Leadership in turbulent times

Carlos Ghosn, Mitt Romney, Stuart Rose: In troubled times, we need inspired leaders more than ever, suggests corporate turnaround specialist Anthony Holmes

Carlos Ghosn, the Brazilian chief executive of Nissan and Renault, achieved what may still turn out to be the most spectacular corporate turnaround of the decade. He became chief executive of Nissan in 2001 when the carmaker had debts of $20 billion and a loss before interest and tax of $6.1 billion. Within a year he had converted the loss into a profit of $2.7 billion and Nissan returned the best operating margins of any carmaker.

This was at the end of a decade in which the Japanese government’s efforts to revive economic growth had failed and its long-term economic problems were exacerbated by turbulence in the world economy. The major obstacle to reform was Nissan’s adherence to its rigidly hierarchical management structure. Not only was Ghosn’s nationality a cultural shock to a large Japanese company, but he was also prepared to act against traditional practices, which is a common characteristic of successful leadership in difficult circumstances.

Ghosn and his team took only three months in late 1999 to formulate a three-year turnaround plan and he declared his objective of returning the business to profit by 2001. Having a detailed plan that you share with all levels of the business (but keeping plan B to yourself), setting clear and simple objectives for each phase of the programme, incentivising staff and personifying this focus are all characteristics of successful leaders. Ghosn has often said how important it was for everyone remaining in the company to understand that the old way of operating had ended. He emphasised this by making himself visible and shaking hands with everyone he encountered, irrespective of their status – a small thing, but a significant cultural change.

He said that the turnaround was not just the result of the big initiatives such as cost cutting, plant closures and divestments. The most important thing was to change the mindset of the employees and to show them that they could affect performance by first achieving small gains that gave them confidence to reach more demanding targets. He told the story of the turnaround in advance and then invited everyone to act their part in it. Nissan returned to profit in 2001 and by 2003 had zero debt, with an auto-industry world-best operating margin of 10.8 per cent.

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