Paper Example on Turnaround: Nissan Improves Efficiency, HR & Adaptation

Introduction

The following case analysis will review and analyze a case on "Turnaround at Nissan" and establish steps taken to improve efficiency, human relations, and adaptation at Nissan and how potential trade-off associated with the performance determinants were addressed. Further, the case analysis will assess the effective change management practices used at Nissan and establish what traits and skills could explain Ghosn's successful strategic leadership at Nissan.

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What Was Done to Improve Efficiency, Adaptation, and Human Relations, and How Were The Potentials Trade-Off among These Performance Determinants Handled?

Nissans excessive costs resulted from the underutilization of available production capacity in its factories. The available capacity was enough to manufacture a million more cars yearly, which was more than the company, could sell yearly. To a move to improve efficiency and reduce costs, five factories in Japan were closed and 21000 jobs eliminated, which was close to 14% of the global workforce for Nissan. Ghosn also reduced the number of car platforms by half to simplify production operations and increase efficiency at the remaining factories. The number of powertrain combinations was also reduced by a third. A potential trade-off from the closure of some factories was undermining employee relations. To handle this trade-off, Ghosn took necessary measures to ensure that employees were aware of why such steps were essential for the firm and inform them about who would be affected by the measures. Most employees preferred to be informed of uncertainties and prepare for them rather than work under anxiety and uncertainty. To minimize the adverse effects of factory closure and job elimination on employees, Ghosn sold subsidiaries, used early retirement strategy, natural attrition, and created part-time opportunities at other Nissan facilities.

Reducing the number of suppliers for Nissan was another measure to improve efficiency. An automakers operating costs comprise 60 percent of purchasing costs. Comparing Nissan's purchasing costs with those of Renault, Nissan had 25 percent higher costs. The higher cost was attributed to Nissan's practice of purchasing small order form too many suppliers rather than ordering larger orders from a reduced number of suppliers. Overly exacting specifications imposed by Nissan engineers on suppliers also contributed to higher purchasing costs. Reducing the number of suppliers in a country considering supplier relationship sacrosanct was unprecedented. The persistent effort by Nissan resulted in a 20 percent reduction in purchasing costs after three years.

Declined sales resulted from a lack of customer appeal for Nissan cars. Designers focused on performance, and little focus was given on determining the customer's wants. An innovative designer was hired to help increase customer appeal and had more power in design decisions. Ghosn encouraged designers to be innovative and shift from copying competitors.

Nissan also had a weak distribution network, which contributed to declining sales. Most dealerships were managed by retirement nearing executives who considered their role more in a social perspective as opposed to entrepreneur responsibility to help increase profits and market share. The company owned dealerships were reduced by 10 percent through closure or sale, and management was improved at remaining dealerships.

Changes in human resource practices included the introduction of a merit pay plan to encourage effective performance. The possible trade-off from changes in human resources practices was the possible demoralization of employees and engendering resentment. Ghosn defined areas of accountability to ensure specific goals measured performance. These changes ensured the replacement of middle and upper-class manager with competent successors who were more skilled.

The revitalization plan by Nissan was also a measure to improve efficiency. The possible trade-off was criticism from stakeholders who did not understand why changes were necessary and how they fit into the overall plan. Ghosn and his executive committee pledged to resign if there was no profit by 2020. The primary objectives of change were achieved.

What Were Effective Change Management Practices used at Nissan?

Change in an organization is not instant due to the challenges in changing rooted organizational culture (Mujtaba, 2013). As such, a set of managerial practices in facilitating the management of the organizational change process is crucial (Raineri, 2011). Identification of the company's strengths and weaknesses was the first change management practice at Nissan. It is important to identify existing problems so that the managers have a clear vision of what needs to be changed. Secondly, Ghosn involved different stakeholders in the change management process, including employees, suppliers, union officials, and customers. Thirdly, there is a structured change management approach. Ghosn created cross-functional teams with defined responsibilities to determine major changes. Fourthly, there was engagement with front line employees. Ghosn explained the reasons change was important and who would be affected by the change. The fifth effective change management practice was frequent and open communication. In a move to avoid undermining employee relations, employees were informed of the changes and therefore reducing uncertainty and anxiety. Another effective change management practice was the engagement and support of middle managers and hiring competent successors.

What Traits and Skills Can Help to Explain the Successful Strategic Leadership By Ghosn?

Ghosn collected information to determine the strengths and weaknesses of the firm. As such, he sets change objectives based on identified problems. Ghosn is also considerate of teamwork and assigns responsibility to teams. Ghosn also possesses communication skills and informs employees of impending changes and what group would be affected by the change. Ghosn also possesses analysis as he analyses aspects such as purchasing costs with those of competitors to set strategies. Ghosn is also innovative and encourages design decisions to be innovative other than copying competitors. Ghosn also shows managerial courage and leadership skills. He pledged to resign if his overall plan failed to show profits by the end of 2020(this also indicates timeline skills and setting achievable goals).

References

Mujtaba, B. G. (2013). Managerial skills and practices for global leadership. ILEAD Academy.

Raineri, A. B. (2011). Change management practices: Impact on perceived change results. Journal of Business Research, 64(3), 266-272. DOI:10.1016/j.jbusres.2009.11.011