The team and decision making before
Describe about the Organizational Behavior Case Study Analysis.
Nissan had been doing well in the car manufacturing business until the past eight years from 1999 when the company started reporting losses. There were several factors to blame for the losses in Nissan which included little recognition of the brand in the US market, production overcapacity and the huge company debts. The Nissan Company in 1999 was considered the most indebted company in the car manufacturing industry and it had lost its share of the market considerably (Manfred et al., 2005).
In the past eight years before 1999 the company was having difficulties controlling its production process. The employee team of 130,000 people spread across the world required an organized coordination which the company was lucking (Manfred et al., 2005). The Nissan Company was making losses because of five major reasons. First the management team had lost its focus on profitability. The company leadership lacked the necessary measures of performance within the company. An instance is how the management failed to note why some car models were not profitable. In the case of Nissan out of the 43 car models only 4 of them were profitable in market thus making the company unprofitable in general (Manfred et al., 2005). The company was investing resources in coming up with many car models but they failed to make a return on the initial investment.
The second reason was that the company’s management which was not focusing on the customers. The company lacked an understanding of their customers’ needs and preferences. In a time when the competition was very stiff the car makers produced models that rivaled each other without consideration of the customers. The third reason was the management team which was reluctant in making decision more quickly. Having noted the loss patterns the management team did not come into discussions earlier enough to reach on agreements on the way forward. The fourth reason was that the company’s culture did not allow transversal collaboration. This collaboration helps companies to share ideas and deal with the common challenges affecting their line of business. The fifth reason was that the company management team lacked clear vision of where they wanted to take their company in the next five or so years to come. The lack of vision was one of the noted characteristic of the Japan companies which also affected Nissan.
Another notable reason where the company’s management team failed to perform is the established seniority system (Linstead. S et al., 2006). This worked in the sense that if an employee served in the company a longer time the more he or she got more responsibilities and hence more salary. This behavior also led to complacency and discouraged the promotion of potential young employees to the company’s management. With new fresh and young leadership come new ideas and new visions that can contribute to a company’s success. In the Japanese company groups are more important and often tasks and responsibilities are often shared. Team work is important but in cases of crisis the responsibilities are spread out and no individual is able to make the final decision. The leaders are elected on the basis of their coordination skills rather than their ability to have many responsibilities (Nissan Revival Plan, 2013).
The team and decision making after
A turnaround of a company is the most important challenging thing to the management team (Manfred et al., 2005). The case study will give an insight of how the Nissan Company was revived through organized and coordinated management under the leadership of Carlos Ghosn. The case study represents the impact of leadership and the transformational changes.
On the appointment of Carlos Ghosn as the CEO of Nissan Company in 1999, he came up with a blueprint on how to transform the company. He came up with the process that would require the employees to come up with cost effective results. Contrary to the previous leadership where the management team only focused on the company in general without involving the employees in the decision process and making them part of the company success. In less than 2 years Ghosn drastically turned the company’s performance using the following instruments: the establishment of a functional work force, identifying the root cause of the problem, designing an economical production plan and the investment in the design process (Linstead et al.2006).
Ghosn as the instrument of change in Nissan Company came up with the strategy that would yield short term and long term solutions to the loss problem. According to Linstead et al. (2006, p3) they have defined strategy as the ultimate plan for top management team to come up with outcomes that are consistent with the organization’s goals and mission. He identified the key to the company’s turnaround lay in the employees themselves and thus his first quest was to travel to all the company’s factories and interact with the employees to get firsthand experience in order to determine the company’s points of weaknesses and the strengths and how the company can exploit new opportunities. In his interaction he was able to draw summaries of what he had learned.
According to Ghosn (2012: 93-94) he says that he was able to construct the image of the company bit by bit based on the hundreds of discussions and meetings. What Ghosn did is he understood the car manufacturing industry from his previous companies but he customized his strategy to cater for Nissan’s needs. After several meeting of discussion Ghosn formed a team that was charged with the challenge identifying the solutions to the managerial and economic issues that were facing Nissan and give reports after 90 days. He formed cross-functional groups which included the executive committee and the other two hundred people from Japan, Europe and US. The teams were formed in a simple structure that is each team was made up of experts from the different production departments. Because the experts understood their areas very well it was easy for them to make comprehensive reports which were more qualitative.
Strategy for turnaround
Ghosn selected his management team very closely using four criteria:
open minded, willingness, experts in the field and experienced in the field. He also understood that there would be wrangles in the company if the management team was not well defined. Considering the merger between Renault and Nissan it meant that there was the possibility of the teams working individually rather as one team so he did not make any Renault meetings. This strategy would be effective in the sense that it would Nissan that would be saving itself rather than Renault. Contrary to the previous form of organization behavior the company was able to establish a working framework. Ghosn understood that the company was always closely watched and that he would not fail in his leadership. In the previous leadership the directors and other employees would hide from responsibilities but under Ghosn the employees would work more at individual level with a closer supervision.
The group focused on several key areas of the company that is sales and marketing, purchasing , the manufacturing , the Research and Development and the organization and decision making process(Nissan Revival plan, 2013). The team analyzed two thousand ideas that had been proposed and made four hundred other proposals to the heading committee. The plan was aimed at improving the production process and structuring the distribution process. As a way of improving efficiency in the company through avoiding over capacity the committee members suggested that three of the factories be shut down and making the other to work in shifts. Reducing the cost of production was the main short term plan to the company. The company also closed ten percent of its retail outlets and the remaining outlets were opened for longer hours.
Despite the media criticism Ghosn was focused on turning Nissan Company back to the road of success. Ghosn eliminated twenty one thousand employees from the company. He was able to reduce the production capacity by 30%. He streamlined the production process between Renault and Nissan where the company used 15 platforms to produce instead of the previous 24 platforms. In 1999 the two companies expected to produce one million units every year through one single platform. The company reduced the number of suppliers from 1145 to 600 within a period of three years. The company also sold the unprofitable investments. In his proposal Ghosn sent a clear vision to the investors, employees and the employees of where he wanted to take the company.
Ghosn’s selection of management team
With the merger between Renault and Nissan Ghosn understood the existing opportunity between two companies. As a way of ensuring that cost of production was reduced significantly he streamlined the R & D team to work together but the production of the car models was different. What this meant is that Nissan could source more ideas on a wider platform now more than ever before. Ghosn believed that the company’s success lay in maximizing the work force and making it more efficient. Ghosn realized the company could not achieve its goals without its greatest assets, the employees.
Ghosn empowered the company directors through cross functioning and the orientation towards profit making. One of the proposals of the OB theory is that job satisfaction is the most important thing in employee motivation (Linstead et al., 2006). A satisfying job is described as one with a reward scheme, good working conditions, positive supervision and a compelling work environment in general. Ghosn used this to his advantage by coming up with the performance reward system such as bonuses and shares option in the company. Through such a scheme as the share ownership it meant that the employees would be willing to work harder to ensure that their shares perform better in the market. This move by Ghosn made him achieve his goals an year earlier before the set time.
The conservativeness in the previous management made Nissan to rag behind and hence the main reason for its losses. The management was no willing to explore new talents and encourage new ideas even within the company. With Ghosn he was able to look out for talent and bring it to Nissan an instance is hiring of Shiro Nakamura the most innovative designer in Mitsubishi. The designer was given exceptional authority in the design team and process and a short while the company was able to lead in car design.
Ghosn’s leadership was tangible as it was noted through performance. By mid-2001 the company moved from a loss of 684 billion Yen in 2000 to a profit of 331 billion Yen in 2001 which was a substantial turn around in the history of car manufacturing industry. Ghosn’s success was associated with establishing a cross functional organizational behavior. He builds trust between him and his employees and his superiors. He encouraged transparency and consistency and making the workers not to work for the company but to work with the company. Ghosn gave an open year to feedback from both the employees and the management team and encourage the sharing on ideas different from the bureaucracy and the structural limitations. During his first public address immediately after joining Nissan he highlighted on the need of seeking solutions through lots of proposals which will reflect openness and the will to listen to other people’s thoughts (Nissan Revival, 2013).
Leadership behaviors should be reflected in the leaders themselves. Ghosn has reflected the leadership traits in Nissan Company and hence fit to be called a leader. Ghosn can be defined as a democratic leader who engages the team in decision making. Employee involvement in critical company decisions is important as it boost the employees trust and confidence a plan that Ghosn used when he designed a cross functional team and asked them to research, think and discuss and come up with ideas and then present them to the management. Ghosn’s leadership created an impact in the car manufacture industry through restoring Nissan into its current market position which sounded as an impossible move by many especially in the car industry. Through his experience he likes to share his knowledge and thoughts to others which is the perfect definition of a leader. An instance is the service introduced by Nissan referred as the Nissan’s Production Way (NPW) (Nissan production way, 2013).
Nissan production way (2013).Nissan production way.Available at.https://bcove.me/me/pm3yqdd9c; accessed 25 October 2016.
Nissan Revival plan, (2013). Nissan Revival plan. Available. At:http//Nissan-global.com. Accessed 25 October 2016
Interview with Carlos Ghosn-MTV Lebanon (2012). Available at: www.youtuube.com; http//carlo-G-gdh23j33.com. Accessed 25 October 2016.
Linstead. S et al. (2006). Management and Organization: A critical Text, Palgrave Macmillan Limited.
Manfred, K. et al. (2005). Nissan. Carlson Ghosn: Leaders without borders.Isead Limited.