Carlos Ghosn: Organizational Change and Leadership (Case 3) Yana Salatsinskaya Christophe Perreault Tatiana Proisy Luis Valin 1. What are the different management practices that are unique to Japanese organizations and how do they differ from the French and European practices? Cultural background is the source of organizational designs. What characterizes a culture is eventually influencing the way organizations tend to take shape. A common company structure in Japan is the Keiretsu, where a lot of departments and small firms are embrace into one big corporation.
It reflects a lot of elements of the Japanese culture and somehow making this structure really unique. The way they do business in this country is the result of a set of values such as a long-term orientation and collectivism. In fact, Japan has a strong high context culture, which means that communication is not only based on words but rather on implicit messages and signals. People from these cultures tend to trust each other personally; they don’t mind accepting informal/oral agreements rather than written contracts.
Moreover, Japan is one of the most collectivistic countries, in which people from their birth all the way to their retirement consider themselves being loyal group members. Consequently, they take personally any group achievement that occurs during their career. This explains the traditional life-long orientation that characterizes the Japanese employment. Therefore, the companies invest significantly in training their workers. Through this mechanism, a mutual trust is built upon the organization and its workforce, which leaves the employees thinking their organization as an actor responsible of all their competences.
Despite that France has a high context culture as well, the French culture doesn’t have a lot of similarities with the Japanese culture. In fact, their business culture is characterized by a strong individualistic identity that tends to create less commitment to the firm; the employees don’t identify themselves to the firm. Furthermore, the French culture is typically a “western” one and favors a short-term orientation. It is crucial to nuance those observations in the case of Ghosn with Nissan. He does not represent the typical French manager in a way that his culture was influenced by his experiences from different countries. . Do the management practices followed by Japanese organizations enable them to remain competitive in a changing global economic environment? Why, how? Firstly, it is crucial to make a difference between the Keiretsu (which is proper to Japan) and other Japanese organizations that follow more or less this rigid structure. Let’s focus our analysis on the Keiretsu due to the fact that it permits us to outline more easily the Japanese cultural particularities. Although those elements create possibilities to have trust-worthy workers producing high quality work, they provide too much rigidity.
They create a path to follow that is almost impossible to avoid. This means that firms that are part of those Keiretsu keep suppliers on a long-term basis and consider employees as a fixed asset. By acting with a long-term orientation in mind, there is no point in changing business partners with whom a good relationship was built upon in order to find better and more profitable partnerships. In the actual economic environment, the organizations are expected to adapt quickly to change thus shortening their products life cycles.
This is due to the business increasing clock speed, which means coming up with new innovative products faster than your competitors. More often, decisions are made to influence the share value. For example, the car industry has totally changed during the last 50 years. The way we look at cars now is not what it once was. Car companies used to build less than 10 models and offering them in 2 colors. Nowadays, cars are being personalized to each and every client with a list of options and characteristics. We tend to see the car like a pure consumption good rather than a transportation tool.
Moreover, many big corporations become project-based. They allocate a tremendous part of their budget for projects. Consequently, all these management practices enable them to satisfy the consumer changing habits and desires. The firms evolving within a Keiretsu frame are blocking themselves from growing and shifting. In this globally changing environment, firms often need to break initial links with partners in order to look for more profits or new agreements that would make them more competitive. The implicit regulations of the Keiretsu don’t enable to do so. 3.
Discuss the reasons behind the problems at Nissan. Was it wise to appoint an outsider as the CEO of Nissan? Carlos Ghosn expressed the fact that the solutions to every firms’ issues can be found within the firms themselves. Nissan was facing problems that traditional Japanese organizations risk to face in the actual economic environment. In fact as mentioned earlier, the Japanese management practices permit to provide high quality work achieved by a highly devoted workforce. However, this fixed structure doesn’t allow any quick or important changes that could be necessary.
Appointing an outsider as the CEO of Nissan was a risky choice. Firstly, this place required a lot of understanding of the Japanese culture in a way to modify the organization’s practices without meeting refusal from the workers. The outsider handling the role of CEO is able to bring a critical analysis of the organization since his point of view differs from the initial one. In fact, macrocultures are importantly influencing the organizations. The new macroculture brought up into the firm allows to detect all the problems that are left unconsidered by its workers and then to handle them.
Thus, as stated in the case, an outsider is expected to operate drastic changes. He shouldn’t stick to the traditional strategy but instead revolutionizing the whole pattern. Carlos Ghosn’s abilities to manage and lead, added to his new vision brought to the organization made the turnaround of Nissan successful. The key to this success was mostly coming from Ghosn’s aptitudes to adapt to a culture, therefore allowing him to operate his restructuration plan in the best conditions possible.
Secondly, many multicultural teams in global firms often face a communication problem. This cultural issue hasn’t been observed in the case of Ghosn at Nissan because he was aware of the difficulties he could have met. He managed to integrate in his strategy crucial elements of the Japanese culture, such as trust. Since his first days at Nissan he was able to gain the workforce’s confidence and to bring new models in the firms, such as a reduced distance between the top management and the workers (he shook hands with everybody on his first day).
In that way, he differs from the traditional executive subculture that tends to consider “people as impersonal resources that generate problems rather than solutions”. In contrary, he adopted the operator subculture that tends to consider “people as the key to the functioning of the organization. ” Schein, Edgar H. (2004). Organizational Culture and Leadership, Third Edition. 4. Discuss Ghosn’s leadership and how he brought about organizational change. What challenges did Ghosn face by heading two diverse cultures at Renault and Nissan? Carlos Ghosn believed in the communication by establishing a way of participation between the employees.
He thought that Japanese employees learnt to work with some problems instead of trying to solve them; Standing out terms like Value and Motivation and providing short targets, were pathways to reach the goals in the firm. “The group cannot test potential solutions if nothing is proposed” According to Ghosn’s ideas the alliance Renault-Nissan, was viewed as “managing contradiction between synergy and identity” and confirmed that “while gaining synergies, the individual identity of each brand would be safeguarded”. The fact that both companies had a different cultural background was an important point to face.
The innovation excellence of the French firm and the dedication towards manufacturing of the Japanese, were an efficient combination in order to establish a real competitive feedback between the companies. However, despite being able to avoid culture clashes, there were doubts about the sustenance of the individual identity of the two companies. When Schweitzer noticed that Ghosn would become the CEO of both Renault and Nissan, many speculations appeared speaking about Ghosn might not be able to handle the situation by leading the two firms.
The pressure that Ghosn had to bear was high and he overlooked few critical aspects, such as the lack of steel supplies that is partly responsible to the $58. 5 million in losses of 2004. Despite that, Ghosn defines an efficient leadership by highlighting important attributes such as “Value, Transparency and Performance” and defining them into their leading style regardless of who is managing the firm. 5. What kind of organizational culture was created? What are the future challenges of this culture in the global environment? What kind of leadership will be needed?
One of the main goals of Nissan Revival Plan (NRP) was to cut cost and improve profits. This reaction needed an emergency change and Ghosn established specific steps in order to create a new organizational culture within the firm. According to Schein, Edgar H. (2004) an organization needs norms and rules to work together. Ghosn defined norms and steps to follow by explaining to employees the need to create cross-functional teams. He provided a communication channel by listening to the employees and facilitating their participation in the decision-making process.
Ghosn also highlighted face to face communication instead of impersonal modes such as e-mailing. He emphasized value and motivation, explaining to the employees the fact of working hard to solve any situation. In the merger with Renault, Ghosn knew the difficulties of cultural clashes between the two companies. He established English as the common language. In addition, he defined a culture of respect between both firms (regular meetings in order to avoid differences). Carlos Ghosn kept the attribute of transparency with the employees.
One of the main challenges to face in the global environment would be to avoid conflict of interests. These kinds of conflicts can be prevented by establishing a culture of trust, which is really important to promote good channels of communication between employees. As we could see previously, Ghosn highlighted “Value, Transparency and Performance” as a way of leading and therefore should be used to lead the firm in the future. These attributes could be implanted with various leadership styles such as: Coaching: leaders develop people for the future.
As Ghosn knew the challenges facing different culture background, he also thought in establishing rules and norms to respect those differences by learning new habits. Consequently, a workforce aware of culture clashes will be more prepared in the future to lead multicultural firms. Affiliative: leaders create emotional bonds and harmony. Referring to the environment already presence in the firm, this kind of leadership could be really important in a global context while the firm continuously expands. It is also crucial to keep a culture of trust.