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Northeastern University Global Leadership 2020-21 Under Guidance from Dr. Sriram Rajagopalan LDR 6145 Global Leadership 2020-21 Under Guidance from Dr. Sriram Rajagopalan LDR 6145 Northeastern University Table of Contents Global Leadership Success Through Emotional and Cultural Intelligences.....................................5 The Global Leadership of Carlos Ghosn at Nissan.........................................................................17 Gojo Industries: Aiming for Global Sustainability Leadership.........................................................29 Leadership in a Globalizing World..................................................................................................41 Regional Strategies for Global Leadership.....................................................................................85 Rising Costs of Bad Leadership.....................................................................................................99 Learning to Manage Global Innovation Projects...........................................................................103 Copyright 2005 by Indiana University Kelley School of Business. For reprints, call HBS Publishing at (800) 545-7685. Business Horizons (2005) 48, 501 — 512 www.elsevier.com/locate/bushor Global leadership success through emotional and cultural intelligences Ilan Alon, James M. Higgins* Roy E. Crummer Graduate School of Business, Rollins College, 1000 Holt Ave-2722, Winter Park, FL 32789, USA KEYWORDS Cultural intelligence; Emotional intelligence; Global leadership success Abstract Culturally attuned and emotionally sensitive global leaders need to be developed: leaders who can respond to the particular foreign environments of different countries and different interpersonal work situations. Two emerging constructs are especially relevant to the development of successful global leaders: cultural and emotional intelligences. When considered under the traditional view of intelligence as measured by IQ, cultural, and emotional intelligences provide a framework for better understanding cross-cultural leadership and help clarify possible adaptations that need to be implemented in leadership development programs of multinational firms. This article posits that emotional intelligence (EQ), analytical intelligence (IQ), and leadership behaviors are moderated by cultural intelligence (CQ) in the formation of global leadership success. D 2005 Kelley School of Business, Indiana University. All rights reserved. tural business is a mundane reality for most contemporary large organizations. Even if your business is a medium- or small-sized firm, you have probably experienced globalization through interactions with global participants that belong to at least one, or perhaps more, of these four key categories: customers, competitors, suppliers, or employees. Global business is already a substantial force in the world’s economy: The World Trade Organization reported that, in 2003, international trade comprised 30% of global GDP. In their book Race for the World, Lowell L. Bryan et al. (1999) predicted that, by the year 2029, 80% of world output would be in global markets. Thus, while globalization has arrived, the full extent of its impact on business has yet to be felt. bBut when a prince acquires the sovereignty of a country differing from his own both in language, manners, and intellectual organization, great difficulties arise; and in order to maintain the possession of it, good fortune must unite with superior talent.Q —Niccolo Machiavelli, The Prince 1. Global interaction and interpersonal relationships To say that globalization is upon us is axiomatic. Conducting global, international, and cross-cul- * Corresponding author. E-mail addresses: ilan.alon@rollins.edu (I. Alon)8 jhiggins@rollins.edu (J.M. Higgins). 0007-6813/$ - see front matter D 2005 Kelley School of Business, Indiana University. All rights reserved. doi:10.1016/j.bushor.2005.04.003 5 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. 2. BH 177 I. Alon, J.M. Higgins If growth in international trade continues as expected and predictions for its eventual size hold true, global business will see at least a twofold increase. Such dramatic changes in the conduct of business require leadership from individuals skilled in global aspects of business functions such as marketing, operations, finance, human resource management, information management, and R&D. However, global leaders must also be extremely skilled in the interpersonal conduct of global business. This requires emotional and cultural intelligences, the focal points of this article. Unfortunately, while the need for global business leaders has never been so urgent, serious deficiencies exist in the preparation of corporate managers as they deal with the interpersonal realities of global business. In a comprehensive review of the global leadership literature, Vesa Suutari (2002) came to the following conclusions: intelligence, as awareness of this important concept is still at an early stage. In this article, we discuss the concepts of emotional and cultural intelligences, why they are critical to successful global leadership, and how they may be developed in global leaders. 2. A convergence of forces It is evident that global leadership development should be a priority for companies that interact across cultures. Fortunately, how this development should proceed is becoming clearer. Several markers of what we term bglobal leadership skillsQ are noteworthy. First, there is increasing agreement regarding what it is that good leaders do, even while management flexibility is assumed as a given. Inevitably, leadership is contingent on the factors involved in a particular situation, but we generally know what good leaders should do or consider doing most of the time, at least in the United States. Simply put, leadership is the ability to turn vision into reality. More specifically, Robert House and his colleagues defined leadership as bthe ability to influence, motivate, and enable others to contribute toward the effectiveness and success of the organizationQ (House et al., 1999, p. 184). Additionally, in 2002, Gary Yukl, Angela Gordon, and Tom Taber, after reviewing a half-century of leadership behavior research conducted primarily in the U.S., concluded that leaders must successfully perform 12 behaviors, which can be grouped into three broad categories: task, relationship, and change/innovation (Yukl et al., 2002). These behaviors are those that leaders/ managers should engage in or consider engaging in to be successful. A second marker of global leadership skills is an emerging focus on leadership at every level of the organization, which facilitates the creation of a platform from which to launch a global leadership development effort. This recognition of the relationship of system to manager is occurring not just in the management literature, but in numerous corporations, as well. For example, IBM, a company already well known for its strong leadership, revamped its leadership model in 2002, when newly appointed CEO Sam Palmisano realized IBM needed a new model of leadership that was future-focused, where the company’s customers became clients (reflecting long-term relationships, not short-term fixes) and whereby IBM enabled its customers to brespond instantly at whatever got thrown at themQ (Tischler, 2004, p. 112). As Donna Riley, IBM’s Vice President for Global Talent, expressed, bIf leader- need to develop global competencies. ! Leaders is a shortage of global leaders in the ! There corporate world. companies do not know what it means to ! Many develop corporate leaders. 8% of Fortune 500 firms have comprehen! Only sive global leadership training programs. is a need to better understand the link ! There between managerial competencies and global leadership. Similarly, Tracey Manning (2003) summarized the research of many leadership scholars and found that multinational companies’ efforts to develop effective global managers fell far short of the optimum: of Fortune 500 firms surveyed did not have ! 85% an adequate number of leaders. felt their leaders needed additional skills. ! 65% of international managers underper! One-third formed in their international assignments based ! on their superiors’ evaluations. Organizations have erroneously promoted leaders to international assignments based on technical and organizational skills. Ultimately, the negative consequences of wrong leadership choices are both expensive and wellpublicized. And while the overall picture of global leadership development indicates businesses are not pursuing this matter sufficiently, the outlook is even more bleak regarding the development of global leaders’ emotional and cultural intelligences. Although some firms are endeavoring to enhance the emotional intelligence capabilities of their leaders, very few have moved to grow cultural 6 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. 502 503 subculture is fiercely proud of its heritage can make for an interesting exercise in cross-cultural cooperation within Spain, itself. Leaders must be able to function across and within these various subcultures. Robert Rosen and Patricia Digh declared that bglobal literacy is the new leadership competence required for business success. To be globally literate means seeing, thinking, acting, and mobilizing in culturally mindful waysQ (Rosen & Digh, 2001, p. 57). Accordingly, the same authors indicate the two predictors of success in the global market place are leadership development across all levels of business and valuing multi-cultural experiences/ competencies. We suggest that leadership development should follow a three-part model: assessment, education, and experience. With most if not all aspects of leadership, it is possible to assess a leader’s skill levels, provide the education that matches that person’s needs, and then let the person experience the foreign culture in its organizational or geographic/ethnic specificity. As we all know, experience itself is a great teacher, and only in the trenches can a leader begin to fully understand another culture and become functional in it. In this article, we focus on the two newest of the three intelligences we believe to be critical to successful global leadership: EI and geographic/ethnic CI. ship is stuck in the past, we have a problemQ (Tischler, 2004, p. 112). After a thorough examination of the situation and various options, IBM in 2004 identified a set of 11 competencies IBM’s leaders must possess. Among these are being clientcentered, innovative, and environmentally aware, all on a global basis. These desired competencies are in addition to, not instead of, more traditional leadership behaviors (Tischler, 2004). 3. IQ is not the only bintelligenceQ There is growing recognition that multiple intelligences are required for global leadership. For example, Ronald Riggio, Susan Murphy, and Francis Pirozzolo presented a strong case that global leaders need to possess more than high IQs. In 2002, they asserted that intelligence is a multidimensional construct, that there are several types of intelligences, and that different kinds of intelligences are needed for effective, situational leadership (Riggio et al., 2002). Based on all evidence available, we suggest at the core of global leadership (and, hence, the development of global leaders) are these three intelligences: (1) Rational and logic-based verbal and quantitative intelligence with which most people are familiar and which is measured by traditional IQ tests; (2) Emotional intelligence (EI), which has risen to prominence as a determiner of success in the past 10 years and which can be measured by EQ tests; and (3) The most recent addition to our list of intelligences, cultural intelligence (CI), which can be measured by CQ tests that are only now coming into existence. 4. Developing global leadership EQ According to The EQ Edge, written in 2000 by Steven J. Stein and Howard E. Book, research across 30 mostly professional and managerial career fields reveals that anywhere from 47% to 56% of work/life success is the result of EQ, with the range being related to job type (Stein & Book, 2000). Even stronger evidence linking EQ to the success of leaders within the U.S. was noted by Daniel Goleman, Richard Boyatzis, and Annie McKee in their 2002 book, Primal Leadership. They found that the most critical leadership skills in the U.S. were linked to emotional intelligence (Goleman, Boyatzis, & McKee, 2002). Their research and the research of others (such as the Hay-McBer consulting firm) suggest that as much as 79% of leadership success in the U.S. results from high EQ. Based on these and other EQ studies, it would seem that leaders’ levels of emotional intelligence influence their behaviors, making them more or less successful. Similarly, organizational CI matters most, at least in the U.S., when leaders move into or work with new organizations. Often, a lack of organizational CI contributes to individual and corporate failures. With respect to cultural intelligence, it is important to note, as Christopher Earley and Elaine Mosakowski pointed out in 2004, that there are two major types. The first is what we call organizational CI. The second type of awareness, the focus of our CI examination, is related to geographic/ethnic culture (Earley & Mosakowski, 2004). For example, when you do business in Spain, many cultural practices are the same throughout the country, but doing business in Bilbao is not identical to doing business in Madrid or Barcelona because each of these cities has a different operant culture, each of which reflects a major Spanish subculture: Basque, Andalusian, and Catalan, respectively. Even matters such as bappropriateQ hours of work differ among these three cultures. The fact that each 7 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. Global leadership success through emotional and cultural intelligence I. Alon, J.M. Higgins Emotional Intelligence is crucial to success in both work and life in general; it is a part of the biological, evolutionary importance of emotions in human beings. As Nigel Nicholson, in a Harvard Business Review article, observed, b. . .for human beings, no less than for any other animal, emotions are the first screen for all information receivedQ (Nicholson, 1998, p. 138). When a person receives a piece of information, it is automatically assessed from an emotional perspective. Emotional assessment was necessary for survival when man hunted in small groups, as it initiated bfight-or-flightQ responses; things are no different today. When someone receives information, the older part of the brain still considers a fight-or-flight response. This phenomenon helps explain why, for example, when a performance appraisal is conducted, even if 99% of the appraisal is positive, the bevaluateeQ will fixate upon the negative 1%. To be successful in any interpersonal activity, one must be aware of one’s own emotions and be able to manage them, just as one must also be aware of the emotions of others and be able to manage any interaction. EQ surveys simply measure the ability to perform these tasks across a wide variety of emotional intelligence skills. job classifications examined were managerial positions, the study has this important implication for leadership: even in the same country, the proper leadership EQ skill set varies to some degree from situation to situation. The ECI was created by consulting firm HayMcBer in conjunction with Daniel Goleman. While the EQi is focused on the psychological underpinnings of EQ, the ECI focuses on EQ’s business applications. In Primal Leadership (Goleman, Boyatzis, & McKee, 2002), Goleman and his co-authors describe a model of how EQ could be used, especially, by business leaders. One of the major contributions of this book is the identification of 15 specific EQ competencies, which are grouped into four overriding domains: self-awareness, self-management, social awareness, and relationship management. The first two of these sets of skills are intrapersonal; the latter two are interpersonal. What makes these behaviors so useful is the development of a model that illustrates how each of these four domains of capabilities sequentially drives the next. According to this model, a person must progress from self-awareness to self-management, from self-management to social awareness, and from social awareness to relationship management. These domains are essentially hierarchical in nature: a person cannot usually successfully manage relationships if that person is not first selfaware, successful at self-management, and also socially aware. Similarly, a person cannot usually self-manage if lacking self-awareness, nor be socially aware if self-management is absent. The third assessment device is the bMayerSalovey-Caruso Emotional Intelligence TestkQ, or MSCEIT (MSCEIT, 2005; What is the MSCEIT, 2005). The MSCEIT is an emotional problem-solving test, as opposed to a self-reported inventory. Participants are asked to solve a number of EQ problems. David Caruso (2005), co-author of the MSCEIT, indicates the test examines two tasks for each of the four following different but related emotional intelligence abilities: 4.1. Assessing EQ There are three primary EQ skill level survey devices on the market today, all of which are paper-and-pencil based. The first two of these are self-report inventories: the bEmotional Quotient InventoryQ or EQi and the bEmotional Competence InventoryQ or ECI, which also has a university student version, the ECI-U. The EQi was created by psychologist Reuven Bar-On, who, in 1980, began a quest to determine what led to work/life success (Bar-On, 1997, 1998). By 1985, he believed he had found a partial, if not a primary, answer in a concept he labeled the emotional quotient, or EQ. Bar-On subsequently developed the EQi survey to measure EQ, a survey which meets the American Psychological Association’s standards of legitimate tests. In The EQ Edge (Stein & Book, 2000), Steven Stein and Howard Book analyzed thousands of EQi surveys given to individuals in more than 30 occupations. Two key findings emerged. First, as noted earlier, their analyses revealed that success in domestic work/life is between 47% and 56% a function of a person’s EQ. Second, their research revealed which 5 of the 15 EQ competencies used in the EQi were most critical to each job classification. The finding that different jobs require different competencies has the potential to become a major factor in job selection. Because some of the (1) bPerceiving emotions: the ability to accurately recognize how you and those around you are feelingQ; (2) bUsing emotions: the ability to generate emotions and use emotions in cognitive tasks such as problem solving and creativityQ; (3) bUnderstanding emotions: the ability to understand complex emotions and emotional dchainsT, how emotions transition from one state to anotherQ; and (4) bManaging emotions: the ability to intelligently integrate the data of emotions in 8 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. 504 yourself and in others in order to devise effective strategies that help you achieve positive outcomesQ. 505 materials that accompany both the ECI and the MSCEIT, there are suggested exercises, readings, and other aids to help improve EQ. Although definitely worthwhile, this is not an inherently speedy process: it can take up to six months of steady work on one behavior to permanently change it. The keys are to accept that mistakes will occur, have adequate self-efficacy to continue on despite setbacks, take action to correct mistakes, and, finally, learn from that experience. All three of these instruments appear to be viable. The use-values of the three surveys differ, however: EQi has a substantial psychological back! The ground, meets APA standards for tests, and has additional supportive research; ECI has a strong, practical business focus; ! The and MSCEIT focuses on problem solving and does ! The not involve self-evaluation, as do the other two 4.4. EQ and global leadership One of the difficulties in changing emotional behavior stems from the dozens of emotional responses humans experience. In 1996, Howard Weiss and Russell Cropanzano identified six emotions as basic and universal, at least within the United States: happiness, surprise, fear, sadness, anger, and disgust (Weiss & Cropanzano, 1996). While there can be a high level of agreement within a country or specific national subculture regarding the meaning of commonly accepted emotions, many emotions and their cues (both non-verbal and even some verbal) do not readily translate across borders. For example, in a 1991 Los Angeles Times report, Emmons (1991) found that, when a group of U.S. citizens was asked to identify six basic emotions using pictures of other U.S. citizens’ facial expressions, there was a range of agreement from 86% to 96%. However, when Japanese citizens were asked to identify these emotions from the same set of pictures, their identification registered as accurately only for the emotion bsurpriseQ, with 97% in agreement. Among the other five emotions, accurate identification levels ranged from 27% to 70%. This example begs the question of how high an EQ someone can have in a culture other than the one they grew up in. Because the cues to emotions across cultures vary from being somewhat different to quite different, CI becomes extremely important. CI enables leaders to translate the varying EQ behaviors of different cultures, and to then choose a more appropriate EQ action for a specific culture than the leader might otherwise have chosen. tests. The EQi and ECI surveys allow for evaluations by others, which helps eliminate subjective biases. Limited numbers of comparative studies of these instruments have been performed; in fact, too few to be useful at this point. As well, since these three instruments are all essentially bound to U.S. culture, only limited use of them has been made outside of the United States. The EQi and MSCEIT are available through Multi-Health Systems (among others) and the ECI from the Hay Group. 4.2. Educating global leaders on EQ Successful leadership development programs incorporate conceptual knowledge about EQ with role playing, case studies, simulations, experiential exercises, visualization exercises, and practice sessions that assist people in not just understanding what EQ is about, but also giving them practice at the skill. Establishing objectives for change and feedback sessions on progress are also critical ingredients for success. It is best to work on only four or five behavioral changes at a time, focusing on the lowest-scoring skills. If a leader is using the ECI survey, the progression from self-management to relationship management should guide the leader’s choices for development. Some of this evaluation can be self-generated, but external evaluators are very helpful. 4.3. Experiencing improved EQ There is no substitute for experience when behavioral change is desired. As illustrated later in this article, this is as true for CI as it is for EI. EQ improvement logs can be a helpful tool in the change process: in them, leaders can record their efforts at improving their EQ. They can keep track of successes and failures, reporting the actions they have taken to further their skills. In Stein and Books’ The EQ Edge (Stein & Book, 2000) and in the 5. Developing a global leader’s cultural intelligence Given the linkage between emotional intelligence and success, how can one transfer emotional intelligence to other nations/cultures? The answer lies in cultural intelligence, which bridges the gap in the transference of meaning. In 2003, Christopher Earley and Soon Ang claimed that emotional 9 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. Global leadership success through emotional and cultural intelligence I. Alon, J.M. Higgins intelligence may not transfer across borders if the symbolism and the ability to respond to the affective states of others carry different interpretations across cultures (Earley & Ang, 2003). Thus, in order to be EQ effective, one must also be CQ effective. The work of Robert House and his colleagues on project GLOBE in 2002 illustrates that successful leadership behaviors differ within various cultures (House et al., 2002). Accordingly, in order for top managers to lead their organizations in the 21st century, they need to understand the regional and ethnic cultural diversity of their working environments and the cross-cultural community of workers around the world. It is becoming increasingly clear that leadership behaviors must be adapted to the cultural variety embedded in the global context. Increasing globalization across most industries has prompted observers to pay attention to the need for augmenting cultural intelligence in workers. For example, Alexander Zakak and Steve Douvas commented in 1999 on the increasing globalization of the insurance industry. They stated that cultural intelligence is a key to business intelligence and is critical if insurers are to succeed in foreign markets (Zakak & Douvas, 1999). To demonstrate their point, they compared Polish and German markets. Their analysis contained general information about culture (e.g., values, work ethic, cultural diversity, and business protocols) and industry-specific factors (e.g., growth rate, level of competition, and the relative involvement of government). Taking into account cultural diversity and environmental differences, Zakak and his colleague suggested that U.S. insurers would be wise to use a strategy of acquiring a local insurer, developing complex products, and using a locally trained workforce in Germany, and creating joint ventures, developing simple products, and hiring expatriates to train the local employee base in Poland. In this way, the authors tailored decisions to fit culture-specific needs. Andrew Holmes, a computer industry commentator, wrote in 2002 about the role of information technology (IT) project managers, suggesting that cultural intelligence is a new skill dimension to effective IT project management and the ability to affect change in heterogeneous locations and organizations (Holmes, 2002). Poor cultural intelligence leads to stereotyping, unnecessary conflict, delays, and leadership failure. Unfortunately, no systematic approach to developing cultural intelligence was evident in practitioner-based articles. As the term bcultural intelligenceQ only came into use in recent years, few academic conceptualizations currently exist. Perhaps the most systematic 10 and contemporary approach to the study of cultural intelligence was published in a monograph, Cultural Intelligence: Individual Interactions Across Cultures, by P. Christopher Earley and Soon Ang, who defined cultural intelligence as bA person’s capability for successful adaptation to new cultural settings; that is, for unfamiliar settings attributable to cultural contextQ (Earley & Ang, 2003, p. 9). In like manner, in 2004, Brooks Peterson defined cultural intelligence as the aptitude to use skills and abilities appropriately in a cross-cultural environment (Peterson, 2004). According to Earley and Ang, cultural intelligence is distinct from social and emotional intelligences in that it requires people to switch national contexts and rely on their ability to learn new patterns of social interactions and devise the right behavioral responses to these patterns: bIn a new cultural setting, familiar cues are largely or entirely absent (or present but misguided), so a common attributional and perceptual frame cannot be relied on. In this case, a person must develop a common frame of understanding from available information, even though he or she may not have an adequate understanding of local practices and norms.Q (Earley & Ang, 2003, p. 61) The authors cite numerous examples of individuals who possessed social, intellectual, and emotional intelligences, and were successful in their own country’s environment, but were unable to transfer these skills to a different country’s setting. The reason: they lacked cultural intelligence. Alternatively, Lynn Offermann and Ly Phan suggested in 2002 that cultural intelligence is ba metaintelligence, encompassing a variety of forms of intelligence (including the traditional analytical skills) and enacting them outside of the frame of reference in which they were developedQ (Offermann & Phan, 2002, p. 191). Emotional intelligence, therefore, is essential for promoting better cross-cultural interaction. 6. Global demands and cultural intelligence How, then, does CQ facilitate effective global leadership? In 2003, Tracey Manning wrote that the need for cross-cultural effective leadership is immediate and widespread, and suggested that global competence with specific reference to the ability to manage increasing cultural diversity is the precondition for effective global leadership (Manning, 2003). After in-depth, face-to-face interviews with CEOs of more than 75 companies in 28 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. 506 countries and a survey of 1000 senior executives around the world, Robert Rosen and his colleagues, in their 2000 book, Global Literacies: Lessons on Business Leadership and National Cultures, make two discoveries: first, that global literacies are the cornerstone of leadership universals and, second, that the more economically integrated the world becomes, the more important cultural difference becomes (Rosen et al., 2000). Cultural literacy (the ability to value and leverage cultural difference) is key among the global literacies. Rosen and his colleagues’ conception of cultural literacy is similar to Earley & Ang’s (2003) conception of cultural intelligence, and provides the link between this form of intelligence and top managerial and leadership success in the global arena. Offermann & Phan (2002) offer further evidence of this link by showing that cultural congruence between leader and follower is related to superiorsubordinate relationships, level of follower satisfaction, and work effectiveness. As with the emotional intelligence construct, we divide the discussion into assessment, education, and experience. 6.1. Assessing cultural intelligence The assessment of cultural intelligence depends in part on its conceptualization. Little has been published on the construct of cultural intelligence and even less on its measurement. This is a fruitful area for future researchers, who can follow the lead of analysts such as Earley & Peterson. In 2004, they reviewed and evaluated the available assessment methods for cultural intelligence, which included paper-and-pencil inventories, role play exercises, behavioral assessment centers, self monitoring scales, cultural shock inventory, and intercultural communication inventory tests (Earley & Peterson, 2004). In turn, the authors proposed a CQ educational and learning model which consists of three facets: meta-cognitive (learning strategies and cultural sense making), motivation (cultural empathy and self-efficacy), and behavior (acceptable behavior in culture and mimicry). In a 2004 follow up article published in the Harvard Business Review, Earley and Elaine Mosakowski provide a self-scored diagnostic tool for measuring cultural intelligence that consists of three components: cognitive, physical, and emotional (Earley & Mosakowski, 2004). This tool, however, is rather primitive and has not been, to our knowledge, subjected to empirical validity tests. Another assessment instrument that shows some promise is the Cross-Cultural Adaptability Inventory Test, developed by Colleen Kelly and Judith Meyers (Kelley & Meyers, 2004). It is distributed 507 through the Pearson group, which sells a number of tools to help companies recruit, select, track, and manage employees. The test is designed to assess the ability of the test taker to adapt to different cultural settings and interact with people from other cultures, which are skills key to successful foreign assignments and leadership success in a cross-national setting. The 50 questions in the assessment instrument are factored into four dimensions of cultural intelligence: emotional resiliency, perceptual acuity, flexibility and openness, and personal autonomy. Comparisons between people and between factors are relevant for developmental processes, as they allow the test taker and/or the evaluator to assess crosscultural strengths and weaknesses. Using a sample of 112 individuals (35 employees of a U.S.-based corporation and 77 undergraduate students), a 1998 study by Amy Montagliani and Robert A. Giacalone found that the ability to adapt crossculturally is positively related to impression management tendencies and suggested that both will have a positive impact on the ability to succeed in global leadership (Montagliani & Giacalone, 1998). Finally, another method of cultural assessment is now under development by Richard Lewis and Duke University, although it is not yet commercially available. The method uses a questionnaire based on Lewis’s book, When Cultures Collide, to assess an individual’s type, and then allows the individual to compare his/her individual socio-type with the culture in question along a variety of dimensions. This test allows trainees to focus on their particular socio-type in the context of the host environment. 6.2. Educating for cultural intelligence In an effort to educate managers on recognizing cultural differences, companies can send them to formal education programs, such as ones which result in an MBA degree, or sponsor global educational initiatives. Companies may also provide managers with books on a country, language education, mentoring, and so on. Regardless of what other steps may be taken, managers should be presented with cultural awareness case studies, and then be taught how appropriate cross-cultural behavior leads to more satisfactory solutions. Role plays, simulations, and other experiential activities are especially useful in building this awareness. Furthermore, there are books (including one edited by Ronald E. Riggio and colleagues) and articles available on differing analytical cultural frameworks, many of which focus on the context of appropriate leadership behavior. Thus, by learning of these models, the leader is better able to adapt 11 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. Global leadership success through emotional and cultural intelligence I. Alon, J.M. Higgins to appropriate modes of behaviors in the host market. As a practical and individualized educational method, Peterson (2004) has suggested that cultural intelligence can be gained by plotting a trainee’s cultural framework with those of other national origins, using a number of key cultural dimensions such as equality/hierarchy, direct/ indirect, individual/group, task/relationship, and risk/certainty. An awareness of self in relation to profiles of different cultures can help develop an appreciation for the differences, the potential for conflicts, and the cultural bfitQ between one’s embedded socio-cultural type and model sociocultural types in the relevant nation. This approach is similar to Lewis’s yet-to-be-released assessment method, but uses established criteria from the analytical frameworks mentioned above. Although these frameworks allow the learner to understand central tendencies in certain cultures, the models have been criticized for reductionism, oversimplification, and ethnocentrism. The complexities of cultures, even those which seem similar, are immense. For example, reporting in 2002 on one of the project GLOBE studies, Felix Brodbeck, Michael Frese, and Mansour Javidan observed several distinct differences between former East- and West-German managers with respect to GLOBE cultural factors (Brodbeck, Frese, & Javidan, 2002). Even more telling was the fact that Swiss-German managers possessed two or three very distinct behaviors from those found in German managers, overall. To complement these generalized frameworks, we suggest a specific study of host-market countries with respect to historical development, art and literature, socio-economic trends, and language. We also recommend use of the GLOBE research studies to gain knowledge of cultural trends and nuances. Additionally, trainees need to be made aware that while central tendencies are useful generalizations, the people they will meet are certain to differ from generalized norms. We believe that one cannot fully understand a culture, and therefore develop cultural competence, without language proficiency. Language provides the basis for cultural understanding, intercultural communication, and possible immersion in a foreign culture. The relationship between linguistic competency and CQ was also suggested, but not sufficiently emphasized, by Earley & Ang (2003). The link between linguistic competence, cultural intelligence, and leadership, therefore, needs reinforcement. This notion now comes not only from industry, but also from government. As 12 reported in a 2004 Wall Street Journal article, Chile has begun a nationwide campaign to better educate high school students in English (Se habla Ingles, 2004). Furthermore, the same source reported in 2002 that the United States government realized its linguistic deficiencies in Arabic when faced with a shortage of speakers in the State Department, the armed forces, and the Central Intelligence Agency (Byron, 2002). Luckily, technology is helping facilitate the learning of foreign languages through the internet. Cultural intelligence education should also attempt to instill motivation in the student to continue learning, experimenting, and trying. While motivation comes from within an individual, it can be extrinsically triggered. It is about satisfying unsatisfied needs that have been recognized either consciously or subconsciously, but there is also an emotional component involved; that is, how does the individual feel about satisfying this need? The larger concern is how companies can stimulate their managers’ desires to behave in ways that are culturally intelligent. At the most fundamental level, companies must recognize the needs of their managers, and show them that being emotionally and culturally intelligent will satisfy those needs. For example, research illustrates that people are motivated to behave in a certain way or learn new skills if they believe these behaviors and skills will help them in the future. Corporate trainers should therefore link, in managers’ minds, the relationship between developing cultural intelligence and success in their future career paths, emphasizing the benefits of learning from different cultures. Since it has been demonstrated statistically that success in one’s work life is significantly impacted by one’s EQ, sharing with managers the numerous studies available that highlight the advantages of EQ and CQ will begin an important process. Once managers see a linkage between generalized btrainingQ and their own success, the harder work of applying the information gained in cases studies, simulations, and role plays can proceed. Lastly, if you want managers to develop EQ and CQ, these elements must be included in performance appraisals, to which everyone attends. Although work and leadership performance are affected by a lack of EQ and CQ, those with low EQ and CQ are unlikely to recognize this in themselves, and will fail in foreign cultures unless there is an individual incentive. The company must draw attention to what is needed specifically in a foreign environment, and then must evaluate and reward or correct behavior related to these specifics. For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. 508 6.3. Experiencing cultural intelligence Experiential learning is needed to form behavioral patterns which support cultural intelligence. On a small scale, corporate trainers can use international culture experiential learning tools, which allow the trainee to understand and internalize skills through experience and reflection. But as reported by Jeanne McNett and Allan Bird in 2002, experientially based modules such as Barnga, BaFa BaFa, and Ecotonus vary in terms of costs, time investment required, flexibility, trainer skills, complexity, emotional involvement, and level of trainee/trainer knowledge needed (McNett & Bird, 2002). Cases, role plays, and simulations are all effective in this regard. It is also important in educational settings that participants set objectives for changing their behaviors, be required to work on changing those behaviors, and then be evaluated on how well they have done so during the educational program. In 2003, Richard Lee asserted the notion of language as simply a tool to express fixed and determinate relationships between words and things was mistaken (Lee, 2003). He further posited the practice of ignoring disparate connotations in language when moving across cultures could lead to gross misinterpretations and failed interactions. Consider the concept of guanxi in Chinese society. To simply translate it as bconnectionsQ, while technically correct, does not and cannot explain the cultural assumptions, values, historical development, and underpinning principles that accompany the guanxi concept. Numerous articles and books have been written about guanxi and its role in management and leadership in China, including one edited by Alon in 2003 (Alon, 2003). No matter how much research a person might do, Westerners would be challenged to fully appreciate guanxi without living and working in that environment. As 509 an American MBA alum colleague of one of the authors stated regarding guanxi, after moving to and working in Shanghai: bReading about it is one thing. Living it is totally differentQ. Ultimately, then, there is no substitute for immersion. This was best stated by Jack Welch, who noted in a speech to GE employees in 2001 that: bThe Jack Welch of the future cannot be me. I spent my entire career in the United States. The next head of General Electric will be somebody who spent time in Bombay, in Hong Kong, in Buenos Aires. We have to send our best and brightest overseas and make sure they have the training that will allow them to be the global leaders who will make GE flourish in the future.Q (Javidan & House, 2002, p. 1) International rotation programs and international practical experience should be included as ways of developing cultural intelligence. 7. Conclusions Due to the impact of increased globalization on business and the factors that lead to successful global leadership, firms need to embrace emotional and cultural intelligences as part of their global leadership development programs. Those that do so will most certainly be rewarded with improved levels of global performance. The implications for the training and development units of HRM departments are clear. However, outcomes for other parts of the organization are also substantial. Since studies of EQ skill levels and managerial performance show them to be positively correlated, companies should think in terms of selecting employment candidates with high EQs, especially for leadership positions. Certainly, developing EQ is both possible but advisable, and IQ Verbal and Mathematical Intelligence CQ Geographic/Ethnic Cultural Intelligence EQ Emotional Intelligence Leadership Behaviors Domestic Leadership Success Global Leadership Success CQ Organizational Cultural Intelligence Motivation Elements and Types of Motivation Figure 1 Components of global business leadership success. 13 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. Global leadership success through emotional and cultural intelligence I. Alon, J.M. Higgins leadership screening for those with high EQs gives the company a leg up on the competition. Similarly, when tests are developed that can accurately determine CQ, these could also be used in the employee selection process. Since only a few CQ tests are currently in development, companies could create their own based on construct validity, until scientifically valid instruments are available. Increasing globalization will make EQ and CQ skills more relevant throughout entire organizations, and virtually everyone in management and global business situations will need to focus on possessing these two skills. The implications for mentoring, coaching, performance management, and other leader/manager activities are obvious. Compensation programs will need to reflect these skills, possibly through a skill-based pay approach, but more likely through the incorporation of success criteria into the performance review reward system. As we have discussed in this article, there are a number of vehicles available to assist businesses as they transform their managers into cross-culturally skilled leaders. Ultimately, companies that ignore this challenge will find themselves at a competitive disadvantage; individuals who fail to develop their EQ and CQ will likewise suffer. Individuals must go through the stages of awareness, motivation, and action/reaction in order to become cross-culturally skillful, and so must each company. We acknowledge that successful global leadership is a function not only of leadership behaviors, but also of multiple intelligences: analytical intelligence (measured by IQ), emotional intelligence (measured by EQ), and cultural intelligence (measured by CQ). In this work, we have focused on the latter two. To be successful, global leaders must not only understand but also be able to work within the local culture and display high IQ, EQ, and CQ. Fig. 1 portrays a conceptualization that links all of the concepts we have presented. To be a successful leader in the domestic environment requires IQ, EI, organizational CI, and motivation. Motivation includes the elements of motivation (its direction, intensity, and persistence) and the types of motivation such as the need for achievement, goal motivation, or the ability to overcome adversity. These motivation issues are discussed in a sidebar. The 12 leadership behaviors that are classified into the three major groupings mentioned in Box 1 are then used to achieve results, but the success levels of these behaviors are affected by the sets of factors on the left side of the model: that is, IQ, EQ, organizational CQ, and other motivation. Accomplished appropriately, domestic leadership success occurs. In summary, at the domestic level of competition, IQ or analytical intelligence, EQ or 14 emotional intelligence, organizational cultural intelligence, motivation and leadership behaviors contribute to successful leadership. But these factors do not immediately translate into global leadership success. Rather, CQ (cultural intelligence) is a moderating variable (Box 1). Box 1 In addition to IQ, EQ and Organizational CQ, there is another factor which contributes to domestic leadership success: motivation; specifically, the elements of motivation and the types of motivation. Stephen Robbins (2003) identifies the three key elements of motivation as the direction, intensity, and persistence of that motivation. The term bdirectionQ refers to whether that motivation is aimed in a positive or negative direction, depending upon the perspective of the perceiver. For example, determination of direction might depend on whether or not the individualTs motivation is good for the individual, is good for the organization, or both. The bintensityQ of the motivation describes how hard a person tries and how compelling the motivation is at some moment. The bpersistenceQ of the motivation describes how long a person can sustain the effort and how long the intensity of the motivation remains compelling. There are many types of motivation. McClelland & Winter’s (1969) need for achievement is one of the best known of the motivation-tosucceed motivators, but success may also be a function of goal motivation, self-actualization motivation, the desire to lead or manage, and other motivational factors. In addition, as Paul Stoltz (1997) has shown, the ability or drive to overcome adversity is often an important motivational factor. A company seeking to have its leaders succeed globally must either select leaders with the appropriate skills or develop its existing leaders in those skills, particularly as they relate to emotional and cultural intelligences. Furthermore, it must either choose those who possess high levels of motivation to be successful leaders or develop those motivations in them. The abilities to persist in the face of adversity, endure in frustrating, confusing, and lonely foreign environments, adapt to different ways of thinking, and elicit the right responses in cross-cultural interpersonal relationships are prerequisites to successful global leadership. Learning from experiences, as well as failures, goes a long For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. 510 way in developing cultural and emotional intelligences. Understanding why a positive or a negative outcome occurred and how to repeat or avoid this outcome in the future is part of a life-long learning process. From an organizational perspective, developing successful global leaders is not just the task of the human resources department; rather, the entire organization must be involved in areas such as mentoring, coaching, role modeling, assessment, education, and providing experience. Only then can the organization expect to derive the maximum impact from a global business strategy. References About the MSCEIT. (n.d.). Retrieved January 4, 2005, from www.emotionaliq.com. Alon, I. (2003). Chinese culture, organizational behavior, and international business management. Westport, CT7 Praeger. Bar-On, R. (1997). EQi, BarOn emotional quotient inventory: Users’ manual (pp. 121 – 127). Toronto7 Multi-Health Systems. Bar-On, R. (1998). EQi, BarOn emotional quotient inventory: Facilitator’s resource manual (pp. 49 – 50). Toronto7 MultiHealth Systems. Brodbeck, F. C., Frese, M., & Javidan, M. (2002). Leadership made in Germany: Low on compassion, high on performance. Academy of Management Executive, 16(1), 16 – 30. Bryan, L. L., Rall, W., Fraser, J., & Oppenheim, J. (1999). Race for the world: Strategies to build a great global firm. Boston7 Harvard Business School Press. Byron, E. (2002, November 18). The best way to. . .learn a foreign language. Wall Street Journal, P.R. 13. Caruso, D. (2005). A practical guide to the MSCEIT. Retrieved February 8, 2005, from http://www.emotionalintelligencemhs. com/1APractical.asp?GUID=&#MSCEIT. Earley, P. C., & Ang, S. (2003). Cultural intelligence: Individual interactions across cultures. Stanford, CA7 Stanford Business Books. Earley, P. C., & Mosakowski, E. (2004). Cultural intelligence. Harvard Business Review, 82(10), 139 – 140. Earley, P. C., & Peterson, R. S. (2004). The elusive cultural chameleon: Cultural intelligence as a new approach to intercultural training for the global manager. Academy of Management Learning and Education, 3(1), 100 – 115. Emmons, S. (1991, January 9). Emotions at face value (p. E1). Los Angeles Times. Goleman, D., Boyatzis, D., & McKee, A. (2002). Primal leadership: Realizing the power of emotional intelligence (pp. 17 – 18). Cambridge, MA7 HBR Press. Holmes, A. (2002). Intelligent about culture. Computer Weekly. Retrieved December 30, 2003, from Business Source Premier. House, R., Javidan, M., Hanges, P., & Dorfman, P. (2002). Understanding cultures and implicit leadership theories across the globe: An introduction to project GLOBE. Journal of World Business, 37(1), 3 – 10. House, R. J., Hanges, P. J., Ruiz-Quintanilla, S. A., Dorfman, P. W., Javidan, M., Dickson, M., et al. (1999). Cultural influences on leadership and organizations: Project GLOBE. In W. H. Mobley, M. J. Gessner, & V. Arnold (Eds.). Advances in global leadership (pp. 184). Stamford, CT7 JAI Press. 511 Javidan, M., & House, R. (2002). Leadership and cultures around the world: Findings from GLOBE: An introduction to the special issue. Journal of World Business, 37(1), 1 – 2. Kelley, P. C., & Meyers, J. (2004). Cross-cultural adaptability inventory. Chicago7 Pearson and Reid London House (Product # 02721). Lee, R. E. (2003). It doesn’t matter: bMei guanxi,Q cultural difference and business opportunity in the People’s Republic of China. In I. Alon (Ed.), Chinese culture, organizational behavior, and international business management (pp. 73 – 84). Westport, CT7 Praeger. Manning, T. T. (2003). Leadership across cultures: Attachment style influences. Journal of Leadership and Organizational Studies, 9(1), 20 – 32. McClelland, D. C., & Winter, D. G. (1969). Motivating economic achievement. New York7 Free Press. McNett, J., & Bird, A. (2002). Experiential teaching and learning in international management. AIB Insights, 2(2), 11 – 12. Montagliani, A., & Giacalone, R. A. (1998). Impression management and cross-cultural adaptation. The Journal of Social Psychology, 138(5), 598 – 608. Nicholson, N. (1998). How hardwired is human behavior? Harvard Business Review, 76(4), 134 – 147. Offermann, L. R., & Phan, L. U. (2002). Culturally intelligent leadership for a diverse world. In R. E. Riggio, S. E. Murphy, & F. J. Pirozzolo (Eds.). Multiple intelligences and leadership (pp. 187 – 214). Mahwah, NJ7 Lawrence Erlbaum Associates. Peterson, B. (2004). Cultural intelligence: A guide to working with people from other cultures. Yarmouth, ME7 Intercultural Press. Riggio, R. E., Murphy, S. E., & Pirozzolo, F. J. (Eds.). (2002). Multiple intelligences and leadership. Mahwah, NJ7 Lawrence Erlbaum Associates. Robbins, S. P. (2003). Organizational behavior. (10th ed.). Upper Saddle River, NJ7 Prentice Hall. Rosen, R., & Digh, P. (2001). Developing globally literate leaders. Retrieved January 3, 2004, from http://www1.sim.edu.sg/ sim/pub/mag/sim_pub_mag_list.cfm?ID=961. Rosen, R. H., Digh, P., Phillips, C., & Rosen, R. T. (Eds.). (2000). Global literacies: Lessons on business leadership and national cultures. New York7 Simon and Schuster. Se habla Ingles. (2004, December 30). Wall Street Journal, A8. Stein, S. J., & Book, H. E. (2000). The EQ edge: Emotional intelligence and your success (pp. 1 – 3). Toronto7 Stoddart Publishing Co. Stoltz, P. G. (1997). The adversity quotient. New York7 Wiley. Suutari, V. (2002). Global leader development: An emerging research agenda. Career Development International, 7(4), 218 – 233. Tischler, L. (2004). IBM’s management make over. Fast Company, 88, 112 – 113. Weiss, H. M., & Cropanzano, R. (1996). Affective events theory. In B. M. Staw, & L. L. Cummings (Eds.), Research in organizational behavior, vol. 18 (pp. 17 – 19) Greenwich, CT7 JAI Press. What is the MSCEIT? (n.d.). Retrieved January 4, 2005, from www.emotionalintelligencemhs.com. Yukl, G., Gordon, A., & Taber, T. (2002). A hierarchical taxonomy of leadership behavior: Integrating a half century of behavior research. Journal of Leadership and Organizational Studies, 9(1), 15 – 32. Zakak, A., & Douvas, S. (1999, January 6). Insurance globalization requires cultural intelligence. Journal of Commerce, 6A. 15 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. Global leadership success through emotional and cultural intelligence I. Alon, J.M. Higgins Further reading At a glance...the world economy. (2004). National Institute Economic Review, 89(1), 2 – 3. Gardner, H. (1983). Frames of mind: The theory of multiple intelligences (pp. 237 – 276). New York7 Basic Books. Gibbs, N., Park, A., & Birnbaum, J. (1995). The EQ factor. Time, 146(14), 67 – 68. Goleman, D. (1995). Emotional intelligence: Why it can matter more than IQ. New York7 Bantam Books. Goleman, D. (2000). Leadership that gets results. Harvard Business Review, 78(2), 78 – 90. 16 Low, P., et al. (2004). World trade report, 2004. Geneva7 World Trade Organization. Pew Research Center for the People and the Press. (2003). AntiAmericanism: Causes and characteristics. Retrieved December 30, 2003, from http://people-press.org/. Rubin, D. (2001, December 30). Grumpy German shoppers distrust the Wal-Mart style (p. A15). New York7 Seattle Times. Salovey, P., & Mayer, J.D. (1990). Emotional intelligence. Imagination, Cognition and Personality, 9(3), 185 – 211. Stein, S.J. (1999, October 27). EQ-I and success [Slide]. Toronto7 EQ-i Certification program. For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. 512 3. The Global Leadership of Carlos Ghosn at Nissan “I did not try to learn too much about Japan before coming, because I didn’t want to have too many preconceived ideas. I wanted to discover Japan by being in Japan with Japanese people.”1 “Well, I think I am a practical person. I know I may fail at any moment. In my opinion, it was extremely helpful to be practical [at Nissan], not to be arrogant, and to realize that I could fail at any moment.” Carlos Ghosn, 20022 Introduction Nissan had been incurring losses for seven of the prior eight years when, in March 1999, Carlos Ghosn (pronounced GOHN) took over as the first non-Japanese Chief Operating Officer of Nissan. Many industry analysts anticipated a culture clash between the French leadership style and his new Japanese employees. For these analysts, the decision to bring Ghosn in came at the worst possible time because the financial situation at Nissan had become critical. The continuing losses were resulting in debts (approximately $22 billion) that were shaking the confidence of suppliers and financiers alike. Furthermore, the Nissan brand was weakening in the minds of consumers due to a product portfolio that consisted of models far older than competitors. In fact, only four of the company’s 43 models turned a profit. With little liquid capital available for new product development, there was no indication that Nissan would see increases in either margin or volume of sales to overcome the losses. The next leader of Nissan was either going to turn Nissan around within two to three years, or the company faced the prospect of going out of business. Realizing the immediacy of the task at hand, Ghosn boldly pledged to step down if Nissan did not show a profit by March 2001, just two years after he assumed duties. But it only took eighteen months (October 2000) for him to shock critics and supporters alike when Nissan began to operate profitably under his leadership. Background of Carlos Ghosn Born in Brazil in 1954 to French and Brazilian parents, both of Lebanese heritage, Carlos Ghosn received his university education in Paris. Following graduation at age 24, Ghosn joined the French firm, Compagnie Générale des Etablissements Michelin. After a few years of rapid advancement to become 1 “Decision-Making and Coordination Structures of the Alliance,” 20 October 1999, http://www.nissanglobal.com. 2 “Nissan President Carlos Ghosn Talks about His Company’s Recovery,” Nikkei Business, 20 May 2002, http://nb.nikkeibp.co.jp/Article/1142. Copyright © 2003 Thunderbird, The American Graduate School of International Management. All rights reserved. This case was prepared by Professor John P. Millikin and Dean Fu, Research Assistant, with assistance from Koichi Tamura for the purpose of classroom discussion only, and not to indicate either effective or ineffective management. 17 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. A07-03-0014 Ghosn led the turnaround initiative at Renault in the aftermath of its failed merger with Volvo. Because he was so focused on increasing margins by improving cost efficiencies, he earned the nickname “Le Cost-Killer” among Renault ‘s top brass and middle management personnel. Three years later, when Renault formed a strategic alliance with Nissan, Ghosn was asked to take over the role of Nissan COO in order to turn the company around in a hurry, just as he had done earlier in his career with Michelin South America. For Ghosn this would be the fourth continent he would work on, which combined with the five languages he spoke, illustrates his capacity for global leadership. Background of Nissan In 1933, a company called Jidosha-Seizo Kabushiki-Kaisha (which means “Automobile Manufacturing Co., Ltd.” in English) was established in Japan. It was a combination of several earlier automotive ventures and the Datsun brand which it acquired from Tobata Casting Co., Ltd. Shortly thereafter in 1934, the company name was changed to Nissan Motor Co., Ltd. After the Second World War, Nissan grew steadily, expanding its operations globally. It became especially successful in North America with a lineup of smaller gasoline efficient cars and small pickup trucks as well as a sports coupe, the Datsun 280Z. Along with other Japanese manufacturers, Nissan was successfully competing on quality, reliability and fuel efficiency. By 1991, Nissan was operating very profitably, producing four of the top ten cars in the world. Nissan management throughout the 1990s, however, had displayed a tendency to emphasize shortterm market share growth, rather than profitability or long-term strategic success. Nissan was very well known for its advanced engineering and technology, plant productivity, and quality management. During the previous decade, Nissan’s designs had not reflected customer opinion because they assumed that most customers preferred to buy good quality cars rather than stylish, innovative cars. Instead of reinvesting in new product designs as other competitors did, Nissan managers seemed content to continue to harvest the success of proven designs. They tended to put retained earnings into equity of other companies, often suppliers, and into real-estate investments, as part of the Japanese business custom of keiretsu investing. Through these equity stakes in other companies, Ghosn’s predecessors (and Japanese business leaders in general) believed that loyalty and cooperation were fostered between members of the value chain within their keiretsu. By 1999, Nissan had tied up over $4 billion in the stock shares of hundreds of different companies as part of this keiretsu philosophy. These investments, however, were not reflected in Nissan’s purchasing costs, which remained between 20-25% higher than Renault’s. These keiretsu investments would not have been so catastrophic if the Asian financial crisis had not resulted in a devaluation of the yen from 100 to 90 yen = 1 US dollar. As a result, both Moody’s and Standard & Poor’s announced in February 1999, that if Nissan could not get any financial support from another automobile company, then each of them would lower Nissan’s credit rating to “junk” status from “investment grade”. Clearly, Nissan was in need of a strategic partner that could lend both financing and new management ideas to foster a turnaround. In addition, Nissan sought to expand into other regions where it had less presence. In March 1999, Nissan President and Chief Executive Officer Yoshikazu Hanawa found such an alliance opportunity with Renault, which assumed a 36.8% stake in Nissan, allowing Nissan to invest $5.4 billion and retain its investment grade status. Hanawa was also able to get Renault’s top management to agree to three important principles during negotiations: 2 A07-03-0014 18 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. COO of Michelin’s Brazilian subsidiary, he learned to manage large operations under adverse conditions such as the runaway inflation rates in Brazil at that time. Similarly, as the head of Michelin North America, Ghosn faced the pressures of a recession while putting together a merger with Uniroyal Goodrich. Despite his successes in his 18 years with Michelin, Ghosn realized that he would never be promoted to company president because Michelin was a family-run company. Therefore, in 1996 he decided to resign and join Renault S.A., accepting a position as the Executive Vice President of Advanced Research & Development, Manufacturing, and Purchasing. It was actually Hanawa who first made the request to Louis Schweitzer, CEO of Renault, to send Carlos Ghosn to Nissan to be in charge of all internal administration and operations activities. Why would Renault agree to all of these conditions in this bailout of Nissan? Renault was also looking for a partner, one that would reduce its dependence on the European market and enhance its global position. In 1997 85% of Renault’s revenue was earned in Europe, 32.8% of which came from its domestic (French) market. Renault also had high market share in Latin America, especially Brazil. On the other hand, Nissan has the second largest market share in Japan and a strong market share in North America (see Appendix 2, Nissan’ market share). Nissan lacked, however, market share and distribution facilities in Latin America. By creating the new alliance, Nissan and Renault expected to balance their market portfolios and become more competitive. Renault wanted a partner that was savvy and established in the North American and Asian markets. Furthermore, the merger of Daimler and Chrysler in May 1998 gave Renault a sense of urgency about finding a partner to compete more effectively on a global scale. As a result, Renault and Nissan agreed to a Global Alliance Agreement on March 27, 1999, with Carlos Ghosn designated to join Nissan as COO. Addressing National Culture Issues When Ghosn went to Japan, he knew that industry analysts were reasonable in doubting whether a nonJapanese COO could overcome Japanese cultural obstacles, as well as effectively transform a bureaucratic corporate culture. Ghosn was going to have to address several Japanese cultural norms in order to transform the company back into a successful one. The following are some of the issues he faced. Consensus Decision-Making and its Relationship to Career Advancement Since the war, the Japanese business culture for decades had been producing leaders who were very good at reaching consensus and working cooperatively within a department (a derivative of the mura-shakai consensus based society system). Thus, the conventional wisdom in Japan was that conscientiousness and cooperation were the key elements to maintaining operational efficiency and group harmony. This paradigm often resulted in delays to the decision making process in an effort to achieve consensus. As an unintended consequence of the emphasis on conscientiousness, Japanese professionals tended to avoid making mistakes at all costs in order to protect their career growth. This can result in frequent informal informational meetings and coalitions (called nemawashi) that occur between professional departments prior to a decision-making meeting. Through these informal contacts, participants try to poll the opinions of other participants beforehand in order to test which positions have the strongest support so that their position is aligned with the position most likely to be influential. Then, at the time for a meeting with their superiors, participants tender their aligned positions one by one to the ultimate decision maker with the feeling that if the decision maker agrees to the consensus, then no one individual can be identified later for originating a faulty position if that decision results in failure. Rules and conformity replace process. In Japan, age, education level, and number of years of service to an organization are key factors determining how an employee moves up the career ladder. Due to a cultural tenet called NennkouJyoretu, placing power in the hands of the most knowledgeable and experienced, promotions are normally based on seniority and education. In practice, the only things that usually thwart these time- and education-based promotions are performance errors that reflect poorly on the team and any behavior A07-03-0014 3 19 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. 1. Nissan would maintain its company name 2. The Nissan CEO would continue to be selected by the Nissan Board of Directors 3. Nissan would take the principal responsibility of implementing a revival plan. This part of Japanese culture had been useful to reinforce control over operations and enhance quality and productivity. During the postwar period of the company’s growth, it contributed to great working relationships among everyday team members at Nissan, but these norms, by the mid 1990s, were actually impeding the company’s decision making. Specifically, these cultural norms severely hampered risk-taking and slowed decision making at all levels. Existing teams of employees routinely spent much time on concepts and details, without much sense of urgency for taking new action, due in part to the risks involved with actions that could result in failure. This mindset contributed to a certain degree of complacency with market position and internal systems at Nissan, undermining the company’s competitiveness. In a related cultural issue, as employees became increasingly aware that Nissan was not performing well, the Japanese culture of protecting career advancement led to finger pointing rather than acceptance of responsibility. Sales managers blamed product planning. Product planning blamed engineering. Engineering blamed manufacturing and so on. When Ghosn first arrived in Japan, he was surprised to learn that, while most of the employees sensed that there was indeed a problem within the company, they nearly always believed that their respective departments were operating optimally. The consensus was that other departments and other employees were creating the company’s problems. Ghosn also learned that many of the employees of the company did not have a sense of crisis about the possibility of bankruptcy at Nissan because of the Japanese business tradition, which implied that large troubled employers would always be bailed out by the government of Japan. This view was based on the long standing partnership between the government and the major businesses to ensure employment and expand exports to world markets. The businesses for their part were committed to providing lifetime employment to their workers. Addressing Corporate Culture Issues Not only were there Japanese cultural norms for Ghosn to contend with, but there were procedural norms at Nissan, both formal and informal, which were holding the company back. First, once decisions were made at Nissan, the follow-up during implementation was often not effective. This was not usually the case in other Japanese companies. Second, top management had developed tunnel vision regarding its strategic focus on regaining market share, as opposed to restoring margin per unit sold. This was in part due to a focus on what was best for maintaining the company’s size and its employees, i.e. more units to produce, rather than what was best for customers (newer, better products to meet market demands) or for investors (higher earnings and higher stock value). Additionally, in an unusual break from Japanese business culture, there were communication problems between the layers of the organization. Staffs seemed relatively uninformed of key corporate business decisions, while top management seemed out of touch with what policy execution issues were present at the middle and lower management levels. Ghosn realized that Nissan’s fundamental problem was the lack of vision from management and the persistent problem of ignoring the voice of Nissan’s customers.3 Furthermore, he identified the following problems at Nissan: 1. Lack of a clear profit orientation 2. Insufficient focus on customers and too much focus on competitors 3. Lack of a sense of urgency 3 4 , p. 155, Carlos Ghosn (2001) (August 10, 2002). , p. 26, (2000) (August 8, 2002). 4 A07-03-0014 20 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. that causes disharmony among team members. When something goes wrong, the most senior person accepts responsibility while accountability at lower levels is diffused. Carlos Ghosn’s Philosophies of Management Despite all of his doubters, Ghosn embraced the cultural differences between the Japanese and himself, believing fervently that cultural conflict, if paced and channeled correctly, could provide opportunity for rapid innovation. He felt that by accepting and building on strengths of the different cultures, all employees, including Ghosn himself, would be given a chance to grow personally through the consideration of different perspectives. The key, he reiterated many times, was that no one leader should try to impose his/her culture on another person who was not ready to try the culture with an open mind and heart. In this vein, Carlos Ghosn came to Japan knowing that if he were to start imposing reforms by using the authority of his company position, rather than work through the Japanese culture, then the turnaround he sought would likely backfire. What he did bring with him was three overriding principles of management that transcended all cultures. And he used these as a backdrop to give employees structure as to their efforts of determining the proper reforms. These three principles are as follows: 1. Transparency—an organization can only be effective if followers believe that what the leaders think, say, and do are all the same thing 2. Execution is 95% of the job. Strategy is only 5%—organizational prosperity is tied directly to measurably improving quality, costs, and customer satisfaction. 3. Communication of company direction and priorities—this is the only way to get truly unified effort and buy-in. It works even when the company is facing layoffs. The First Months in Japan and the Cross-Functional Teams When you get a clear strategy and communicate your priorities, it’s a pleasure working in Japan. The Japanese are so organized and know how to make the best of things. They respect leadership. Ghosn5 Even though Ghosn expected that his attitude toward cultural respect and opportunism would lead to success, Ghosn was pleasantly surprised by how quickly Nissan employees accepted and participated in the change of their management processes. In fact, he has credited all of the success in his programs and policies (described below) to the willingness of the Nissan employees at all levels to change their mindsets and embrace new ideas. Perhaps it was the way he started that set the foundation among the employees. He was the first manager to actually walk around the entire company and meet every employee in person, shaking hands and introducing himself. In addition, Ghosn initiated long discussions with several hundred managers in order to discuss their ideas for turning Nissan around. This began to address the problems within the vertical layers of management by bringing the highest leader of the company in touch with some of the execution issues facing middle and lower management. It also sent a signal to other executives that they needed to be doing the same thing. But he did not stop there. After these interviews, he decided that the employees were quite energetic, as shown by their recommendations and opinions. With this in mind, Ghosn opted to develop a program for transformation which relied on the Nissan people to make recommendations, instead of hiring outside consultants. He began to organize Cross-Functional Teams to make decisions for radical 5 Middleton, John. ExpressExec.com, http://www.expressexec.wiley.com/ee/ee07.01.07/sect0.html, Acquired on Internet, 7 August 2002. A07-03-0014 5 21 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. 4. No shared vision or common long term plan 5. Lack of cross-functional, cross-border, cross-cultural lines of work.4 Before the strategic alliance occurred between Renault and Nissan, Renault had made an agreement with Hanawa to remain sensitive to Nissan’s culture at all times, and Ghosn was intent on following through on that commitment. First and foremost, when he chose expatriates to accompany him from Renault to Nissan, he screened carefully to ensure that those expatriates would have his same cultural attitudes toward respecting Nissan and the Japanese culture. And, after completing his rounds of talking with plant employees, he chose not to use his newfound understanding of the problems to impose a revival plan. Instead, Ghosn mobilized existing Nissan managers by setting up nine CrossFunctional Teams (CFTs) of approximately 10 members each in the first month. Through these CFTs, he was allowing the company to develop a new corporate culture from the best elements of Japan’s national culture. He knew that the CFTs would be a powerful tool for getting line managers to see beyond the functional or regional boundaries that defined their direct responsibilities. In Japan, the trouble was that employees working in functional or regional departments tend not to ask themselves as many hard questions as they should. Working together in CFTs helped managers to think in new ways and challenge existing practices. Thus, Ghosn established the nine CFTs within one month of his arrival at Nissan. The CFT teams had responsibility for the following areas: Business Development, Purchasing, Manufacturing and Logistics, Research and Development, Sales and Marketing, General and Administrative, Finance and Cost, Phase-out of Products and Parts, Complexity Management, and Organizational Structure. Ghosn had the teams review the company’s operations for three months and come up with recommendations for returning Nissan to profitability and for uncovering opportunities for future growth. Even though the teams had no decision making power, they reported to Nissan’s nine-member executive committee and had access to all company information. The teams consisted of around ten members who were drawn from the company’s middle management. Ten people could not cover broad issues in depth. To overcome this each CFT formed a set of subteams. These sub-teams also consisted of ten members and focused on particular issues faced by the broad teams. CFTs used a system reporting to two supervisors. These leaders were drawn from the executive committee and ensured that the teams were given access to all the information that they needed. To prevent a single function’s perspective from dominating, team had two senior voices that would balance each other. One of the regular members acted as a pilot who took responsibility for driving the agenda and discussion. The pilot and leaders selected the other members. The pilots usually had frontline experience as managers. The CFTs also prescribed some harsh medicine in the form of plant closures and employee reductions. The CFTs would remain an integral part of Nissan’s management structure. They continue to brief the CEO; however the team’s missions have changed somewhat. They are to carefully watch the on-going revival plan and try to find further areas for improvement. Since the members of the teams were often mid-level managers who rarely saw beyond their own functional responsibilities, this new coordination had high impact on participants. Specifically, it allowed them to understand how the standard measures of success for their own departments were mean6 A07-03-0014 22 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. change. Part of his interest in doing this in-house was to address the motivation and horizontal communication issues that he encountered throughout the organization. He felt that if the employees could accomplish the revival by their own hands, then confidence in the company as a whole and motivation would again flourish. In a sense he was making it clear that he was also putting his own future in their hands because he had publicly stated several times that the Nissan company had the right employees to achieve profitability again in less than two years. As Ghosn explained in a speech in May 2002, “The trouble is that people working in functional or regional teams tend not to ask themselves as many hard questions as they should. By contrast, working together in cross-functional teams helps managers to think in new ways and challenge existing practices. The teams also provide a mechanism for explaining the necessity for change and for projecting difficult messages across the entire company.”6 Ghosn did have one great stroke of luck that helped him reinforce the need for change. At approximately the same time as he was arriving in Japan, Yamaichi, the major financial house in Japan, went bankrupt and was not bailed out by the Japanese government. Before that, Japanese employees, including Nissan’s, did not worry about corporate problems because the government was always saving the day. This recent turn of events helped to develop a sense of urgency among Nissan employees. Ghosn, to his credit, used the Yamaichi example whenever he could to continue to motivate his employees, repeating that their fate would be no different if they did not put all of their effort into figuring out, and then executing, the best way to turn Nissan around. Reforms in Full Swing Within the first six months, the fruit of the CFTs and the increased sense of urgency were apparent. Management (especially Ghosn) was increasingly perceived as transparent among all levels of employees, which Ghosn attributed to his respect for protecting Nissan’s identity. In addition, decisions were being made faster; and there was increased communication and understanding about what was important to management. There was, however, very little implementation yet, only planning. Having received from the CFTs the recommendations, which included plant closures and reduced headcount, Ghosn created and communicated what he called the Nissan Revival Plan (or NRP) in October of 1999. From that point forward he stressed implementation and follow-up, rather than planning and reexamining decisions. Other CFTs were formed, but the bulk of his efforts lay in ensuring high-quality execution of the decisions that were laid out in the plan. Ghosn’s main focus areas included: (1) development of new automobiles and markets, (2) improvement of Nissan’s brand image, (3) reinvestment in research and development, and (4) cost reduction. Reducing Redundancies To achieve these results, the closing of five factories and the reduction of 21,000 jobs (14% of Nissan’s workforce) were planned. Job cuts would occur in manufacturing, management, and the dealer network.7 Since Japanese business culture had tended to have lifelong employment as a principle, Ghosn endured strong criticism from the media, including being labeled as a gaijin, a foreigner. In addition, Ghosn fired several managers who did not meet targets, regardless of the circumstances. Many industry analysts cited his demotion of Vice President of Sales and Marketing in Japan, Mr. Hiroshi Moriyama, as unacceptable and reckless. They contended that falling revenues and dissipated market share were 6 Ghosn, Carlos, “Saving the Business without Losing the Company,” Harvard Business Review, Vol. 80, No. 1, January 2002. 7 “Nissan’s Napoleon,” Worldlink, 11 July 2002, http://www.worldlink.co.uk. 8 Barr, C.W. “Get Used to It: Japanese Steel Themselves for Downsizing. Mitsibushi and Nippon Telephone Have Added 30,000 Layoffs to Nissan’s 21,000 Announced Oct. 19,” Christian Science Monitor, Nov. 12, 1999. A07-03-0014 7 23 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. ingless to Nissan unless they were framed in a way that connected to other departments to result in customer attraction and retention. In many cases, these mid-level managers enjoyed learning about the business from a bird’s eye perspective and felt fully engaged in the change process, giving them a sense of responsibility and ownership about turning Nissan around. Keiretsu Partnerships As one of the biggest changes of the NRP, Nissan broke away from the Japanese cultural norm of keiretsu investments. However Nissan maintained customer-supplier relationships with those former keiretsu partners. As it turned out, Nissan regained billions in tied up capital to use for debt servicing and new product development without losing any significant pricing advantages. In fact, because Ghosn put such an emphasis on reducing purchasing costs, Nissan actually began to substantially lower its costs after the keiretsu investments were sold. Reorganization Another major component of the NRP was the restructuring of the organization toward permanent cross-functional departments, which each serviced one product line. As a result, the staffs gained better visibility of the entire business process and began to focus on total business success and customer satisfaction, as opposed to misleading performance goals that could be taken out of context. In addition, Ghosn also eliminated all advisor and coordinator positions that carried no responsibilities and put those personnel in positions with direct operational responsibility. Employees were disciplined much more strongly for inaccurate or poor data than misjudgment, thereby stimulating risk-taking behavior and personal accountability. Ghosn also made it clear, however, that engineers were not to reduce product cycle times or do anything that would negatively impact product quality or reliability. He repeated this often to drive home the point that the way to restore the power of the Nissan brand was through each individual customer’s experience. For higher-level staff, Ghosn created a matrix organization to improve transparency and communication. Within this matrix, he assigned each staff member two responsibilities: functional (e.g., marketing, engineering) and regional (e.g., domestic, North America). The result was that each staff member would have two bosses, thereby building awareness of both functional and regional issues. Ghosn also put an emphasis on cross-functional department members having very clear lines of responsibility and high standards of accountability. Every report, both oral and written, was to be 100% accurate. Ghosn is quoted as saying, “Right from the beginning, I made it clear that every number had to be thoroughly checked. I did not accept any report that was less than totally clear and verifiable, and I expected people to personally commit to every observation or claim they made.”9 Performance Evaluations and Employee Advancement Ghosn also put focus on performance by introducing a performance based incentive system. These incentives included cash incentives and stock options for achievements that could be linked directly to successful operating profits and revenue. This was a large departure from the traditional Japanese compensation system, in which managers usually received no stock options or bonuses. Under Ghosn’s compensation system, the highest achievers got the highest rewards. And promotions were no longer limited to age, length of service, or educational level. For example, a female factory worker who had only a high school diploma was promoted to be a manufacturing manager based on her strong abilities to perform the work, relating promotion and salary increase to the ability to perform challenging or demanding tasks. The promotion of some younger leaders over older, longer-serving employees caused some problems regarding lack of cooperation. But just as Ghosn saw cultural differences as growth opportunities, he thought these tests of authority were growth experiences for young managers. 9 Ghosn, Carlos. “Saving the Business without Losing the Company,” Harvard Business Review, Vol. 80, No. 1, January 2002. 8 A07-03-0014 24 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. due to Nissan’s aging product line rather than to Moriyama’s performance. In addition to the media and industry analysts, the government, also expressed concern about the layoffs, but Prime Minister Keizo Obuchi responded by offering subsidies and programs to help the affected workers.8 The NRP was achieved in March 2002, one year ahead of schedule.10 One success was a 20% reduction in purchasing costs. This was a result of achieving a purchase price from kereitsu suppliers that matched the prices offered by Renault’s suppliers. In addition, the supplier base shrunk by 40% and the service suppliers decreased by 60%.11 Prior to NRP, seven plants produced automobiles based on 24 platforms. After NRP, four plants produced automobiles based on 15 platforms.12 The Near Future—Implementation of Nissan 180 On May 9, 2002, Ghosn stated in a speech for an annual business review, “The Nissan Revival Plan is over. Two years after the start of its implementation, all the official commitments we took have been overachieved one full year ahead of schedule… Nissan is now ready to grow.” He went on in the speech to set out the goals for a new plan, one he called “Nissan 180” which would focus on profitable growth. All new goals were to be accomplished by April 1, 2005. The one in “Nissan 180” represents an additional 1,000,000 car sales for Nissan worldwide; the eight, an 8% operating profitability with no changes in accounting standards; and the zero represented zero automotive debt. In addition, the plan called for an increase of global market share from 4.7% presently to 6.1%, a further reduction of purchasing costs by 15%, and a significant increase in customer satisfaction and sales satisfaction ratings. In 2002, midcareer hires (400) outnumbered college recruits (280). Because hiring outside managers might create animosity among managers within Nissan, this practice reflects a sharp change in hiring decisions. “We’re moving to a system where it doesn’t matter if you’ve been in the company ten years or 40 years….If you contribute, there will be opportunity and reward,” said Kuniyuki Watanabe, Nissan’s Senior Vice President for Human Resources.13 Not only was Ghosn aggressively launching the Nissan 180 program to transition out of the Nissan Revival Plan program, but he was also pushing a new, customer-focused initiative called “Quality 3-3-3”. He said that this program focuses on three categories of quality: product attractiveness, product initial quality and reliability, and sales & service quality. Challenges for Ghosn and Nissan As Ghosn contemplates the future, he knows that the transformation has really just begun. How could the momentum and the energy that his employees exhibited be maintained now that they had all reached the goals that were seemingly Herculean just over two years ago. Would there be a letdown of effort and results by Nissan employees, or would Ghosn be able to mobilize them to get to the next level of profitable growth and reestablishment of brand power and market share? He was aware that current succession plans called for him to return to Renault as its new CEO, replacing Louis Schweitzer in 2005. Before this could happen, Ghosn would be challenged to find an adequate replacement who could take Nissan to new heights of accomplishment as planned. Could the new approaches that had been so successful become part of the Nissan culture without his continued guidance? Would the success of the NRP spoil the sense of urgency that helped reinforce the need for change allowing Nissan to slip back into old habits? How could he find someone to carry forward the need to create a sustainable pattern of customer focus and profitable growth? 10 2002 News, “Nissan Announced NRP Will Conclude One Year Earlier than Planned,” http:// www.nissan-global.com. 11 Nissan 180, “Fiscal Year 01 Business Review,” http://www.nissan-global.com. 12 Nissan 180, “Fiscal Year 01 Business Review,” http://www.nissan-global.com. 13 Raskin, Andy. “Voulez-Vous Completely Overhaul This Big, Slow Company and Start Making Some Cars People Actually Want Avec Moi?” Business 2.0, January 2002. A07-03-0014 9 25 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. The First Three Years Summary of Results of NRP The turnaround at Nissan was phenomenal, with the following statistics: • From seven out of eight years of operating losses to profitability within the first 12 months. Since 1999, Nissan has shown four consecutive semi-annual operating profits, and the year 2001 was marked by the best-ever, full-year earnings at Nissan. The current operating margin is 7.9%, over 3% greater than committed to in the NRP. • Net automotive debt is the lowest it has been in 24 years (down from $10.5 billion to $4.35 billion). • The company developed eight new car models to be launched by late 2002/early 2003, including the awardwinning, revamped Altima, and the new 350Z. • Supplier costs were reduced by 20%, as per the NRP, mainly through sourcing and other strategies to minimize exchange rate issues, as well as the reduction of the number of parts suppliers by 40% and the number of service providers by 60%. • Five plants have been closed, according to the NRP. • Headcount was reduced by 21,000, according to the NRP, mainly through natural turnover, retirements, pre-retirement programs, and by selling off non-core businesses to other companies. • The number of car models that were profitable increased to 18 of 36 models from 4 of 43 models. 10 A07-03-0014 26 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. Appendix 1 Appendix 2 A07-03-0014 27 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. Nissan and Renault Profile 11 1954 1974 1978 1981 1984 1985 1989 1990 1996 1999 Carlos Ghosn’s Background* Born in Brazil, March 9 Receives chemical Engineering degree from École Polytechnique, Paris Graduates from École des Mines de Paris. Joins Michelin Becomes plant manager at Le Puy plant, France Becomes head of R&D Becomes COO of South American operations. Turns company around President and COO of North American operations Named CEO of North American operations Joins Renault as Executive VP of advanced R&D, car engineering and development, power train operations, manufacturing, and purchasing. Gains nickname, “Le Cost-Killer” Named Nissan president and COO * http://www.google.co.jp/search?q=cache:NNR0tavWLwAC:www.ai-online.com/articles/ 0302coverstory.asp+carlos+Ghosn,+background&hl=ja&ie=UTF-8 12 A07-03-0014 28 For use only in the course Global Leadership at Northeastern University taught by Under Guidance from Dr. Sriram Rajagopal from September 17, 2019 to December 31, 2021. Use outside these parameters is a copyright violation. Appendix 3 9B13M108 GOJO INDUSTRIES: AIMING FOR GLOBAL SUSTAINABILITY LEADERSHIP Professor Chris Laszlo, Anya Briggs and Jayesh Potdar wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization.