh put it: “We want to be a company that is constantly renewing itself, shadding the past, adapting to change.“39 An example of transactional change would be introducing a new technology, like electronic data exchange in resource planning, CRM, supply chain automatisation. Changes to systems and processes affect daily people lives, the way they do their jobs and how they are

Copyright © 2014. Diplomica Verlag. All rights reserved.

treated. The impact of transactional change is high or can be even higher than strategic or organisational change. A transactional change does not alter the fundamental form, fit or function of the components of the company; it isn’t that costly as transformational changes. 37

Compare to Graetz Fiona; Rimmer, Malcom: Managing Organisational Change. 2012, p. 78 Compare to Farhad Analoui; Azhdar Karami: Strategic Management: In Small and Medium Enterprises. 2003, p.280 39 Michael Armstrong; Tina Stephens: Management and Leadership. 2005, p. 93 38

20

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

3.2 Transformational change Transformational change is the process of ensuring that an organisation can develop and implement major change progress so that it responds strategically to new dimensions of effective functioning in the environment it operates. Organisational transformation may involve radical changes to the structure, culture and processes of organisation. Transformational change may be forced by investors or government decisions. It may be initiated by new management with a wish to ”turnaround“ the business. There are plenty examples of transformational change in business or government organisations. Just a few of them are going to be named to demonstrate the diversity of factors influencing it. Some companies, such as Nokia, have undergone transformational change by changing their core products or focus as new technology came along. Nowadays Nokia is known as one of the world's leading makers of cellular phones, but just a few know that the company began in 1865 as a paper mill.40 Nokia transformed itself into a manufacturer of cell phones during the Finnish recession of the 1990s, when the company streamlined its business to stay profitable. Restructuring products is another way for companies to transform. One example of a company that achieved transformational change by altering its product line is Apple Computer. In 1996, Apple was losing money and had very little market share when it purchased former owner Steve Jobs' Software Company, NeXT. In 1997, Jobs become CEO of Apple and began restructuring the product line, placing greater emphasis on style and the use of proprietary Copyright © 2014. Diplomica Verlag. All rights reserved.

operating systems, rather than systems it licensed from other designers.41 The transformation to focus on quality and innovation led to a return to prosperity.

40

Compare to Magloff, Lisa: Examples of Transformational Change. Internet: http://smallbusiness.chron.com/examples-transformational-change-18261.html, 28.03.2013. 41 Compare to Magloff, L. Internet: http://smallbusiness.chron.com/examples-transformationalchange-18261.html, 28.03.2013.

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

21

4. Different levels of change in organisation Depending on change, it could be a complex and multilevel process that impacts the whole organizational structure starting from top management and going through the whole organization till the last person in a warehouse. In the following the author is going to present the aspects of individual, team, organisational and cultural change in order to outline possible difficulties during a change process and to present possible solutions on each level of change. 4.1 Individual change: reasons for resistance Why is it important to involve people during a change process? What is the effect of leadership and change management strategies on acceptance of change by individuals? Change in any organisation is always carried out by people. No change is possible without them. The individual is a basic element of a group and groups are tied up in departments and departments build up an organisation. If individuals don‘t support change, their performance will lead to a change fail. Any change means that the known is going to be replaced by something new and unknown, so it is just a part of human nature to resist change. There are many reasons for that, as for example: surprise, inertia, misunderstanding, emotional side effects, lack of trust, fear of failure, personality conflicts, poor training, threat to job status, work group breakup, fear of poor outcome, faults of change.42 Because people get used to behave and to act in a certain traditional way, any

Copyright © 2014. Diplomica Verlag. All rights reserved.

change that can alter the usual way of their life is usually resisted at first. The major challenge for a leader is to move people to accept new ways. There are four approaches dealing with individual change that a leader can consider in order to make the right system to motivate and to reward people: behavioural,

42

Compare to Robbins, Stephen: Essentials of Organisational Behavior. 2012, p. 260

22

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

cognitive, psychodynamic and humanistic.43 These approaches are not going to be presented in detail, but it is necessary to mention that each of them has strong as well as weak sides that a leader shall take into consideration when developing his individual approach. For example, the behavioural approach can be used to get the reward strategies right, the cognitive approach to link goals to motivation, the psychodynamic to understand individual’s states as well as your own and the humanistic to be authentic and to understand employees emotional states as well as your own.44 There are many ways to create the atmosphere of transparency, support and trust in order to overcome negative feelings that provoke resistance. Measures that can help to intensify this atmosphere are: education, participation, facilitation, negotiation, manipulation, coercion, discussion.45 Empirical studies showed that communication in a change process is vital in order to create transparency, authenticity and to reduce a feeling of insecurity and to prevent resistance.46 Also employee’s involvement is necessary in order to make them a part of a change process. For example, when IBM decided to introduce a new set of organisational values there was a 3-day forum discussion on this topic, and 50,000 employees could share their ideas. After that the proposed values were evaluated and a new set of values was introduced.47 When a message about an organisational change is announced, individuals immediately ask themselves ”How is it going to influence my job?“, ”Am I going to keep my job?“, ”Company is having a problem“. Even when a manager or supervisor talks with an employee about a change in a positive way and is

Copyright © 2014. Diplomica Verlag. All rights reserved.

excited about it, an employee might be negative and fearful. ”The supervisor might spend 95 % of time talking about business and 5% about implications to the employee, the later is more likely to talk at home 95% of time about the 43

Compare to Cameron, E.; Green, M. 2009, p. 22 Compare to Cameron, E.; Green, M. 2009, p. 59 45 Compare to Robbins, S. 2012, p. 261 46 Compare to Robbins, S. 2012, p. 261 47 Murray, Peter; Pool, David; Grant, Jones: Contemporary Issues in Management and Organisational Behaviour. 2005, p. 374 44

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

23

impact on his personality and 5 % about a company.“48 So if to multiply all the employees by fears they might have, then it becomes clear that change management can’t ignore the human side of a change process and the more people are involved, informed, educated the more they are going to accept change. Management can though decide upon the degree of the employee’s involvement which depends on the impact of change on their lives. In some cases involvement can be minimalised and in some cases it is vital. The more the impact of change on individuals, the greater the need for their full involvement.49 4.2 Team change: the role of teams in a change management process Team is a group of people united by a task they have to accomplish. Different types of teams can be implemented in organisations and all of them have a specific task or function. For example, a work team is a group of people which is managed by one person and does what it is supposed to do according to a present management agenda or present processes. Such types of teams e.g. parallel, project, matrix, virtual, networked, management and change teams can be found within organisations.50 It is a leader’s task to organize successful and effective team work. According to Rollin and Christine Glaser there are five elements that contribute to team’s effectiveness or ineffectiveness over time.51 They are: x Team mission x Team roles

Copyright © 2014. Diplomica Verlag. All rights reserved.

x Team operating processes x Team interpersonal relationships 48

Hatt, Jeffrey M.; Creasey, Timothy J.: Change Management: The People Side of Change. 2003, p. 16 49 Compare to Burnes, B.: Managing Change: A Strategic Approach To Organizational Dynamics. 2006, p. 445 50 Compare to Cameron, E.; Green, M. 2009, p. 64 51 Compare to Cameron, E.; Green, M. 2009, p. 72

24

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

x Inter-team relation According to Belbin some teams are more effective than others, the effectiveness is defined by a number of roles that team members play. The more roles they play, the more effective they are. There are nine major roles defined by him introduced in a table beneath.52 Table 2: Nine team roles according to Belbin Plant

Creative, imaginative, solves difficult problems

Resource investigator

Extrovert, enthusiastic, communicative

Co-ordinator

Mature, confident, a good chairperson. Clarifies goals, promotes decision-making, delegates well.

Shaper

Challenging, dynamic, thrives on pressure. The drive and courage to overcome obstacles

Monitor Evaluator

Sober, strategic and discerning. Sees all options. Judges accurately

Teamworker

Co-operative,

mild,

perceptive

and

diplomatic.

Listens, builds, averts fiction Implementer

Disciplined, reliable, conservative and efficient. Turns ideas into practical actions.

Completer, Finisher

Painstaking, conscientious, anxious. Searches out

Copyright © 2014. Diplomica Verlag. All rights reserved.

errors and omissions. Delivers on time. Specialist

Single-minded, self-starting, dedicated. Provides knowledge and skills in rare supply.

Putting a team together a manager can take different characteristics of individuals into consideration. If, for example, a manager is putting a marketing 52

Compare Cameron, E.; Green, M. 2009, p. 89

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

25

and design team together he will need more individuals playing a plant role, which means that the individuals are creative, imaginative, unorthodox. A management team will need a Co-ordinator or a Shaper who is challenging, dynamic, thrives on pressure and has courage to overcome obstacles. 53 Team effectiveness is also largely influenced by its attitude toward the organisation. Researches proved that if management acts in a committed and supportive way, team members are going to exhibit high productivity, if they feel lack of support – they are more likely to limit their efforts.54 Different team types will not be explicitly described here except of CrossFunctional Teams which crucial role made Nissan’s revival possible. Further team types are: Organisational Policy Making Teams, Department Improvement Teams, Quality Circles, Self-Directed Work Teams, Self-Managed Teams.55 Task-Force or Cross-Functional Teams This type of team includes five to eight members, individuals usually come from one or more different work areas. This kind of team necessitates long meetings over a short period of time and gets trained in a variety of skills. The tasks of such

team

are:

implement

strategic

plan

for

addressing

a

problem/concern/opportunity, others may complete the implementation of the plan, assume, investigate, have corrective and interactive function.56 For example, Google uses its Business Operations and Strategy team to define and to drive strategic, operational and organizational improvements across the company. Founded in 2003, BizOps is a high-profile, high-impact team working with Google's businesses across the globe. BizOps works on a range of critical

Copyright © 2014. Diplomica Verlag. All rights reserved.

projects and issues - from growth strategies for exciting products like YouTube, Chrome and Mobile; to engineering prioritization and global sales force

53

Compare to Cameron, E.; Green, M. 2009, p. 89 Compare to Cameron, E.; Green, M. 2009, p. 90 55 Detailed descriptions are in: Mackin, Deborah: The Team Building Tool Kit: Tips, Tactics, and Rules for Effective Workplace. 1994, p. 3 56 Mackin, D. 1994, p. 4 54

26

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

alignment; to partner development and strategy work in emerging markets such as Africa and India.“57 4.3 Organisational change: organisation metaphors Before presenting different models of organisational change, the author would like to introduce metaphors and perspectives on organization developed by different scholars. One of the most famous approaches comes from Garry Morgan where he compares the organisation to a machine or to a political system, to brains, etc.58 There are eight metaphors introduced by him, the most popular ones are: machine, political system, flux and transformation and organism metaphors.59 A machine metaphor suggests that an organisation shall work like a mechanism with order, rationality and a clear structure of roles inside60. This approach comes from a technical-theoretical perspective of Reed who viewed management as an instrumental tool, though some adherents saw that the decision making process, especially a rational one, might be constrained by the „information processing capacity“ of an actor and that the bounds of rationality may shift as new technologies or initiatives emerge.61 This techno-bureaucratic, emotionless approach on organization is opposed by a political perspective of Morgan and describes an organisation as a political party. This metaphor implies the importance of negotiation through which organizational structure is reproduced.62 Green and Cameron mention though that such perspective may turn an organization into a war zone of different interests.63

Copyright © 2014. Diplomica Verlag. All rights reserved.

There is also a cultural perspective on organization which corresponds with the Morgan’s metaphor on organization as cultures. According to Morgan this 57

Compare to http://www.google.de/about/jobs/teams/business-strategy/, 10.03.2013 Cameron, E.; Green, M. 2009, p. 100 59 Compare to Cameron, E.; Green, M. 2009, p. 100 60 Compare to Cameron E.; Green, M. 2009, p. 101 61 Dawson, Patrick: Organizational Change. 1994, p. 12 62 Dawson, P. 1994, p. 13 63 Cameron, E.; Green, M. 2009, p. 101 58

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

27

perspective helps to get a better view on what is going on in the organisation and also of feelings, values and actions of people.64 The cultural perspective emphasizes moral order as well as creating supportive and positive culture. Organization as flux and transformation sees the organization as part of the environment, rather than as distinct from it. This approach allows to look at the organization as simply part of the ebb and flow of the whole environment, with a capacity to self-organize, change and self-renew in line with a desire to have a certain identity.65 Each metaphor has its strong and weak sides and the best way is probably to use a mix of them in order to reach the best organisational performance. For example, a machine metaphor can help to keep a clear structure in organisation and to move in a clear linear way towards the goal. A leader can additionally use the political metaphor to figure out the important groups inside the organisation and to know from which side possible resistance could be expected, as well as to use cultural approach to guarantee motivation with positive working conditions and organizational values. 4.3.1 Three models of organisational change Along with numerous metaphors on organisation, there are also different models of organisational change. Cameron and Green introduced nine different models, some of them are more popular than the others, but each of them provides a powerful tool for implementing change in organisation. The widely used models of Kotter, Kanter and Lewin are considered to be the most popular ones and will be presented here.

Copyright © 2014. Diplomica Verlag. All rights reserved.

Lewin‘s Three-Step Model is probably the most known one. It includes three stages of change such as unfreeze the status quo, move to a desired end state and refreeze the new change.66 This model was developed for consultants to

64

Alvesson, Mats: Understanding Organisational Culture. 2013, p.16 Cameron E.; Green, M. 2009, p. 109 66 Compare to Robbins, S. 2012, p. 262 65

28

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

take an organization through a change process. Belbin’s force field analysis is very useful for identifying the driving and the resisting forces in organisation.67 Though this model is widely used, the critics say it is oversimplified. That’s why this model was developed further and there are few models that arise from Lewin’s famous organisational change approach. The Continuous Change Process Model is one of them and treats change from the perspective of top management and indicates that change is continuous.68 This model is basically the Lewin’s model in the phase of implementation. This model shall be carried out with the help of a change agent who can be either internal or external. The Kotter‘s Eight Steps Model is popular in the business world and is widely applied in organisational change since decades. The success of this model is based on its clear structure as well as on Kotter’s experience as a consultant which helped him to form eight clear steps according to experience with more than 100 organisations.69 This model suggests that creating a new vision, communicating it on all levels of organization and then institutionalizing it – are the core values of the model. Nearly the same model Ten Commandments of Executing Change was offered by Kanter in 1992 and contains ten steps. The majority of them overlap with the Kotter’s model.70 Both models are presented in

Copyright © 2014. Diplomica Verlag. All rights reserved.

the table below.

67

Compare to Cameron E.; Green, M. 2009, p. 110 Kavita, Singh: Organisational Change and Development. 2009, p. 29 69 Cameron E.; Green, M. 2009, p. 110 70 Compare to Cameron E.; Green, M. 2009, p. 110 68

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

29

Table 3: Kotter’s and Kanter’s leading change models Eight Steps Model71 1.

Establish a sense of urgency

2.

Form a powerful coalition

3.

Create a vision

Ten Commandments of Executing Change72 Analyse the organisation and its needs for change Create a shared vision and a common direction Separate from the past

4.

Communicate

Create a sense of urgency

5.

Empower others to act on their vision Plan for and create short-term wins Consolidate improvements and produce still more change Institutionalize new approaches

Support a strong leader role

6. 7. 8. 9. 10.

Line up political sponsorship Craft an implementation plan Develop enabling structures Communicate, involve people and be honest Reinforce and institutionalise change

Kotter’s and Kanter’s models provide a framework for implementing change but before conducting a change, the necessity of change must be communicated and the organization’s readiness for a change process must be provided. These steps are very important in order to make employees aware of the situation. After presenting Cummings and Worley’s model on cultural change in the

Copyright © 2014. Diplomica Verlag. All rights reserved.

following chapter, the author would like to present the model which is based on all three approaches but organizes them in a different way, in order to provide an approach mostly suitable for analysis of Nissan’s turnaround in 1999 to 2001.

71 72

Burnes, B. 2006, p. 308 Burnes, B. 2006, p. 307

30

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

When change is announced, it depends on leader’s expertise, trustworthiness, credibility and sincerity how it is taken by employees.73 The change message shall include five components: discrepancy, efficiency, appropriateness, principal support and personal valency.74 The major role of a leader is not just to announce change but to create organisational structures and culture that supports a change process and encourages learning and risktaking, as well as develops workforce. 4.3.2 Change of organisational culture International companies nowadays are owned by people from different countries and cultures, and have employees with different cultural, social, religious, sexual background. Corporate culture

that implements how

employees shall behave in a given set of circumstances can be compared to culture of a nation with a set of values and traditions. Organisational culture prescribes certain forms of action or allows behaviour be judged as acceptable or not.75 There are different cultures known and each industry has its own type of culture. The classification of Deal and Kennedy is quite popular and identifies four basic types: 76 x The Tough Guy, Macho culture, typical for military or police. x The Work-Hard/Play-Hard culture is characterised by low risks and quick feedback, typical for Air Force. x The Bet-your-company culture is characterised by high risks and very Copyright © 2014. Diplomica Verlag. All rights reserved.

long feedback. x The Process culture, characterised by low risk and slow feedback, like insurance companies, for example. 73

Compare to Cameron E.; Green, M. 2009, p. 110 Compare to Cameron E.; Green, M. 2009, p. 110 75 Compare to Burnes, B. 2006, p. 170 76 Compare to Burnes, B. 2006, p.173 74

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

31

How can the homogeneity of company’s culture be protected when a company is growing through mergers and acquisitions? Large international concerns like BP, for example, communicate its culture through the values in BP’s brand. These values include such ideas as “Progressive in the restless search for improvement“, ”Commitment to development of staff“ etc.77 As the BNSF Railway merged with Atchinson, Topeka and Santa Fe Railway the leaders of these organizations were faced with a challenge of combining processes, existing systems and cultures.78 Analyzing the existing cultures, their positive and negative sides, leaders figured out that they would rather define a new culture instead of taking any of the existing ones. Company’s values were defined and included style, shared values, community, liberty, equality and efficiency. But creating values is one thing, making the model to work is another. The BNSF example is remarkable because of the company’s focused and deliberate way of ensuring that this culture is achieved. The organisation sent leaders to regular trainings that trained leaders to learn new behaviour, to implement it and to get feedback on how they are progressing. The leadership model of BNSF includes five steps, and the annual training takes one tenet of the model as the basis for the training, while still incorporating leaders as teachers and coaches to provide guidance and feedback to participants. “The annual training is rolled out from the top with the Leadership Team (all Vice Presidents and above) as the first participants, followed by the Management team (the next 70 or so executives) and down all the way through the first-line supervisors. As the curriculum rolls down the organisation, it is tailored to more effectively meet the needs of that particular layer of leadership, while staying true to the particular tenet that its focal point of the training. The Leadership and

Copyright © 2014. Diplomica Verlag. All rights reserved.

Management teams, comprised of the 100+ leaders in the organization, serve as teachers for a portion of the course for leaders lower on the organization

77

Compare to Richard J. Black: Organisational Culture: Creating the Influence needed for Strategic Success. 2003, p. 8 78 Michalski, Jeanne: BNSF’s Leadership Engine, in: Organizational Dynamics. Vol.42, Issue 1, January-March 2013, p. 41-42

32

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

structure“.79 BNSF ensures that employees are not only trained in the Leadership Model but are also responsible for this behaviour. The idea to communicate company‘s values is to make different people to look in one direction. Diversity itself is an issue that many companies stress, implementing that they gain on creativity and motivation of staff having different perspectives and different cultures. Diversity isn’t about different cultures or gender, it is about people who bring different views, resources, expectations and lifestyles.80 The role of manager here is to find the right way to promote the benefits of diversity in order a company can survive in increasingly competitive global economy and enrich its culture. Which elements of organisational culture are the most important ones is hard to say. Brown made a long list of 38 key elements of culture that had been identified by experts, but no one can determine for sure the most crucial ones.81 Along with the important key elements of organisational culture there are several models developed by scholars to present several layers of culture. According to Hostede, for example, culture is a hierarchical system that consists out of values at the bottom of the system and has rituals, heroes and symbols at the upper levels.

82

Very similar was the model introduced by Cummings and

Huse which comprises four basic elements of culture such as: basic assumptions, values, norms and artefacts.83 The most difficult issue though is to figure out how new behaviour patterns can be learned and organisational culture changed. Schein who studied this topic was sceptical about top-down change management approach.84 Other scholars like Schwarz and Davis see the necessity of cultural change because of the Copyright © 2014. Diplomica Verlag. All rights reserved.

requirement to react to changing environment. It means that a company shall

79

Michalski, J. 2013, p. 41 Compare to Burnes, B. 2006, p. 495. 81 Compare to Burnes, B. 2006, p. 171. 82 Compare to Burnes, B. 2006, p. 172 83 Compare to Burnes, B. 2006, p. 172 84 Compare to Burnes, B. 2006, p. 180 80

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

33

consider if a new strategy will cause cultural change and if there will be resistance to it and weather a company shall ignore culture, change it to fit the strategy or change strategy to fit culture. 85 There are companies with weak as well as with strong culture. Kotter points out the necessity of strong and adoptive culture.86 After studying eleven multinational companies for his work Corporate Culture and Performance (1992) he introduced the idea that companies with strong and adoptive cultures are always more effective and can survive severe competition and market challenges.87 Moreover, strong cultures have powerful influence on individuals in a company. Strong culture is even more important than other factors usually highly praised by management such as, for example, strategy, organisational structure, management systems, financial tools, etc. All successful examples of companies with strong culture had some common features. All of them had competent leadership at the top. Each leader had a track of successful change management and knew how to produce change and was also willing to do so. Each leader built strong teams that were able to pursue change and to set strategies for implementing them in order to achieve established vision. The question, how to create cultural change and which steps need to be implemented was answered by Cummings and Worley who introduced six “practical” steps for achieving cultural change.88 If a strong leader wants to pursue change, he can use following steps: x Formulate a clear strategic vision x Display top-management commitment

Copyright © 2014. Diplomica Verlag. All rights reserved.

x Model culture change at the highest level x Modify the organisation to support organisational change

85

Compare to Burnes, B. 2006, p. 180 Kotter John, Heskett James L.: Corporate Culture and Performance. 1992, p. 9 87 Compare to Kotter J; Hesket J.1992, p. 9 f. 88 Compare to Kotter, J.; Heskett J.1992, p. 178 86

34

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

x Select and socialise newcomers and terminate deviants x Develop ethical and legal sensitivity But before changing culture, top management shall be sure that company‘s problems come from culture and not from other spheres such as strategy, for example. It is also necessary to keep in mind that change will always meet resistance because it deals with human values. And people react emotionally when their deep values are going to be altered. To overcome resistance seems to be the basic and the most challenging issue of change management. Resistance is considered to come in most cases from middle and senior management, because those see their status and their beliefs challenged.89 That’s why it is seldom that new managers are introduced for key leadership positions when a new course for change is announced. It gives the advantage that they immediately act according to defined goals and don’t defend their previous actions as the old managers would do. New managers are considered to bring more emotional commitment and the outsider perspective.90 To sum up the cultural aspect of organisational culture the author would like to point out that this issue seems to be a very sensitive and also a hard one to deal with. A leader shall understand what type of culture the organisation has, which values, rituals, heroes and artefacts it appreciates. Deciding to introduce new cultural practices, top management must be sure that real problem is coming from organisational culture and changing it, the organisation will move to prosperity, otherwise change management is not going to bring expected

Copyright © 2014. Diplomica Verlag. All rights reserved.

results but to add strain and loss of money and efforts. There are different models that can help top management to introduce new culture or to renew the existed one. Six steps of Cummings and Worley is a useful tool in this challenging task. Managers shall be clear about changing 89 90

Compare to Burnes, B. 2004, p.180 Compare to Kotter, J.; Heskett, J.1992, p. 89

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

35

environmental conditions, which means that creating strong and adjustable culture would provide effectivity and flexibility and guarantee survival in most severe market conditions. Managers shall be prepared to face resistance and to consider a fact of replacing middle and senior managers with new managers with the outsider perspective and strong track of record in their field as well as commitment. 4.3.3 “New” approach for conducting organisational change Kotter’s and Kanter’s models of organisational change introduced earlier can be considered as a powerful tool, but they ignore some steps such as presenting a short and precise analysis of organisational core problems before the turnaround. In case of Nissan this step is very important. Before employees start to act on the change management plan, they need to have a clear picture of what goes wrong. After that a shared vision and the sense of urgency should be established in order to start producing change and to be effective in creating short term wins that will motivate people to move on. Another issue that both models do not reflect on is the meaning of top management and their impact on behaviours and attitudes of the followers. Top management impact is mentioned though in Cummings and Worley model on cultural change in organisations. During a change management process top management sets a benchmark and becomes a role model for the followers. If managers do not take responsibility, for example, how shall their employees act in this way? When new culture and structures are introduced, managers are the ones that share the vision and lead by their own example. According to the points mentioned above all three models are going to be united Copyright © 2014. Diplomica Verlag. All rights reserved.

in one approach, containing the issues that are mostly important for analysing Nissan’s transformational change.

36

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

8 Steps to New Organisation Approach: 1. Make a clear diagnosis of the present situation 2. Establish a sense of urgency 3. Create a vision and communicate it all the time 4. Demonstrate commitment, demand commitment 5. Create involvement and enable taking responsibility 6. Model organisational culture and structure that support your vision 7. Create and communicate short wins 8. Institutionalise new ways to create more change

5. Nissan’s U-turn: 1999-2001 After the alliance of Renault and Nissan in 1999, Nissan got a new leader to put the company back on track. The alliance was aimed to help Nissan out of the continuous profit loss of the last seven years as well as to strengthen its position in North American and Asian markets. Carlos Ghosn, known for his tough costs reduction policy, was number two at Renault at that time and was appointed to make Nissan profitable again.91 The alliance between the two companies was aimed to reduce Renault’s European concentration and to expand beyond European and Latin American

Copyright © 2014. Diplomica Verlag. All rights reserved.

base where they had a strong presence and to increase their market share in Asia and North America where Nissan had an established market position since

91

Compare to INSEAD case study. Nissan’s U-Turn: 1999 -2001. Condensed Version of Redesigning Nissan (A & B). 2007, p. 2-4

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

37

decades.92 Nissan could reach Europe and Latin America due to their alliance with Renault and even use Renault’s plants and dealership in Latin America. Having a leader position with Nissan which was heavy in debt at that time, Ghosn formulated a clear objective to bring the company back on track by 2002. He declared his personal commitment and commitment of his management team to reach profit of at least 4.5 % of sales by 2002 and to halve a debt of $ 12.6 billion in three years. 93 Everybody who knew Nissan’s situation and the history of mergers in the automobile industry was more than sceptical on this ambitious plan. Bob Lutz, for example, General Motor’s vice chairman, condemned the merger as his managerial experience indicated that the alliance of companies belonging to such distinct and distinctive national cultures would fail.94 But three years later, in 2001, Nissan came back to profit and achieved the operating margin of 4.75% by March 2001. Its debt was reduced to $ 6.6 billion in 2001.95 Ghosn was experienced in making large operational restructurings in the past, putting Renault back in the black, and could use his previous experience at Nissan. The Nissan Revival Plan (NRP) was announced by him in 1999 and included the restructuring of the organisation, closing three out of seven plants as well as cutting the number of suppliers by half.96 The goal was to bring the company back to manufacturing efficiency and cost effectiveness. Not only the revival plan was celebrated as a triumph at the end, but also Ghosn was named as the best CEO in the world in 2001 by the Time Magazine.97 Nissan’s car model Altma became the influential North American Car of the Year award in the same year. Ghosn became a national hero in Japan for saving Nissan, and

Copyright © 2014. Diplomica Verlag. All rights reserved.

the story of Nissan’s notorious U-turn became an inspiring example of visionary and transformational leadership for ongoing leaders and managers. 92

Compare to Lim, Marc: The Voyage of the Renault-Nissan Alliance: A Successful Venture, in: Advances in Management, Vol. 5 (9), September 2012, p. 25 93 INSEAD. Nissan’s U-Turn: 1999 - 2001. P. 7 94 Compare to Lim, M. 2012, p. 25 95 Compare to Lim, M. 2012, p. 25 96 Compare to INSEAD. P. 5 97 Compare to INSEAD. P. 16

38

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

5.1 Overview of Nissan’s economic situation in 1999 After alliance with Nissan, Renault injected $ 5.4 billion for an equity stake of 36% in Nissan to reduce a huge debt of the Japanese car maker. Altogether Nissan’s situation was quite miserable and there was no area where Nissan could demonstrate its superiority. If Toyota was bought because of quality, people bought Nissan to make a deal. ”Our cars sell for $ 1.000 less than totally comparable cars from competitors! The numbers of sales in the last seven years had fallen by 800,000 units what is nearly equivalent of Mercedes or Mazda’s worldwide sales, and more than BMW“, stated Ghosn, talking to Nissan’s employees in 1999.98 Nissan’s market share was continually sliding during 26 years with a peak of 34% in 1974 and comprising just a half of it in 1999.99 The company was managed in a way that made no sense. For example, the US plants were running at full capacity regardless of how well the cars were selling. Under its bookkeeping rules, the plants were generating a profit even if dealers were selling cars at loss.100 There were too many car platforms (2 expensive chassis, compared with Volkswagen’s four), too many suppliers (3,000 nearly ten times more than Ford) and too many dealers.101 After analysing the dramatic situation, Carlos Ghosn announced a rescue plan that would put Nissan back on track. He announced that the purchasing costs would be reduced by 20 %, the number of suppliers would be halved, as well as 10 % of its domestic leadership and plant’s current capacity would be shrinked by 30 %.102 The number of platforms would be rationalised from 24 spread

Copyright © 2014. Diplomica Verlag. All rights reserved.

between 7 plants to 15 spread between 4 plants by 2002.

98

INSEAD. P. 5 Compare to INSEAD. P. 9 100 Compare to Taylor, Alex: The Man Who Vows to Change Japan Inc., in: Fortune, Vol. 140 Issue 12, 1999, p. 4 101 Compare to INSEAD. P. 7 102 Compare to INSEAD. P. 7 99

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

39

The first responds to a survival plan started to appear one year later in 2000, as the market stock price had risen to 25 % since the beginning of the year and 11 out of its 40 models were now profitable in Japan. Ghosn promised that a group will return to a net profit by the following year.103 The tough strategy for improvement of the financial situation didn’t find support and understanding of some employees and industry critics, but the achieved results finally turned even the most sceptical opponents to supporters. After the success of the NRP, a new plan called “Plan 180”, which implemented new targets for Nissan’s growth, was announced in 2001. It was phase two of the NRP and was supposed to make Nissan a benchmark of the industry.104 5.2 Carlos Ghosn: the European leader versus the Japanese tradition Carlos Ghosn was born in Brazil of French and Lebanese parents and was educated as engineer in the most prestigious high school of France. Before revitalizing Renault due to aggressive cost-cutting plan, he had already restructured Michelin North American Operations where he was the COO but left the company as he realized that he would never become a president in a family owned company.105 Actions taken by him in Japan were already done before in France but only on a smaller scale. ”Le cost-killer“, a nickname he earned due to his aggressive cost reduction policy, closed one Renault plant with 2,700 jobs and slashed the number of suppliers.106 What could be implemented by Ghosn in Europe was never done in Japan before that’s why industrial critics were expecting rather the fail than the

Copyright © 2014. Diplomica Verlag. All rights reserved.

success of this alliance. Japanese business culture had some long term traditions that no one questioned in Nissan or in other Japanese companies before such as keiretsu

103

Compare to INSEAD. P. 12 Compare to INSEAD. P. 16 105 Compare to Millikin, John; Fu, Dean: The Global Leadership of Carlos Ghosn at Nissan, in: Thunderbird International Business Review, Vol.47 (1) 121-137, January-February 2005, p. 122 106 Compare to INSEAD. P. 3 104

40

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

supplier tradition as well as lifelong employment and promotion based on seniority. Analyzing Nissan’s problems, Ghosn announced that all these traditions will only contribute to Nissan’s bankruptcy instead of saving it and introduced radical changes in all three areas.107 The outsider status gave him the right to implement these changes that could never be implemented by a Japanese manager. His radical staff layoffs were announced as extreme for Japanese history, but were accepted at the end by unions, government and suppliers. The reason for this acceptance was his ability to paint a vivid picture of consequences when appropriate measures are not taken.108 Ghosn preached transparency at all levels all the time. This practice was new to Nissan and its employees. The press was, for example, allowed to visit the shareholder meeting and to report on everything they saw. It never happened in Nissan’s history before.109 Carlos Ghosn always pointed out, that saving Nissan was his mission with top priority and that he would do everything it takes to reach this goal. Even if his actions were criticised because they were in conflict with the Japanese tradition, Ghosn stayed unmoved. When he appointed a woman to run corporate communications, this step got a widespread attention from the national press because it was the first woman in Nissan’s history to run the department.110 His lack of knowledge of Japanese culture was criticised by the public, and Ghosn sincerely admitted that he was too busy with Nissan and didn’t have time to get better knowledge of the Japanese culture, but he would become more Japanese in the future.111 His sincere way of admitting mistakes and taking full responsibility for his own actions and decisions seemed to give him the trust

Copyright © 2014. Diplomica Verlag. All rights reserved.

and respect of his employees and the public. On his way to bring Nissan to profitability Ghosn broke nearly every taboo of the Japanese business culture, and still got celebrated as a national hero and was 107

Compare to INSEAD. P. 3-7 Compare to INSEAD. P. 8 109 Compare to INSEAD. P. 4 110 Compare to INSEAD. P. 15 111 Compare to INSEAD. P. 13 108

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

41

named as number one CEO by Time Magazine in 2001 and Industry Leader of the Year by Automotive News for the successful turnaround of Nissan. Carlos Ghosn’s breaking rules and challenging tradition was accepted by the Japanese because Ghosn managed to make it clear, why the tradition was challenged. It was responsible for keeping the culture or company from moving forward – that’s why the tradition should be challenged. The second point, why people accepted the change, is that they got an explanation on how the change will be brought and by what the former tradition will be replaced. 5.2.1 Different leadership styles implemented by Carlos Ghosn The Japanese business culture is known to be bureaucratic with strong hierarchical structure, managers usually use the autocratic leadership style that fits in and supports this cultural context. In order to get a buy in and lead effectively, Ghosn was using different behaviour patterns and leadership styles, depending on the role he was taking in a particular situation. In order to analyse different leadership styles implemented by Carlos Ghosn, a model of Kenneth Blanchard and Paul Hersey on situational leadership will be applied. As mentioned already above, this model includes four different areas: participating, selling, delegating and telling. In his leadership Ghosn successfully used all four styles. Participating, for example, was displayed when he took part in test driving of dozen cars, vans, and pickup trucks at the company’s test facility in Arizona in 1999. Ghosn showed his interest in the company’s products and the people who developed them. ”He put us through the wringer with his questions“, said one Nissan engineer, ”but it is really exciting to have a senior executive who is Copyright © 2014. Diplomica Verlag. All rights reserved.

truly interested in the product.“112 He also strolled up and down the assembly lines, asked questions and listened carefully to what the workers and engineers told him. He wanted to make his own picture of problems in each department, demonstrating sincere interest. 112

Taylor, Alex: The Man Who Vows To Change Japan Inc. 1999, p. 5

42

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

Carlos Ghosn was using the participating leadership style as it helped him to get in touch with the employees. .

Selling was used when his vision and expectations about the organisation were explained. Ghosn was very successful in “selling” because dealers and suppliers who initially defined his plan as extreme, as well as usually vociferous Ministry of International Trade and Industry finally supported Nissan. Also the tough labour unions concentrated on requesting better packages for those who would accept early retirement or transfers. Normally they would demand that no employees are laid off, but due to Ghosn‘s ability to show how dramatic the situation was, even the opponents got involved to contribute to Nissan’s revival plan.113 Telling was used when Ghosn announced the elimination of divisional presidencies or when he introduced the setting of nine cross-functional teams.114 Delegating was used when he needed support of Nissan’s Japanese colleagues. For example, he let Nissan President Hanawa select the members of the executive committee. When Hanawa asked him, whom he shall choose, Ghosn replied: ”I don’t know. You choose. You know me, so please, you pick them - knowing what you know of me.“115 5.2.2 The U-turn of communication in Nissan New communication traditions introduced by Ghosn in Nissan will be examined here as well as how they supported Nissan’s turnaround and company’s later growth.

Copyright © 2014. Diplomica Verlag. All rights reserved.

Like Dianna Booher wrote in her article on five critical communication skills for leaders: ”Governments cannot lead. Technology cannot lead. Strategy cannot lead. Only people put all these things in motion through their communication.

113

Compare to INSEAD. P. 8 Compare to INSEAD. P. 11 115 INSEAD. P. 4 114

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

43

Leaders drive action with their lives and their lips: clear, focused, persuasive, relevant, and memorable messages.“116 A focused and clear language is what Carlos Ghosn showed at all times in his communication as a leader. In the interview with Fortune just after the appointment as Chief Operating Officer, he said: “The situation is bad, and some radical change has to be done. There are fundamental management problems. Nissan has to do things that make business sense, not because of habit or tradition.“117 In his first board meeting he also used a simple but blunt message: “Gentlemen, we’ve had 10 years of decline. That’s enough“.118 After announcing plant closures he got straight to the point when top management mission was spelled: “The top management will be accountable for delivering the committed performance - all of it.“119 Ghosn wasn’t afraid of delivering bad news. He did it decisively without sugarcoating, presenting very clear, unsentimental statements about the situation. By communicating clear and direct messages, he created a climate of trust. He got attention of the public and the employees by delivering crystal-clear the relevant priority message. Through communication he ensured that not only the senior management staff and employees are all well informed on what to do, but also the Japanese society gets informed about the coming renaissance of the company. Once asked by a journalist on how much time he spends on communication he said that he couldn’t think of a single moment when he was not communicating.

Copyright © 2014. Diplomica Verlag. All rights reserved.

“Even in brainstorming sessions, even when we elaborate strategy, you communicate all the time.“120 116

Booher, Dianna: Five Critical Communication Skills for Leaders of the Future, in: The ASTD Leadership Handbook. 2010, p. 55 117 Stricker, Gabriela: Mao in The Boardroom. Marketing Genius from The Mind of The Master Guerilla. 2003, p. 123 118 INSEAD. P. 4 119 INSEAD. P. 7 120 INSEAD. P. 13

44

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

In literature on change management leadership communication is often stressed as a vital ingredient of a successful change.121 The position of active communicator helped Ghosn to avoid misunderstandings and uncertainty as well as to “build bridges” in tough times. English became a communication language in the company and language courses were provided to everybody from secretary to top managers. Making everyone to speak one language was another step heading for clear communication. At the beginning of the alliance between Renault and Nissan, organizational managers used French and Japanese respectively, which had the risk to misunderstanding. Japanese have another way of telling things due to their high context culture, their ”yes“ may mean ”no“, but by using English everybody was encouraged to open communication.122 As Ghosn wanted to transform Nissan into a high performing company that shall become a benchmark of the industry, all processes including communication were supposed to be redesigned. To speed up communication Ghosn introduced the usage of email that was so widely spread in West European companies but little used at Nissan. He encouraged everybody to send him an email if there was a problem.123 Due to this, he could react immediately and shorten the reaction time in problem solving process. To institutionalise new communication processes Ghosn created new communication rituals like regular meetings of the cross-functional teams as well as of four management teams that met once a month instead of regional presidencies that only led to contradictory information flow. In overall, Nissan’s leader managed to create effective organisational Copyright © 2014. Diplomica Verlag. All rights reserved.

communication not only at Nissan but also between Nissan and Renault. This was a big challenge because both companies come from completely different and strong national cultures which could turn into a troubled communication and result in a failed alliance. 121

See Chapter 4.1 Compare to Lim, M. 2012, p. 27 123 INSEAD. P. 11 122

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

45

5.2.3 Cultural U-turn of Nissan with Carlos Ghosn “In cross-border acquisitions or alliances, cultural differences can be viewed as either a handicap or a powerful seed for something new.”124 Carlos Ghosn When the French car maker Renault decided to invest in Nissan and to get 36.6% equity stake in this Japanese car producer in order to strengthen its market position in North America against the merged Daimler and Crysler as well as Ford, no one was talking about a merger, but of an alliance instead. Renault had already a failed merger attempt with Volvo in the early 1990s, but failed due to cultural problems. In case of Nissan no one wanted to waste time on planning merger operations and on deciding who is in charge of what. The redesign of Nissan’s structure and culture started with introducing crossfunctional teams (CFTs) which provided flexible communication across departments and different levels of organization.125 CFTs could significantly speed up the problem solving process which was not practised in Nissan before as the company had a very bureaucratic and slow problem-solving culture. Ghosn changed the compartmentalised culture with limited communication flow. Japanese were very aware of formal organizational structure, communicating only among the same hierarchy. Ghosn implemented an effective formal and informal communication that helped to overcome the autocratic system and high power distance culture. The second major transformation carried out by Ghosn was the elimination of the keiretsu practice.126 The loyalty to supplier’s network was never questioned

Copyright © 2014. Diplomica Verlag. All rights reserved.

in Nissan before but was severely criticised by Ghosn because it made a company to pay disadvantaged prices and was one of the most severe shortcoming in the modern global economy. Nissan maintained equity stakes in partner companies and the portfolio run for billions of dollars. So the capital was 124

Emerson, Victoria: An Interview with Carlos Ghosn, President of Nissan Motors, Ltd. and Industry Leader of the Year, in: Journal of World Business; Spring 2001, Vol. 36 Issue 1, p. 3 125 INSEAD. P. 4 126 INSEAD. P. 2

46

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

locked up and couldn’t be invested in new product development. For example, Nissan had an equity stake of $ 216 million in Fuji Heavy industries, a company that produces Subaru cars and was a rival of Nissan.127 According to Ghosn this made no sense. Dismantling this keiretsu network Nissan could gain additional capital and also push the suppliers to better profitability. His approach was based on logic and pure cost-advantage analysis ignoring the aspect of traditional Japanese business landscape. There was a continuous resistance from suppliers at first to meet Nissan’s demands; especially it was fuelled when Ghosn failed to attend a Year End party hosted by them. It was considered as a sign of bad faith.128 But at the end the relationship with suppliers became stronger than ever because suppliers learned to distinct between Nissan as a customer and Nissan as a shareholder. Many other Japanese companies followed Nissan’s lead afterwards. The next very important step taken by Mr. Ghosn in changing Nissan’s culture was introducing the performance-based promotion. This Western way of promoting employees gave a chance to many young people in Nissan for career growth that was not possible before. Ghosn recognised that the age and seniority boundary was not motivating because everybody would get reward and promotion some day. It was just a matter of time. He also introduced certain practices such as ”walk-the-talk“, a practice that would strengthen young leaders. This practice was aimed at reducing the effect of high context culture and make sure that actions correspond with words.129 High performance of organisation depends on competence and performance of its employees. In order to change Nissan’s uncompetitive and incompetent

Copyright © 2014. Diplomica Verlag. All rights reserved.

culture, Ghosn employed effective personnel and career growth policies. In order people don’t suffer cultural shock and have time to adapt to new culture – one year was given to everybody for changing attitudes.

127

Compare to Ghosn, Carlos: Saving the Business Without Losing the Company, in: Harvard Business Review, January 2002, p. 39 128 INSEAD. P.10 129 Compare to Lim, M. 2012, p. 27

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

47

The idea of honouring high performance and talent no matter of race, gender, age, etc. was once again demonstrated when the first woman in Nissan’s history was hired to head the communication department.130 In a country with the second highest male employment rate in the world, such an appointment got a widespread press attention, of course. By this personnel decision, Ghosn showed that Nissan appreciates high competence regardless of age or gender. By implementing changes Ghosn turned Nissan’s “process culture“ into a ”work hard, play hard culture“ which is widely spread in the automobile industry. One part of this process consisted of changing the blame culture into taking responsibility culture. As the responsibility areas were not very well defined, it was always someone else’s fault. Sales blamed engineers, engineers blamed finance and so on.131 Also consultants that served in Nissan before were advisers responsible for application of innovative Japanese management practices. Their role though became redundant when the familiarity with these practices spread. These positions still existed when Ghosn came to Nissan, but he put all advisors into positions with direct operational responsibility.132 Strong and adoptive culture, underlined by Kotter and mentioned in chapter 4.3.2, was a very important issue for Carlos Ghosn. Building strong culture in Nissan, he was always aware of the necessity to protect Nissan’s company identity as well as the employees’ self-esteem in the transformation process. He mentioned that the company‘s identity is a much more important factor than its country of origin.133 Strong culture can turn, in his own words, the promising (HR) resources into gold.134 The secret of organisational turnaround consisted in a successful combination

Copyright © 2014. Diplomica Verlag. All rights reserved.

of new cultural practices in the organisation and the unique Japanese tradition of keen competitiveness and sense of community.

130

INSEAD. P. 15 Compare to Ghosn, C. 2002, p. 40 132 Compare to Ghosn, C. 2002, p. 40 133 Ghosn, C. 2002, p. 45 134 Compare to Ghosn, C. 2002, p. 45 131

48

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

5.3 Leading change: the secret of Carlos Ghosn success as a leader Leader‘s personality, style and skills have a direct impact on the company’s performance. Nissan’s success can be also viewed as Ghosn’s success as a leader. Personal and professional skills and talents of Carlos Ghosn are going to be examined in order to disclose the secret of his unprecedented triumph. Credibility was established as the most important feature of a leader in chapter 2.1. In order to understand, how Nissan’s leader managed to motivate and convince employees for radical changes that conflicted with Nissan‘s previous company culture and partially with Japanese business tradition, his credibility will be thoroughly examined here.

Figure 2: Credibility As the above figure 2135 shows, credibility is based on trust and influence. Trust consists out of the character and the competence of a person. On his mission, Ghosn has managed to gain trust of sceptical Japanese managers as well as to

Copyright © 2014. Diplomica Verlag. All rights reserved.

create the atmosphere of trust in the company. Trust was absolutely crucial for him and his team in order to succeed. As trust is based on character and competence, both of them will get closer attention.

135

Source: Harvar, Timea: Leadership in an International Business Transformation. MBA Course in Strategic Leadership. ESB Business School, Summer Term 2012, p. 14

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

49

5.3.1 Character Carlos Ghosn demonstrated not just a character but a character of the inspiring and motivating leader. ”Inspiring“ is often perceived as ”charismatic“, and ”charisma“ has a touch of mystery, many studies have been conducted to reveal the nature of charisma and features of charismatic leadership. In the study of Zenger, Folkman and Edinger ten qualities were identified that set up inspiring and motivating leaders apart from the rest.136 These ten qualities were divided into three areas that will be applied on the coming analysis of the inspiring leadership of Carlos Ghosn.

Figure 3: Inspiring leadership Attributes

Copyright © 2014. Diplomica Verlag. All rights reserved.

Leaders usually inspire followers leading by own example, serving as a role model for behaviours they expect from others. Ghosn acted as committed, energetic, sharp-minded, proactive and focused on the main goal. An inspiring

136

Adopted from Zenger, J.; Folkman, J.; Edinger, S.: Unlocking the Mystery of Inspiring Leadership, in: ASTD Leadership Handbook. 2012, p. 260

50

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

leader is usually known for working without ”time-outs“ from being a leader.137 He is a leader at all times and in all situations. Ghosn, known for his long working hours, was displaying the same features. His way of pushing others to better performance showed that he expected pro-activity and effectivity as well as taking responsibility, qualities that were very typical for himself. If he saw sluggish performance or limited cost cuts by one of the managers, he would immediately get proactive, address a person, saying: ”This is your responsibility. Brainstorm. Discuss. You will be held accountable for this.“138 Such statements do not have only the verbal effect but also contain a non verbal message, showing other participants what kind of behaviour and working ethics is expected. On the other hand followers shall not be only pushed but inspired by a leader and admire him. “We have an incredible number of projects we are doing in a very short time. I’ve never experienced this kind of tough schedule,“ reported Nissan’s star designer Nakamuro when four new models were presented at Detroit Motor show in 2001.139 Inspiring leaders never accept the status quo and their fingerprints are over different initiatives, they focus on change and want produce more change, sometimes moving the organisation in a completely different direction.140 Carlos Ghosn produced remarkable changes not only in Nissan but in the whole car industry in Japan. Changes initiated by him were later copied by other car companies. One of such examples is the dismantling of keiretsu tradition and the changing of compensation system, offering incentives to top performers that could reach more than a third of their annual pay package as well as giving stock options to employees.

Copyright © 2014. Diplomica Verlag. All rights reserved.

Behaviours The six most typical behaviours of inspiring leaders mentioned in Chapter 2.2 such as: stretch goals, clear vision, communication, developing people,

137

Compare to Zenger; J.; Folkman, J.; Edinger, S. 2012, p. 260 INSEAD. P. 11 139 INSEAD. P. 11 140 Comp. Zenger, J.; Folkman, J.; Edinger, S. 2012, p. 260 138

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

51

teamwork and innovation will be examined in order to see if they were demonstrated by Carlos Ghosn and contributed to his credibility. In the previous chapters 5.2.2 and 5.2.3 the majority of these behaviours such as clear vision, communication, developing people and team work were already introduced. That’s why such behaviours as stretch goals and innovation will be the focused in this chapter. “Think big, act great!“ could be probably Carlos Ghosn’ life motto. When he first announced his vision, everybody was more than sceptical. How can a company with continuous losses come back to profit and halve the debt pile from $ 12 billion to $ 6 billion within only three years? And all this after eight years of market share loss, absence of new products and dysfunctional company culture? This one must be either completely crazy or have no idea what he is talking about. Not in this case. The legend of the car industry, Henry Ford, once said: “If you think, you can, you can. If you think, you can’t - you are right!“ Only 18 months after the turnaround, and one year ahead of the planned deadline, the goal was hit - to the complete astonishment of industry insiders, critics and opponents. After this first success, new targets such as selling one million vehicles worldwide in 2005 and moving into the “zero“ debt zone, posting industry-best margins showed Nissan’s new ambitions and Ghosn’s strong belief in what he and Nissan could reach. Even when he faced the quit of 1,000 white collar staff due to the company’s move from Los Angeles to Nissan’s factory in Nashville and the launch of four new car models within only four months in 2006, Ghosn stayed optimistic about his goals: “There’s never a good time for a move,“ Ghosn admitted. “But if I

Copyright © 2014. Diplomica Verlag. All rights reserved.

didn’t have a big challenge, then I am not stretching the company.“141 Probably the power of the inspiring leader is in announcing and reaching highly ambitious goals that seem scary at first, but hitting them stretches employees and brings a company to the next level. One old proverb says: “If your dreams don’t scare

141

Welch, David: Nissan’s long Haul to Nashville, in: Business Week, July 3, 2006, p. 40

52

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

you, they are not big enough.“142 In case of Carlos Ghosn this probably can’t be applied. Another behaviour issue that is important for inspiring leaders is innovation. Innovative behaviour was typical for Ghosn not only in the described period of transformational change from 1999-2001, but also later. His main innovation was aimed though at creating new organisational structure and culture that will support creation of competitive products, organisational processes and stimulate personal excellence. Emotions Emotional intelligence and the ability to connect was mentioned in Chapter 2.1 as one of the leader’s most important quality. In order to change people’s lives and to influence people’s minds, a leader shall be able to touch their hearts. John Maxwell, a modern “guru” of leadership, names the ability to connect as an absolutely important ability of a true leader.143 According to the six leadership approaches of inspiring leaders introduced in Chapter 2.1 Carlos Ghosn could be identified as the driver.144 He was able to connect, to inspire, to motivate and to convince because of his highly focused way of achieving goals typical for drivers. “We are not going there to teach the Japanese the role of women in Japanese business. We are going there to help fix Nissan, that’s all. Any issue that doesn’t contribute to that is of no concern to us“, was his short speech with some key messages to a manager team before coming to Japan.145 His focused and clear approach helped others to deliver priority-based performance, like, for example, CFTs that worked according to a

Copyright © 2014. Diplomica Verlag. All rights reserved.

guideline: one goal, one deadline, one rule. The VP of Finance Thierry Moulanguet witnessed working with Ghosn in the following way: “With Carlos Ghosn the rules of the game are simple and clear. 142

Unknown author. Compare to Maxwell, John: Everyone Communicates, Few Connect. What the Most Effective People Do Differently. 2010, p. 4 144 Compare to Zenger, J.; Folkman J.; Edinger, S. 2010, p. 263 145 INSEAD. P. 3 143

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

53

That was perfectly understood by the young generation of Japanese managers. …He reacts in an open and straightforward way.“146 Ghosn was described as direct, open and enthusiastic by employees with whom he would shake hands regardless of rank.147 Carlos Ghosn was preaching transparency and staying direct and open for communication, he demonstrated that his words comply with his actions and demanded that from others. Jed Connely, Senior VP of Sales and Marketing of Nissan’s US division, witnessed: “One thing that Ghosn brought to the party was a clear focus on our priorities and a clear plan by which to execute those priorities.“148 Building connection and trust depends on how a leader treats employees. Before they trust him, a true leader should evidence his trust in them.149 Announcing the revival plan, Ghosn conveyed confidence that Nissan employees would embrace internal company reform: ”Given their strong enthusiasm and pride, I am very hopeful that we can put Nissan on the road to recovery and growth.“150 In studies conducted by Posner and Kouzes trustworthiness was mentioned as the most important quality of a leader. Followers want a leader they can trust. Trust comes when they see that a leader respects them and provides evidence of his trust. Ghosn admitted that he and his team could win trust of the employees because they have shown them respect.151 He also conveyed confidence that employees would embrace internal company reform. Instead of hiring consultants, Ghosn talked to Nissan employees and was convinced by their recommendations and opinions on transformation. He realised that if employees will accomplish revival by their own hands and follow their own ideas, it will give them motivation and confidence in their company again.152 Copyright © 2014. Diplomica Verlag. All rights reserved.

Several times he stated in the media that he fairly believed that Nissan had the

146

INSEAD. P. 11 Compare to INSEAD. P. 11 148 Compare to INSEAD. P. 17 149 Posner, Barry; Kouzes, James: Leadership Change. 1987, p. 19 150 INSEAD. P. 4 151 Ghosn, C. 2002, p. 44 152 Compare to Millikin, J.; Fu, D. 2005, p. 127 147

54

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

right employees to achieve profitability in less than two years.153 Trust and respect to them paid off in participation and acceptance which he even didn’t expect himself. Apart from the ability to deliver the focused performance, Ghosn also demonstrated other features of the driver such as getting teams committed to a difficult goal by leading the effort himself and pushing everyone to keep the pace. 5.3.2 Competence Besides character, trust relies on competence: professional and personal skills that help a leader to turn opponents into followers. In case of Carlos Ghosn, his cultural, emotional and professional competence will be analysed. First of all, due to his international family Carlos Ghosn grew up speaking four foreign languages and learning different cultures such as French, Arabic and Latin American. Speaking several foreign languages and have been working on four continents he possessed intercultural competence and experience that enabled him to adjust to a new cultural environment, completely different from everything he had experienced before.154 To make a fundamental change in a company where he was the outsider, non-Nissan, non-Japanese, was quite a challenge. Success was possible because he demonstrated sensitivity to Nissan identity as well as intention to protect self-esteem of its people. He made it clear through communication that organisational structure must be global but at the same time it should be implemented locally. Introduction of cross functional operating structure was against highly hierarchical traditional Japanese organisation principle but at the same time Cross-Functional Teams Copyright © 2014. Diplomica Verlag. All rights reserved.

(CFTs) were successful because they used the collective aspect of the Japanese culture. Besides intercultural competence Ghosn had professional skills that helped him to gain the trust of Japanese managers and employees. He was trained as an 153 154

Compare to Millikin, J.; Fu, D. 2005, p. 129 Ghosn, C. 2002, p. 38.

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

55

engineer in one of the best schools in France, and entering the automobile industry, possessed technical competence and sincere interest in cars, which helped him to understand the challenges of the industry as well as the possibilities of technology in creating new models, new engines, etc. As Colin Dodge, a Senior Vice President of industrial operations for Nissan Europe, put it: “Ghosn has a perspective on the global car industry that very few people have.”155 Along with technical competence he had also deep knowledge of the car industry. Before coming to Nissan Ghosn had two decades of working experience in the car industry, working nearly seventeen years for Michelin North American Operations and three years for Renault. The turnaround of Nissan was definitely the largest transformational change he had ever done but similar restructurings were already done by him in Renault and Michelin. Introduction of CFTs in Nissan was not occasional but proved itself as a reliable tool in turnaround of Renault after its failed merger with Volvo. Due to his status of the industry insider, Ghosn immediately saw cost saving potential for Nissan. For example, Nissan’s purchasing prices were 20 % higher than that of Renault. As a result negotiations with suppliers on cost reduction were immediately initiated and Nissan slashed 20 % of its purchasing costs. Ghosn also suggested that some savings could be reached through changes on engineering specifications that were stricter than at other companies. Though Nissan’s engineers didn’t believe they could save money by changing specifications, Ghosn proved to be right. 156 The quality standards of Nissan for headlamps, for example, were higher than

Copyright © 2014. Diplomica Verlag. All rights reserved.

its competitors even though there was no discernible performance difference. By making a small reduction in standards, Nissan was able to reduce the rejection rate of this component by zero. Another small reduction in standards for heat resistance made it possible for Nissan to use less expensive material

155 156

Muller, Joann: The Impatient Mr. Ghosn, in: Forbes, Vol.177, 5/22/2006, p. 3 Compare to Ghosn, C. 2002, p. 43

56

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

for the lenses in the inner panels of the head lamps. Both changes decreased the cost of headlamps by 2.5%.157 Professional skills in technical and organisational areas, developed social skills as well as high emotional intelligence built up Ghosn’s competence that helped him to win trust of employees and to strengthen his position as a leader. Though professional competence was important to make a clear picture of Nissan’s current situation and form a plan for its recovery, but the ability to connect and Ghosn’s credibility were absolutely crucial in overcoming resistance in first six months of the announced NRP. As a true transformational leader he developed a generation of new leaders that provided continuous improvement and kept the company’s focus on market oriented products and profit oriented performance. 5.4 Transformational change of Nissan according to 8 Steps to New Organisation Approach There were different factors mentioned in Chapter 3 influencing transformational change of a company: external and internal ones. In case of Nissan change was initiated by new management, because of company’s dramatic financial situation that was caused by its bad management in previous years, lack of focus on the market, as well as bureaucratic culture that slowed down company’s operational effectiveness. 8 Steps to New Organization approach that unites the features of organisational and cultural models will be applied to analyze Nissan’s transformational change. The reason of creating this model was based on the necessity to combine

Copyright © 2014. Diplomica Verlag. All rights reserved.

actions with attitudes that were presented till now in separate models. Carlos Ghosn named attitude and commitment as the greatest determinants of Nissan’s success.158 Using just one model of organisational change either Kotter’s or Kanter’s would not provide the necessary perspective on Nissan’s 157

Compare to Ghosn, C. 2002, p. 43 Emerson, Victoria: An Interview with Carlos Ghosn, President of Nissan Motors, Ltd. and Industry Leader of the year. Automotive News 2000, p. 9 158

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

57

change. Cummings and Whorley model on cultural change contains the issue of attitudes but lacks the performing perspective such as establishing the sense of urgency, forming the powerful coalition, etc. So either the action or the attitude issue can be ignored because only a combination of both can give a vivid picture why this transformation succeeded. 1. Make a clear diagnosis of the present situation Before people start to act on change, they need to understand, why the path they were going till now shall be changed. After studying Nissan’s situation and before coming up with the Nissan Revival Plan, Ghosn could clearly indentify fiver major problems of Nissan that touched three major areas such as: company, culture and customers. After identifying the problem zones, he shared the diagnosis with employees and public. It sounded: x Lack of clear profit orientation x Insufficient focus on customers, too much focus on chasing competitors x Lack of cross functional border x Lack of sense of urgency x No shared vision or common long-term plan159 Such a clear analysis of the situation comprises already a road map out of trouble and gives an idea about the next steps. 2. Establish a sense of urgency

Copyright © 2014. Diplomica Verlag. All rights reserved.

When the ”world’s foremost authority on leadership and change“ John Kotter was asked what competency he considered most important for a leader to be successful at implementing change, he named sense of urgency. Kotter

159

INSEAD. P. 6

58

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

admitted that when this first step is established, then the following steps are going to be easier and faster.160 Lack of sense of urgency was also mentioned by Carlos Ghosn in the diagnosis of Nissan. His first measures were aimed at creating this sense of urgency by implementing different measures and communicating them. For example, CFTs were created just one month after he took the wheel at Nissan. They were supposed

to

review

company’s

operations

and

to

come

up

with

recommendations announced later in NRP.161 No sense of urgency was widely spread in Nissan because of the employees knowing that if the company goes bankrupt, the government would save the day. But when Ghosn arrived to Japan a major Japanese financial house, Yamaichini, went bankrupt and was not bailed out by the government. Ghosn put this example all the time to motivate people to pull all of their effort to turn Nissan around.162 This extern coincidence helped him to reinforce the need for change. Sense of urgency was demonstrated by Ghosn himself from the very beginning of his appointment and in every situation relevant for the turnaround afterwards. When he was officially named as the Chief Operating Officer, he insisted on picking up 17 executives who would accompany him on his mission. Those were given only 48 hours to decide either to follow him or not. Just after nine months as Chief Operating Officer Ghosn managed to introduce a new truck for the American market, a product that North American Nissan sales staff asked for years. It was a sign that Nissan didn’t want and couldn’t wait any longer. ”Nissan has its back to the wall!“ was his message when he Copyright © 2014. Diplomica Verlag. All rights reserved.

reminded workers that a company just lost its position as the country’s second car maker to Honda.163 Coming back to profit was the most important issue of 160

Biech, Elaine: Leading Change: A Conversation with John P. Kotter in Five Critical Communication Skills for Leaders of the Future, in: The ASTD Leadership Handbook. 2010, p. 90-91 161 Ghosn, C. 2002, p. 42 162 Millikin, J; Fu, D. 2005, p. 131 163 INSEAD. P. 5

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

59

the moment. As no one at Nissan was communicating the urgency of change before, workers just used to think that the company will be always supported by the government and didn’t understand that these times are over. Ghosn made it clear that a company must take responsibility for its profitability itself. 3. Create a vision and communicate it all the time Without a shared vision, a company can be compared to a ship in the sea without a route. Carlos Ghosn could immediately see that Nissan missed the route and the vision. When Renault and Nissan agreed on their partnership, Renault knew that they choose a partner for long term cooperation, so defining Nissan’s vision and making a long term strategic planning was absolutely crucial for the alliance. In the annual meeting of shareholders just after his appointment, a new Operation Chief formed a clear vision: ”I have not come to Japan for Renault, but for Nissan. I will do everything in my power to bring Nissan back to profitability at the earliest date possible and revive it as a highly attractive company.“164 Going more into detail on company’s priority he claimed: ”Product development will be at the heart of Nissan’s revival. Our cars sell for $ 1000 less than totally comparable cars from competitors. The goal would be to cut that price differential by at least 35 % over the next three years and eradicate it altogether over the next decade.“165 From the very beginning of his employment Carlos Ghosn paid attention to communication of vision and mission and creating transparency. He claimed

Copyright © 2014. Diplomica Verlag. All rights reserved.

that if people don’t know the priority and don’t understand the strategy and don’t know where they are going, a company is heading for trouble, and it’s the

164 165

Ghosn, C. 2002, p. 4 INSEAD. P. 6

60

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

leader’s duty to clarify the environment, to make sure there is the maximum light in the company.“166 Transparency on Nissan’s revival plan was exercised at all levels. Everyone was informed about the priorities of the moment and the consequences of the failure. Press was never invited at the board meetings before. But Nissan’s new chief broke this tradition and allowed media to cover whatever they saw. Nissan’s investment of $ 930 million for a new assembly plant in US to create a better response to US needs was criticised by some executives as a premature decision. In response Carlos Ghosn clearly communicated this step: ”People need to know what the prize is, what are they aiming for, what the benefits or the advantage to them of changing some established traditions. When this is clearly spelled out, people will be motivated to follow…You cannot over communicate about why we’re doing certain things or how we are going to do it and what is the advantage we’re going to get from this.“167 Also the newly formed CFTs were a very powerful tool on spreading the vision and ensuring cross-functional communication. Because CFTs consisted out of front

line

managers

and

executives

of

two

different

departments,

communication between different types of leaders according to Senge was provided. They helped to ensure that departments move into the right direction and reported to Ghosn at least once a month on the progress done. Communication doesn’t mean just talking, but also listening. Ghosn collected information carefully not only from managers, but also from production workers, dealers and engineers. After analyzing this information he could define the direction and to add things that need to be done in order Nissan becomes an Copyright © 2014. Diplomica Verlag. All rights reserved.

attractive company again. Communication outside the company was aimed at transporting the message of Nissan’s revival. A new advertisement campaign in the main Japanese newspapers featured a single word “Renaissance“ with letters N;I;S,S,A,N, 166 167

INSEAD. P. 9 INSEAD P. 17

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

61

picked out in red.168 At Tokyo Motor Show in October 2001 company unveiled its global identity campaign which was centred around the notion ”Shift“. Shift not only in products, but shift in attitude was proclaimed.169 4. Demonstrate commitment, demand commitment A leader sets a benchmark for behaviours and attitudes. When a leader shows commitment, he would probably also expect commitment from others. Ghosn demanded total commitment from all departments and clearly communicated the consequences of failure. ”The top management will be accountable for delivering the committed performance - all of it.“170 The prove was delivered pretty soon as he fired several managers who didn’t meet targets, among them was the Vice President of Sales and Marketing Japan, Mr. Hiroshi Mriyama.171 Only result, not the circumstances, counted for Nissan’s boss. ”Ghosn is pressing the outer limits of what is doable, both within the company and externally, with the government and Nissan’s very tough labour unions,“ commented once the independent Asia analyst Jay Woodworth .172 But first, the limits were set for Ghosn himself as he was running two major international car manufactures having for each of them highly ambitious goals. Some people complained about Ghosn’s demanding work expectations but due to his long office hours himself he got a nickname ”7-11“.173 He also demanded that employees present best possible solutions and thoroughly checked numbers. When two managers came up with their solution for a new information system, Ghosn challenged them to prove that their solution couldn’t be bettered by outside consultants. Committed and reliable performance was a part of new culture established in Nissan and was communicated as well as demonstrated Copyright © 2014. Diplomica Verlag. All rights reserved.

all the time at the highest level of the company. The same tactics was used by

168

Compare to INSEAD. P. 8 Compare to INSEAD. P. 15 170 INSEAD. P. 7 171 Millikin, J.; Fu, D. 2012, p. 132 172 Taylor, Alex: A Man who Vows to Change Japan Inc., in: Fortune, Vol. 140 Issue 12, 1999, p. 4 173 INSEAD. P. 11 169

62

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

the US Navy Captain Michael Abrashoff described in his book Its Your Ship: Management Techniques from the Best Damn Ship in the Navy (2007). Captain Abrashoff turned the mediocre Navy ship into the best performing ship in the whole US Navy in two years. His management methods are often studied in MBA and management programs worldwide. One of his principles was to question if the offered problem solution was the best one. When someone came up with a solution, he would always ask, if the solution could get better. If the answer was yes, another try was given. Very soon everyone got used to approach Captain only when they were absolutely sure that the solution was the best one. As mentioned earlier in chapter 4.2., commitment of top management influences the work of the employees and their attitude toward organisation, as well as the performance of organisation’s teams. As CTFs proved to be extremely effective, it gives the clue that support and commitment of top management including Ghosn himself played a vital role in the transformation process of Nissan and effectivity of workforce. 5. Create involvement and enable taking responsibility Carlos Ghosn‘s aim was to bring Nissan to a new level which demanded commitment and involvement of everybody. Ghosn underlined that those who wish to contribute to Nissan’s success are welcome and everyone counts. ”There is a place for every single person in this company who wants to give the company a chance for recovery, no matter what age, what gender, what citizenship.“ 174 Devotion to one common purpose meant creating organisational structures that Copyright © 2014. Diplomica Verlag. All rights reserved.

would reflect and support the unity of Nissan’s image worldwide and unite the company’s efforts. Untill now Nissan’s teams worldwide were diversified and didn’t have common corporate identity. To eliminate diversity in Nissan‘s image one branding group was set up including leaders of marketing and advertising for Japan, Europe and US. Also a design team was removed from R&D and put 174

INSEAD. P. 4

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

63

under the responsibility of Patrick Pelata, head of product strategy. Star designer Nakamura, head of design division, explained this step as a huge contribution to creating market-oriented car design because all eight design studios were reporting to one person which made the brand much stronger.175 Empowering others to act, Ghosn introduced a new bonus system based on performance rather than production levels. He stressed that no one will get pay increase without contribution to costs cut.176 Promotions were now no longer based on seniority but performance which meant that long term managers suddenly did no longer have the power and privilege they had before and young managers got a chance to make a career that was earlier impossible for them.177 As mentioned in chapter 4.1 organisational change meets resistance, also Carlos Ghosn was aware of coming doubts and confusion from some opponents of the NRP. Those who were resisting change got one year to change their attitudes and to get used to new culture.178 Another major step taken by Ghosn to provide more organisational flexibility and effectivity was the elimination of divisional presidencies in Europe and North America. Ghosn viewed regional presidencies contributing to crossed communication and unclear leadership and retention of information.179 Instead of

regional

presidents

he

introduced

four

manager

teams

including

representatives from the major functions who would meet once a month. This change wasn’t planed by him from the beginning and was made in the process of restructuring. Taking responsibility and delivering best performance possible was stressed by Copyright © 2014. Diplomica Verlag. All rights reserved.

Ghosn all the time, everyone was supposed to be personally committed to every observation or claim they made.180 175

INSEAD. P. 14 Compare to Ghosn, C. 2002, p. 40 177 Compare to Ghosn, C. 2002, p. 39 178 Compare to INSEAD. P.11 179 Compare to INSEAD. P. 11 180 Compare to Millikin, J.; Fu, D. 2005, p. 133 176

64

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

6. Model organisational culture and structure that support your vision Ghosn introduced three management principles that transcended all cultures. He used these principles as a backdrop to give employees structure in order to decide on the right reforms. The introduced principles were: a) Transparency – an organisation can only be effective when followers are absolutely sure that what leaders say goes in line with what they do. “Walk-the talk” practice mentioned in Chapter 5.2.3 was supposed to institutionalise this new attitude.181 Also Ghosn himself was talking to employees, strolling the lines and shaking hands with anyone coming into his office regardless of ranks and monitoring reactions to his proposed plans by having intranet messages posted in corporate headquarters.182 “...I also sought to impose transparency on the organization to ensure that everyone knew what everyone else was doing”.183 b)

Execution is 95 % of the job and strategy is only 5 %. The organisazion’s success and prosperity are connected directly to improvements in costs, quality and customer satisfaction. Proclaiming performance oriented payment, he restructured management pay offs, making manager’s salary dependent on contribution to cost cuts.184

c) Communication of company’s direction and priorities – this is the only way to get truly unified effort and buy-in. It works even when the company is facing layoffs.185

Copyright © 2014. Diplomica Verlag. All rights reserved.

All organisational reshuffles and new organizational structure toward permanent cross-functional departments helped the staff to gain better visibility of entire business process and to focus on total business success and customer

181

Compare to Millikin, J.; Fu, D. 2005, p. 127 INSEAD. P. 11 183 Ghosn, C. 2002, p. 42 184 Compare to Millikin, J.; Fu, D. 2005, p. 128 185 Compare to Millikin, J., Fu; D. 2005, p. 128 182

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

65

satisfaction.186 Introduction of CFTs was a step absolutely necessary to come up with competition as all major automobile manufacturers as Toyota, Honda, BMW, GM, Ford and Daimler & Chrysler use this form of team to coordinate complex projects.187 Centralisation of key functions such as R&D, purchasing and marketing guaranteed the homogeneity of actions toward the final goal and helped to make the working flow more efficient. If redesign of culture have had failed the whole U-turn would have failed. As Ghosn admitted himself the most fundamental challenge for him was Nissan’s culture, not the financial problems of the car maker.188 The decision not to introduce one common culture between Nissan and Renault made it possible to build on Nissan’s strengths and make the right culture for achieving Nissan’s goals that at the end served the common interests of the alliance. 7. Create and communicate short wins From the beginning of the NRP short term wins were reached regularly, motivating employees for further achievements. The winning over the star designer Nakamura was a clear message that Nissan is going to come up with strong market-oriented design. The secret why so many new car designs were introduced in a very short period of time (ten new models per year, plus five or six concept cars) was because of Ghosn’s never dallying on a final design decision. In every meeting a precise decision was made. As a star designer recalls, it was very motivating for teams.189 The rapid approval of long term requested investments to build better vehicles

Copyright © 2014. Diplomica Verlag. All rights reserved.

for the US market was a necessary and quite important short term win indicating Nissan’s new orientation on the US market. It was vital to come up

186

Compare to Millikin, J.; Fu; D. 2005, p. 133 Compare to Robbins, S. 2012, p. 149 188 Compare to Ghosn, C. 2002, p. 39 189 Muller, J. The Impatient Mr. Ghosn, in: Forbes Vol.177, 5/22/2006, p. 3 187

66

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

with new car and truck models on the North American market as the sales volume dropped steadily to 3.5 % in comparison to 5.6 % in the past.190 Creation of CFTs and recognition of young talents were both important for establishing a new and effective cross functional organisational structure. 8. Institutionalise new ways to create more change After the first steps on change and first wins it is necessary to create new initiatives and traditions that will provide more success in the future. Carlos Ghosn introduced organisational changes that influenced the whole company’s structure and culture. A new, proactive way of addressing and solving problems was established. An open-minded, flexible, creative and goaloriented working style was introduced. The move from a decentralised, regionally managed company to a globally integrated organisation was established. Output efficiency and costs awareness were put on the top of the list. The introduction of a first woman to run one of Nissan‘s section was an important steps towards a new tradition of women involvement in management positions in a traditionally men ruled company and culture. Empowered by Nissan’s recovery in 2001, Ghosn declared the introduction of 22 new models in the following three years. ”We have moved from the emergency room to the recovery room“, was his comment on Nissan’s overall situation.191 After the Tokyo Motor Show in 2001 Ghosn declared the growing ambition of Nissan. With eight concept vehicles Nissan could prove its innovation potential

Copyright © 2014. Diplomica Verlag. All rights reserved.

and achievements. The clear sign of Nissan’s recovery was the fact that it took 15 % stake in its French partner.192 Just after the first positive results of Nissan’s transformational changes in 2001, Ghosn was setting the phase two of his NRP. ”Plan 180“ stood for 1 million 190

INSEAD. P. 13 INSEAD. P. 8 192 Compare to INSEAD. P. 15 191

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

67

more units sold by 2005 and 8 % operating margin and “zero“ debt. He also planned to announce 15 % cost reduction from suppliers additionally to 20 % Nissan got before. ”Plan 180“ was not supposed to come after the NRP, both plans were supposed to be executed at the same time.193 Some journalists called a new plan as the toughest part of the turnaround, but Ghosn saw it as completely different, more motivating because success encourages more and more people to join and reminds of nurture circle where

Copyright © 2014. Diplomica Verlag. All rights reserved.

performance feeds motivation and motivation feeds performance.194

193 194

Compare to INSEAD. P. 16 Compare to INSEAD. P. 16

68

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

6.

Conclusion

After analyzing Nissan’s spectacular turnaround, the final conclusion is going to be made on the reasons of its success. As the main driving force of this change was Nissan’s new leader Carlos Ghosn, the author will define which characteristics of a leader were necessary to make the company profitable again and its employees proud of their company. Carlos Ghosn came to Nissan when a company was in a very bad economic shape. He took full responsibility for putting a company back on track which he really did just two years after a company had nearly gone a bankrupt. When a leader comes to run a company in tough times, he needs other qualities and competences than a leader who is in charge of a company when it is doing well. In a crisis, a leader shall communicate the urgency, act and decide quickly and come up with a road map out of the crisis. Ghosn demonstrated highly developed conceptual and human skills while mastering this task. He demonstrated the ability to be sensitive and tough at the same time, to provide laser-sharp and unemotional analysis. Sensible for Nissan’s identity, he proved the Schein’s theory on organisational change which foresees change not from above but from the bottom. Ghosn knew that ordered from above change would meet resistance and people would not cooperate. To win their hearts and minds he provided a structure where they could figure out problems themselves and to come up with recommendations on Nissan’s change and to manage the turnaround by their own hands. This was achieved due to efficient Cross-Functional Teams that not only challenged the existing culture and structure, but were also a mechanism for explaining the necessity Copyright © 2014. Diplomica Verlag. All rights reserved.

for change and spreading difficult messages on costs cuts and plant closures across the entire company. Exactly here is a difference between Senge’ definition of a hero leader and Ghosn’s hero role. In Senge terms transformational leadership can lead to dependency from a hero leader because after some short-term wins like cost reduction and increasing of productivity, employees start to please the CEO and

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

69

to comply which leads to a new crisis and the vicious circle starts again with a new crisis. In case of Nissan the employees didn’t start to please the new CEO and to comply, they were invited by him to reflect on their own culture and structure. Instead of short-term wins that bring a leader his “hero” status, Ghosn’s hero role was in changing Nissan’s culture that could ensure Nissan’s operating competitiveness on long term even after his leaving of a company. Continuous stretching of the company together with new cultural and organisational mechanisms showed that Nissan’s potential was much higher than Nissan’s Revival Plan addressed. The ultimate test of transformational leadership of Carlos Ghosn was in turning followers into leaders according to Burns theory. He managed to educate a new generation of Nissan’s leaders. It was probably not planed at first, and was the outcome of his successful leadership and the fact that Nissan accepted him and his leadership style. According to Burns195 the transformational change has two aspects: it is relational and it produces real change. The ultimate test of it is in the realisation of change in people’s lives, attitudes and behaviours. According to executive VP and board member, Norio Matsumura, Ghosn’s key contribution and greatest performance was that he had been able to restructure people’s mindsets.196 In chapter on cultural U-turn new attitudes and new practices were presented in detail as well as the impact of new practices of Nissan on the Japanese business landscape in general which proves that Nissan passed the ultimate test of transformational change. On the other side, elimination of keiretsu supplier’s network and seniority based promotion, so typical for Japan, was only possible because of the outsider status of Carlos Ghosn. A Japanese manager would never step back from the Copyright © 2014. Diplomica Verlag. All rights reserved.

Japanese business tradition or would probably never question them. The outsider perspective from the cultural point of view but the insider position from industrial point of view made it possible for Nissan’s leader to eliminate things that made Nissan uncompetitive on the global market and to introduce practices

195 196

Compare to Chapter 3.2. INSEAD. P. 17

70

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

that were used by other automobile companies and contributed to Nissan’s success. The outsider status of Carlos Ghosn proves the theory of Kotter that transformational change is better done by professionals coming from outside the company and having already experience of conducting change in the past. The analysis of transformational change with 8 Steps to New Organisation Approach was based on two models of Kotter and Kanter as well as on Cummings and Worley’s cultural change model and united both actions and attitudes that were so important for Nissan’s turnaround. According to provided analysis the most important issues that made the turnaround possible were new culture as well as sense of urgency established from the very beginning. In the past people were afraid of taking risk and action at all levels as it could result in failure. That’s why most of the time was spent in discussions and details without the sense of urgency and risk taking. New culture empowered them to take action, to achieve results, to be responsible. Secondly, a lot of time and effort was invested in communication of the vision in order to create the ultimate transparency at all levels inside and outside the organisation. It helped to ensure that top and middle level managers, especially the younger generation, became more approachable and perfectly understood one another. It changed the situation of the past when staff was pretty uninformed of key corporate decisions and top management was out of touch with which decisions the middle management executed. Communication was used as a tool to create transparency. Transparency was the only way to overcome resistance and to build a bridge of trust. Last but not least was the total commitment of top management and employees Copyright © 2014. Diplomica Verlag. All rights reserved.

that made it possible to reach the goal one year before the planed deadline and to ensure the company’s and the employee growth afterwards.

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

71

Literature 1. Alvesson, Mats: Understanding Organisational Culture, 2nd edition. Los Angeles, Delhi, Singapore, Washington DC: Sage Publications Inc. 2013 2. Armstrong, Michael; Stephens, Tina: A Handbook of Management and Leadership: A Guide to Managing for Results. London: Kogan Page Limited 2003 3. Avolio, Bruce J.: Pursuing Authentic Leadership Development. In: Handbook of Leadership Theory and Practice. Nohria N., Khurana, R. (Edit.). Harvard Business Press 2010 4. Bass, Bernhard M.; Bass, Ruth: The Bass Handbook of Leadership: Theory, Research, and Managerial Applications. New York: Free Press 2008 5. Baumgärtner,

Stefanie;

Transformationsmanagement.

Horz,

Claudia;

Rennstrategien

Klein, für

Uwe:

erfolgreiche

Veränderungen. In: Zeitschrift Führung+Organization, 82. Jahrgang, 1/2013, p. 54 6. Biech, Elaine: Leading Change: A Conversation with John P. Kotter in Five Critical Communication Skills for Leaders of the Future. In: The ASTD Leadership Handbook. United States, Aleksandria: ASTD Press 2010

7. Booher, Dianna: Five Critical Communication Skills for Leaders of the Future. In: The ASTD Leadership Handbook. United States, Aleksandria: ASTD Press 2010 8. Burnes,

Bernard:

Managing

Change:

A

Strategic

Approach

To

Copyright © 2014. Diplomica Verlag. All rights reserved.

Organizational Dynamics. 5th edition. Upper Saddle River: Financial Times Prentice Hall 2006 9. Burns, MacGregor: Leadership. New York: Open Road Integrated Media 2012

72

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

10. Cameron, Eather; Green, Mike: Making Sense of Change Management. A Complete Guide to the Models, Tools, and Techniques of Organizational Change. London: Kogan Page Limited 2009 11. Dawson,

Patrick:

Organizational

Change.

Thousand

Oaks:

Sage

Publications Inc. 1994 12. Du Brin, Andrew J.: Research, Findings, Practice, and Skills. 7th edition. Mason: South-Western Cengage Learning 2012 13. Emerson, Victoria: An Interview with Carlos Ghosn, President of Nissan Motors, Ltd. and Industry Leader of the Year. In: Journal of World Business, Vol. 36 Issue 1, Spring 2001 14. Eli B. Cohen: Navigating Information Challenges. Santa Rosa: Informing Science Press 2011 15. Farhad Analoui; Azhdar Karami: Strategic Management In Small and Medium Enterprises. United Kindom, Andover: Cengage Learning EMEA 2003 16. Franken, Swetlana: Verhaltensorientierte Führung. Handeln, Lernen und Ethik in Unternehmen. Hamburg: Diplomica Verlag 2010 17. Ghosn, Carlos: Saving the Business without Losing the Company. In: Harvard Business Review, January 2002 18. Graetz Fiona; Rimmer, Malcom: Managing Organisational Change. Milton: John Wiley & Sons Australia Ltd 2012

Copyright © 2014. Diplomica Verlag. All rights reserved.

19. Harvar, Timea: Leadership in an International Business Transformation. MBA Course in Strategic Leadership, Summer Term 2012. Reutlingen: ESB Business School 2012 20. Hatt, Jeffrey M.; Creasey, Timothy J.: Change Management: The People Side of Change. 2nd edition. Colorado: Prosci Learning Center Publications 2012

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

73

21. Huszczo, Gregory E.: Tools for Team Leadership: Delivering the X-Factor in Team Excellence. Boston, London: Nicholas Brealey Publishing 2010 22. INSEAD Case Study. Nissan’s U-Turn: 1999 -2001. Condensed Version of Redesigning Nissan (A & B). INSEAD 2003 23. Kavita, Singh: Organisational Change and Development. New Delhi: Excel Books 2005 24. Kotter John; Heskett James L.: Corporate Culture and Performance. New York: The Free Press 1992 25. Leadership.

A

Leader

Lives

in

Each

of

Us.

Internet:

http://higheredbcs.wiley.com/legacy/college/schermerhorn/0471734608/mo dule16/module16.pdf, 19.04.2013 26. Lim, Weng Marc: The Voyage of the Renault-Nissan Alliance: A successful Venture. In: Advances in Management. Vol.5, September 2012 27. Mackin, Deborah: The Team Building Tool Kit: Tips, Tactics, and Rules for Effective Workplace. New York: AMACOM 1994 28. Magloff,

Lisa:

Examples

of

Transformational

Change.

Internet:

http://smallbusiness.chron.com/examples-transformational-change18261.html, 28.04.2013 29. Maxwell, John: Developing a Leader Within You. Nashville: Thomas Nelson Inc. 1993 30. Maxwell, John: Everyone Communicates, Few Connect. What the Most

Copyright © 2014. Diplomica Verlag. All rights reserved.

Effective People Do Differently. Nashville: Thomas Nelson Inc. 2010 31. Millikin, John P.; Dean, Fu: The Global Leadership of Carlos Ghosn at Nissan. In: Thunderbird International Business Review, Vol.47, No. 1, 2005 32. Michalski,

Jeanne:

BNSF’s

Leadership

Engine.

Dynamics. Vol.42, Issue 1, January-March 2013

74

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

In:

Organizational

33. Muller, Joann: The Impatient Mr. Ghosn. In: Forbes Vol.177, 5/22/2006 34. Murray, Peter; Pool, David; Grant, Jones: Contemporary Issues in Management and Organisational

Behaviour. Mason:

South-Western

Cengage Learning 2005 35. Northhouse, Peter : Leadership: Theory and Practice. 6th edition. Los Angeles, Delhi, Singapore, Washington DC: Sage Publications Inc. 2013 36. Posner, Barry; Kouzes, James: Leadership Change. San Francisco: Jossey-Bass 1987 37. Richard J. Black: Organisational Culture: Creating the Influence needed for Strategic Success. United States: Dissertation.com 2003 38. Robbins, Stephen: Essentials of Organizational Behavior. 11th edition. Upper Saddle River: Prentice Hall 2012 39. Sadler, Philip: Leadership. London: Kogan Page Limited 2003 40. Schermerhorn, John R.: Introduction to Management. 11th edition. New York: John Wiley & Sons 2011 41. Shriberg, Arthur; Shriberg, David: Practicing Leadership Principles and Applications. 4th edition. New York: John Wiley&Sons Inc. 2010 42. Stricker, Gabriela: Mao in The Boardroom. Marketing Genius from The Mind of The Master Guerilla. 1st edition. New York: St. Martin's Press 2003 43. Welch, David: Nissan’s long Haul to Nashville. In: Business Week, July 3, 2006

Copyright © 2014. Diplomica Verlag. All rights reserved.

44. What Ghosn will Do with Renault. In: Business Week, 25 April 2005 45. Zenger, J.; Folkman, J.; Edinger, S.: Unlocking the Mystery of Inspiring Leadership. In: The ASTD Leadership Handbook. The ASTD Press 2010

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,

75

If you are interessted in publishing your study please contact us: [email protected]

Anchor Academic Publishing

Copyright © 2014. Diplomica Verlag. All rights reserved.

disseminate knowledge

Bieck, Olga. Back on track! Successful management techniques to get a company out of debt pile, Diplomica Verlag, 2014. ProQuest Ebook Central,