Leading Change – Carlos Ghosn at Renault and Nissan

Final Exam – Case Study: “Leading change – Carlos Ghosn at Renault and Nissan”

Juliana Marques Bross

Point Loma Nazarene University

MBA Evening Program

Managing In a Changing Environment

Professor Dr. Ken Armstrong

Organizational overview

The case analyzed describes an interesting series of factors about an executive that applied a large-scale transformational change, after an alliance formed between two major companies, Nissan and Renault. The difference between those two organizations is an important fact to be addressed. More importantly, is the profile of both parties before the introduction of the executive into their operations.

Renault is a France-based automobile company, with a functionality base thinking and multiple departments working independently. The organization had separate areas and each one was responsible for their own results. Nissan, on the other side of the world, a traditional Japanese firm, was facing problems to manage their profit. Due to the traditional operations management, Nissan was struggling with supplier costs and aggressive competitors in the automobile market. In a tentative to look for potential partners to improve the actual organizational scenario, Nissan agreed to create an alliance with Renault. Part of this agreement consisted in bringing one of Renault’s executives to oversee the operations in Japan.

Main characters

Carlos Ghosn is a Brazilian executive, with a successful history in managing operations of a tire company, called Michelin. Ghosn is the main character of this case study. After the success with Michelin, Ghosn started with Renault back in 1996 to run engineer, manufacturing and purchasing operations. Ghosn’s leadership style was very demanding and firm. Executive members agreed that he was tough, but a consensus builder. With Renault’s situation, he targeted high standards of performance and set ambitious but realistic achievements. He performed changes across the board and brought the collaboration culture to Renault. In one year of Ghosn arrival, the company profit increased.

The alliance with Nissan came in a time when Renault was looking to expand the market and seek sales outside Europe. Ghosn was the executive pointed to lead the change and start the diagnostic of Nissan’s current operation style. He moved to Japan in 1999, as the COO of Nissan. The Japanese firm at that time had a massive debt and was facing more than five consecutive years of losses.  Ghosn goal was bringing Nissan back to profitability.

Using a similar approach to start a change, even with different styles and cultures, Ghosn proposed the creation of cross-functioning teams to look for opportunities for synergy with both companies. His objective was creating a binational organization.

Brief history of events to date

When the Executive arrived Japan, his goal was profitability, but he also wanted to protect the company’s identity and the self-esteem of the employees. As a non-Japanese, Ghosn had to be careful with his decisions. He knew that his approach was being not too harsh but not too passive. He decided to focus on specific business goals, with a performance-oriented approach, so then people would be too busy to focus on the cultural differences. He focused on results, giving people a reasonable time to adapt to the change. Within two years, he removed executives that were not meeting the performance targets.

Ghosn started his diagnostic visiting all the parts of the organization. He wanted no outside influences. He mentioned that numbers show just one part of the company, and talking with people is where you feel the whole environment and can find organizational gaps. Talking with people, he asked what was wrong, what was right and their suggestions.

Additionally, he announced three significant changes:

-    Official language going forward was English;

-    Japanese press would attend a shareholder meeting, to show transparency of the current company’s situation; and

-    Created four cross-functional management teams.

With his diagnostic, he noticed a lack of urgency of the executive team. Putting everyone on the same page and sharing the problem would motivate the entire company for the change.

The cross-functional teams were created to help people to think new ways and challenge existing practices. Also helps to project difficult messages across the entire company. The teams had three months to review processes and operations and prepare their recommendations. Ghosn was strict with the Teams, pushing challenging but achievable goals. At the same time, he motivated the people to work harder. He challenged the teams to higher commitments.