April 28, 2008

• Gentemann on Change Management at Nissan Japan

  Nissan is a company worth exploring with regard to Informal Structure. Although Nissan as a Japanese company has an extremely formal and hierarchal organizational structure Carlos Ghosn created a temporary informal structure to initiate change and reach his aggressive goals for the troubled automaker.
  
  “Ghosn’s challenge was to act quickly, yet minimize the inevitable resistance that arises when an outsider tries to change traditional Japanese business practices. To resolve this dilemma, Ghosn formed nine cross-functional teams of 10 middle managers each and gave them the mandate to identify innovative proposals for a specific area (marketing, manufacturing, etc.) within three months. Each team could form sub-teams with additional people to analyze specific issues in more detail.

  More than 500 middle managers and other employees formed a new informal structure to implement the so-called Nissan Revival Plan. After a slow start—Nissan managers weren’t accustomed to such authority or working with colleagues across functions or cultures—ideas began to flow as Ghosn stuck to his deadline, reminded team members of the automaker’s desperate situation, and encouraged teams to break traditions.

  Three months later, the nine teams submitted a bold plan to close three assembly plants, eliminate thousands of jobs, cut the number of suppliers by half, reduce purchasing costs by 20 percent, return to profitability, cut the company’s debt by half, and introduce 22 new models within the next two years. Although risky, Ghosn accepted all of the proposals.

  Moreover, when revealing the plan publicly on the eve of the annual Tokyo Motor Show, Ghosn added his own commitment to the plan: “If you ask people to go through a difficult period of time, they have to trust that you’re sharing it with them,” Ghosn explains. “So I said that if we did not fulfill our commitments, I would resign.” Within 12 months, the automaker had increased sales and market share and posted its first profit in seven years. The company introduced innovative models and expanded operations.

  Ghosn, who received high praise throughout Japan and abroad, will likely become head of Renault. The change process that Carlos Ghosn launched at Nissan seems to be smoothly executed, but it was buffeted by uncertain consequences, organizational politics, and various forms of resistance from employees and suppliers.” (Kreitner, Kinicki, 2004)

  

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