Imagine it’s your first day as chief operation officer of a global manufacturing company. You're in a foreign company and you don't speak the language. You don't even know where the plants are.
That’s what it was like for Carlos Ghosn when he took over Japan's then-floundering Nissan Motor Corp. in 1999. The culture shock was bad enough, but Nissan was some $20 billion in debt after 27 years of declining market share.
Today Nissan is cruising along on all cylinders. It sold 5.1 million cars in 2013, compared to 2.6 million the year Ghosn took over, and expects to make a $4 billion profit this fiscal year. Now CEO of the Renault-Nissan Alliance, the Brazilian-born executive is trying to make Nissan a leader in electric- and self-driving cars.
He didn't accomplish all this by adhering to conventional wisdom. At a View From the Top talk in January, Ghosn explained the challenges of being a business leader in a foreign country and why adhering to cultural norms doesn't always work.
Ignore the Rules
No one wants to be the ugly American. After all, "every class you would take in how to do business in a global environment would say to respect local cultures," Ghosn said. But had he followed conventional wisdom, Ghosn might have failed. "'You cannot shut down a plant in Japan. You cannot dismantle the carry-through in Japan. You cannot challenge the seniority system in Japan. You cannot put younger people in top jobs in Japan.' I mean, the list of what you [could not] do was huge," he said. Still, Ghosn defied Japanese business etiquette. He cut 21,000 Nissan jobs--or 14 percent of the total workforce--shut five domestic plants, and auctioned off prized assets such as Nissan's aerospace unit.
Don't Rely on Consultants
High-powered consulting firms are a fact of modern business, and a good consultant may bring an excellent turnaround plan to the table. Ghosn was contacted by many consulting firms, but he declined. Without buy-in from employees, even a well-crafted plan will fail, and the way to get buy-in is to ensure that the solution comes from inside, he said. "Five percent of the challenge is the strategy. Ninety-five percent is the execution. At the end of the day, the most disciplined organization, which gives a lot of importance to processes, ends up prevailing."
Listen, Then Listen Some More
"The best way to look for a solution is to interview as many people as possible, particularly people in critical process areas," said Ghosn. You have to say, "let me go and see the people who are in charge of the process or around this process, interview them and ask, 'What's wrong? What do you think is wrong? How can you fix it?'" Ghosn talked to hundreds of people inside Nissan as he formulated his turnaround plan. Soon he identified purchasing and overcapacity as critical weaknesses.
Don’t Fear Making Waves
"Nobody wants to talk about shutting down plants in Japan. Why? Because it is something which is sacred." But Ghosn did just that. He also pruned his supply chain, another move that risked "public outrage," analysts said at the time. Cutting ties with suppliers was precedent-breaking in Japan, where corporate buyers and suppliers are entangled in webs of business and personnel relationships called keiretsu. Before Ghosn took the helm, Nissan sourced 25 percent of its steel from just one company. He lowered it to less than 10 percent. Nissan executives seemed distant from the company’s core product, so Ghosn moved executive meetings to the test track. Ghosn himself went one step further, driving Nissan cars and competitors' at speeds above 120 mph.
Commit to results
When you know a turnaround effort requires changing old habits, the boss needs to be frank and say so. Explain what you're doing and commit to results, said Ghosn. People don’t like change unless commitment is there. "If it is, they may give you the benefit of the doubt. And that's exactly what happened in the case of Nissan," he said.
Make alliances, not mergers
The alliance between Renault and Nissan is unusual, as it’s more than a partnership but less than a merger. Alliances between companies of different cultures are powerful because each one brings its own culture and strengths, said Ghosn. If you merge them, you risk losing some of the benefits of diversity. "As long as you can make a company with different cultures working together, you're going to get the best out of every single culture."
This story was originally published by Stanford Business and is republished with permission. Follow GSB @StanfordBiz