Carlos Ghosn Is the Right Company

In the history of Modern Corporation Carlos Ghosn has led the most dramatic turnaround. He achieved one of the great milestone in the Auto Industry. He managed to get the French and Japanese automaker to act as on entity which could help both the companies to prosper in the sector where scale is everything. Nearly two decades he was dominating the Renault-Nissan alliance. In 1999 Nissan was almost bankrupt. Daimler reviewed them but later the made corporate marriage with Mitsubishi. At that time Renault was also in the verge of bankrupt and became state owned just few year before invested $5 billion in Nissan for one third of their stake.

He took the responsibility and he started doing costing cutting methods as a first step like he slashed costs, unprofitable factories were shutdown, decreased the supplier network etc., He also called as “LE COST KILLER” for his activity. When everyone was skeptical about his move he proved them that they wrong by making the company as second most profitable largest auto manufacturer in the Japan within a year.

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He was widely credited for the saving the company from collapse when the industry has seen failed merger like Daimler and Chrysler.

Under his leadership he transformed the company as one of most profitable companies in the world. Each company will have time for cost cutting and next phase of growth but he had the simultaneously and that’s why he has abled to bring profit in a year. He did this thing like formula car race.

He was investing more in developing zero emission vehicle in affordable segment which includes Nissan LEAF which was launched in 2010. While everyone is speaking about the electric vehicle in recent times he had a vision for that a decade back. When Japan was affected in earthquake and Tsunami in March 2011 which affected their plant which is one of the biggest engine plant and later that year flood in Thailand has affected their key suppliers inspite of all these issues company has managed to meet the demand under his leadership.

Ghson was the only and the first person to run two fortune 500 companies at the same time. He was handling three leadership role: Chairman and CEO of Nissan and Renault alliance as well as holding the same position in individual companies. He was seen as transformational leader. When he was considered as a superhero or legend in the auto industry what has made to fall him from that grace and cause reverberating across the industry and leaving a question mark with the future of the alliance company.

In the month of the November he was arrested by the Japanese officials for financial misconduct. Where Carlos Ghosn went wrong? Pay, Power and Politics? The underlying issue is too much of power lying with the one person which allowed him for the unethical activities and company was not able to detect the problem because it was not having transparent structure. Another problem is we people will not question the star people or they will not be held accountable like others for any issues. It is not because of their authority that they have it’s because of the influence they have on the employees. The more you become strong as a manager the more people will have to follow. When you have followership you will be allowed to do lot more things than usual. The most important thing for any leader is follower. This kind of charismatic leadership can be utilized positively to inspire and make things happen but on the flip side it will the turn most of the leader to turn deaf ear such that at a certain point of time they will stop/ignore feedback from others. This is what happens when start leaders have uneven proportion of powers, authority etc.,

We can’t simply say all the mistakes were done by him the board has failed to do their job. The have to check whether governance are good and other issues at each and every meetings. We have seen what happened with Satyam computers when board didn’t do their jobs. The problem for the board not monitoring the issue properly is they start believe the star leaders are the significant reason for the success of the business and they good at their job and they have aleady proven their track record. So board starts believing that he will make all strategic decision adhering to the rules and regulations. When a leaders images has been over magnified he gets the power of influencing any audit committee if set up or any report to impact the company’s financial statements. At later stage when the leader gets into a trouble they find difficult to solve. Company has to take responsibility for this because they started treat leaders as god once they started giving more success which at certain point of time which makes them to feel they are the supreme.

One of the way to solve this is adopting distributing leadership in the organization. No more authoritative or dictator leadership will work. Each and every decision has to be taken by team of leaders where each one will be held accountable for the decision or mistakes committed by them. When companies expect even employee for entry level job to be team player or focus in on team building why can’t they implement the same in the top level management as well? It’s time for democratic leadership.

Another mistake in the leadership of this alliance is “Key Person Problem” which means company will depend on one person for everything. They completely depended on the Ghosn where he fails to create a successor for him. Even company failed to do so. A most important character for a leader is to groom his/her successor. Even Carlos Ghosn in a interview with Satya Nadella, CEO, Microsoft said that leaders are to be groomed. In colleges they teach only how to face internal problems they will not teach how to face external and that comes with proper mentoring and experience. But still he failed to groom a successor which is going to affect the company.

The company is in dire need of leader who will take the lead of the company from last years sale of 10.4 billion cars. The alliance also in a crises now. Ghosn was the only person who has holding the alliance together. Ghosn has created the framework by gathering power around himself that the alliance will not work without him. As we mentioned earlier this is the problem when power concentrates with an individual person. Ghosn was the person who puts an end the tug of war played by the two companies.