Magic happens when the French Wizard COO and the Japanese middle managers team up
Carlos Ghosn and the transformation of Nissan: lessons in cross-cultural leadership
In 1999, Nissan was on the brink of collapse. The company faced an enormous debt of $22 billion and had seen a decade of declining profitability. Its global market share had plummeted from 6.6% in 1991 to 4.9% by 1999, losing $5.6 billion annually. That same year, Carlos Ghosn, Renault's COO, was tasked with leading the Japanese carmaker's turnaround following the Renault-Nissan alliance. What followed was a tale of financial recovery, cultural alignment, strategic brilliance, and transformative leadership.
Having spent a summer in Tokyo in 2000 studying emerging economic systems and the rise of Japan's economy after World War II, I've always been fascinated by the interplay between Japanese business culture and global management practices. Ghosn's story exemplifies how cross-cultural competence can make or break a transformation.
1. Introduction: The Carlos Ghosn and Nissan Story
Carlos Ghosn's turnaround of Nissan wasn't just about profitability—it was about balancing bold global strategies with a deep respect for Japanese cultural values. The Nissan Revival Plan, introduced under Ghosn's leadership, aimed to reduce the company's debt by half within three years, increase operating margin to 4.5%, and achieve net profitability by the end of fiscal year 2000. His leadership marked one of the most significant corporate transformations of the late 20th century, setting an example for approaching international business with empathy and strategy.
2. Cross-Cultural Competence: The Secret Sauce for Transformation
Carlos Ghosn's ability to turn Nissan around wasn't just the result of managerial expertise—it was wizardry. I categorize him as a Wizard COO, someone who creates magic not by dominating the room but by unlocking the potential of others. In Ghosn's case, this magic stemmed from his cross-cultural competence and talent for inspiring emotional energy within teams.
A Wizard COO has an innate knack for reading the room, understanding unspoken dynamics, and aligning diverse talents toward a shared goal. Ghosn's multicultural background—Brazilian by birth, Lebanese by heritage, and French by nationality—equipped him to bridge the divide between Renault and Nissan. His leadership style balanced respect for local culture with bold strategic vision, making him the ideal person to navigate the complexities of Japanese corporate culture.
How Ghosn's Wizardry Manifested
Building Emotional Energy: Ghosn didn't just impose a vision; he created emotional buy-in. He tapped into their tacit knowledge by including middle managers in critical decision-making through the Cross-Functional Teams (CFTs) and gave them ownership of the transformation.
Cultural Sensitivity as a Superpower: The Wizard COO respects the nuances of the cultures they engage with. Ghosn clarified that Nissan would retain its Japanese identity, blending local strengths with global practices.
Boldness Without Arrogance: Wizards operate with confidence but not condescension. Ghosn's French background could have been a cultural stumbling block, as French business culture is often perceived as elitist. Instead, he approached the role with humility and collaboration, earning trust across the organization.
3. Unlocking the Power of Middle Management
Middle managers often operate as corporations' "sandwich kids," caught between executive mandates and operational realities. Ghosn saw them differently. He believed they held the tacit knowledge necessary to revive Nissan.
The Cross-Functional Teams (CFTs): A Wizard Move
Ghosn introduced nine CFTs, composed of middle managers from various departments and divisions, tasked with identifying the changes Nissan needed. These teams worked collaboratively for three months to deliver actionable recommendations, breaking silos and encouraging bold decision-making.
The CFTs generated more than 200 proposals, some of which required radical changes, such as plant closures, layoffs, and reducing the number of suppliers by half. These recommendations became the foundation of the Nissan Revival Plan, demonstrating the power of engaging middle management to foster buy-in and accountability.
Photo by Wassim Chouak on Unsplash
4 Creating a Transformation Roadmap with Cultural Nuance
Transformation often requires disrupting the status quo, but Ghosn recognized that this disruption must be aligned with Japanese cultural values. He maintained employees' self-esteem during plant closures and job cuts by being transparent and empathetic.
Ghosn's measures included closing five plants in Japan and reducing the workforce by 21,000 employees, but he framed these changes within the broader context of securing Nissan's future. His clear communication and respect for cultural norms minimized resistance and helped employees see the necessity of these decisions.
5 Lessons for Leaders Managing International Teams
The story of Carlos Ghosn and Nissan offers timeless lessons for managing transformations in international contexts. Ghosn's success wasn't just about operational strategy but about understanding and respecting cultural differences. His leadership aligns with key insights from Erin Meyer's The Culture Map, which provides a framework for navigating cross-cultural challenges:
Listen first: Ghosn spent his early days visiting factories and meeting employees to understand Nissan's internal dynamics. This listening phase built trust and provided critical insights into Japan's high-context communication culture, where much is conveyed through non-verbal cues and shared understanding.
Give local talent a chance: By leveraging the knowledge and commitment of Nissan's middle managers, Ghosn ensured that change came from within the organization. This approach reflected Japan's preference for consensus in decision-making, which Ghosn respected while maintaining executive decisiveness.
Balance global and local: Ghosn preserved Nissan's Japanese identity while introducing global best practices. This approach built relationship-based trust, crucial in Japanese culture, where trust is earned over time.
Adapt feedback approaches to local habits: Ghosn tailored his communication to align with Japan's preference for indirect feedback, delivering critiques thoughtfully to preserve harmony and morale.
Use emotional energy wisely: Ghosn inspired Nissan's workforce to believe in the turnaround by fostering a culture of ownership and pride, balancing bold moves with empathy and respect for cultural norms.
6 The Legacy of Carlos Ghosn
Under Ghosn's leadership, Nissan halved its debt, reached 10.8% operating profit in 2004, and became one of the most profitable carmakers in the world. While Ghosn's later controversies cast a shadow over his career, the lessons from the Nissan revival endure.
At its core, the story is about the magic that happens when cross-cultural competence meets strategic vision. In 2000, I spent my month of August in Tokyo, studying the post-war rise of the Japanese economy. Thus, this case is a fascinating intersection of history, culture, and modern management.
Steering a transformation while cutting costs is always challenging. Add to that the cross-cultural layer, and you will be doomed! But as Ghosn demonstrated, it's possible when leaders respect cultural differences, empower their teams, and lead with empathy and purpose.
Sources:
INSEAD case study “Building emotional energy for renewal: Nissan” (condensed version). By Quy Nguyen Huy, associate professor of strategy, INSEAD. 2010.
Professor Erin Meyer. The Culture Map: Breaking Through the Invisible Boundaries of Global Business. Published 2016.