Carlos Ghosn: Creating value across cultures
Global business partnerships cannot achieve their full potential unless they also embrace respect for national identities and cultural values in different parts of the world – at a personal and a corporate level. Carlos Ghosn, a Brazilian-born executive of Lebanese descent who trained in France and has spent the past four years turning round a Japanese car maker (and who has run businesses on four continents), outlines the importance of managing cultural diversity
Technology and new management approaches have made it possible for a large number of people across the world to participate in the wealth creation process.
Business is increasingly conducted globally, and that increase in scope is accompanied by an increase in complexity as cross-cultural teams and companies conduct business across national, cultural and social boundaries.
The challenge is to acknowledge the differences from market to market and yet to manage the business cohesively to achieve corporate objectives.
In today’s business landscape, the creation of transnational partnerships is becoming a commonplace and valid practice. And even though there are numerous accounts of ineffective alliances between companies, it is possible to create significant, sustainable value through strategically-designed and effectively-managed business partnerships. The Renault-Nissan alliance provides a good example of one model that works.
In the late 1990s, Nissan was a company in distress, looking for a partner to help solve urgent short-term issues, and Renault was a successful European maker looking to expand its business internationally.
Nissan’s partnership with Renault began in March 1999. Renault’s $5.4 billion capital infusion and top management resources provided the necessary catalyst that led to the start of Nissan’s revival.
From the beginning, the decision to form the alliance was not so much a financial decision as it was a strategic decision about the future of each company. The structure of the alliance itself gives a clear picture of the relationship between the two.
Renault and Nissan are partners linked by a cross-shareholding. Renault holds a 44.4% stake in Nissan, and Nissan owns 15% of Renault shares. Both companies have a direct interest in the results of its partner, but each company is responsible for its own performance.
Renault and Nissan retain their own distinct brand identities. Product planning is separate. Within the Renault-Nissan alliance, which ranks fifth among global automakers, are five brand names: Nissan and Infiniti for the Nissan group, and Renault, Dacia and Samsung for the Renault group. For customers, there can be no confusion between a Renault car and a Nissan car.
Corporate identities are separate as well. Each company implements its own strategy and manages its operations under its respective executive committee. Each is accountable for specific results to its own board of directors and, ultimately, to its own shareholders.
Nissan and Renault consult each month about potential synergies through the alliance board, which steers the alliance’s medium-term and long-term strategy and coordinates joint activities on a worldwide scale. But decision-making is clearly divided between Nissan headquarters in Tokyo and Renault headquarters in Paris.
Corporate cultures are intact. Renault is predominantly French, and Nissan is predominantly Japanese. There is no blurring between Nissan and Renault. That distinction has been honoured from the very beginning.
When the alliance was signed between the two companies, there was no winner and no loser. Even though Nissan was financially weak at the time, executives at both companies were extremely aware that if the partnership were to succeed, it would be vital to respect the identities and self-esteem of all the people involved.
The reason was simple: in the final analysis, the only real asset any company has is its own people. And people will perform well only if they are motivated.
In any global organization, intra-company or regionalized cultural clashes can present an insidious danger. The same is true for inter-company or company-to-company clashes that make the media headlines.
If people feel that their identity is being consumed by a greater force, they can feel demoralized. If it becomes obvious that one partner is making all the decisions, the motivation of the other team will surely decline significantly. If that happens, the result can be a waste of talent, a waste of resources and a waste of opportunity.
From a positive perspective, a fundamental respect for the self-esteem and identities of the people involved can be a potentially vibrant tool to enrich the company’s performance.
I have always believed that you can learn the most from people who are not just like you. Seeing issues from someone else’s perspective can be very instructive.
Over the course of my career so far, I have had the responsibility to manage operations on four continents. I have no doubt that cultural influences can affect the outcomes of discussions among multi-cultural teams, contributing much richer solutions than those teams’ members might have developed on their own.
Generally speaking, my impression is that Japanese people are naturally process-oriented thinkers. French people are conceptual, ingenious and innovative. Americans are direct, get-to-the-point, bottom-line-driven. The mix of those traits can be a tremendous asset during problem-solving or brainstorming sessions.
We firmly believe that diverse perspectives have shaped the successes that Nissan has earned over the past few years. We have learned from each other as we benchmarked best practices, compared experiences and shared solutions or ideas. The differences among us have proved to be an asset, not a liability.
We have used cross-cultural management, cross-functional teams and cross-company teams as tools we have employed in our search for commonality, for synergy and for better performance. We have achieved that combination of synergy and better performance in a variety of important areas, from engineering to purchasing, information systems or manufacturing.
Nissan and Renault have complementary strengths that, from the beginning, have been considered as opportunities for the alliance itself.
Nissan has always been known for the reliability of its products, the talent of its engineering and its outstanding manufacturing capabilities. Renault is known for its innovative design, cost management, product planning and marketing capabilities. Nissan’s current market strength is in Asia and North America, whereas Renault’s market strength lies primarily in Europe and South America. As we have worked together to identify and realize synergies, we always take the same approach: conduct in-depth benchmarking and allow the strongest partner to take the lead to develop the business and to support the other partner.
This win-win approach has been applied in Mexico, where Nissan has long been a major player. Renault was able to re-enter the market with minimal investment through the production of the Renault Scenic at Nissan’s Cuernavaca Plant and the Renault Clio at Nissan’s Aguascalientes Plant. In a similar manner, Nissan was able to produce models in the Mercosur market at Renault’s Brazilian plant in Curitiba without the expense of building and equipping a new plant. In Brazil, Nissan is creating a network of dealers from existing Renault dealers.
Both companies are also realizing significant benefits through shared resources, such as common platforms for the entry-level and mid-size sedan vehicle segments, and the joint use and organized development of engines and transmissions.
Another example is the Renault-Nissan Purchasing Organization, the joint purchasing company established as part of the alliance. This organization has greatly aided the process of building purchasing competitiveness in quality, cost and delivery while managing supplier relations globally through a common supplier base.
Starting in 2004, 70% of the combined purchasing requirement for both companies will be negotiated by the Renault-Nissan Purchasing Organization.
By cooperating in many areas through the alliance, we avoid wasting resources or duplicating efforts. Nissan is achieving results far beyond what it could achieve as a mono-cultural Japanese company.
Nissan and Renault are two companies pursuing synergies, but only for the sake of meaningful and significant performance. Synergy for the sake of synergy alone is meaningless. Doing things in common only makes sense if it leads to better, measurable performance.
The measurement of performance and of the quality of results is an essential tool of cross-cultural management. As long as you can measure everyone’s performance according to the same standards, using the same references from one country or one company to the other, you are on the right track.
Figures and data never lie. Quality, costs and delivery mean the same thing around the globe. Everyone counts in the same way, and numbers have comparable meaning and value. With a common system of measurement, the decisions made can be understood, and performance can be evaluated according to non-biased conclusions.
We have learned that within one corporate culture, you can respect multiple cultures. Nissan is not homogenized. We operate as a global, multi-cultural company.
Nissan in Japan is different from Nissan in Europe, or Nissan in Brazil, or Nissan in China. But each is still Nissan. There is one vision, one set of objectives, one set of measurements. The richness within each part of the company contributes to the enrichment of the whole.
With a fundamental respect for identity and a common system of measurement, a remaining cross-cultural consideration is a pragmatic one: the motivation of the people involved.
At the start of Nissan’s revival process, that question was critical. How could we motivate 125,000 people on six continents to work together with a sense of urgency to meet corporate objectives and change Nissan’s destiny?
We knew that the positive motivation of our employees would be critical. For any company, the motivation of its employees is its greatest asset and only power, and that truth is magnified in times of crisis or radical change.
We began by expressing a vision, a simple strategy for the future that clearly stated our destination. When we announced the Nissan Revival Plan in October 1999, we said that our vision was to enrich people’s lives.
In order to do that, first we had to revive Nissan. The Nissan Revival Plan was our guide. The plan was designed to free resources that we could invest in a product-led and brand-led recovery that would put Nissan back on the track of lasting, profitable growth. The most brilliant strategy in the world is worthless if people are not willing or able to understand it and act to contribute to it. Distinctive and simple communications were used to help people understand their roles and be motivated to perform.
The Nissan Revival Plan contained just three public commitments – all quantifiable, measurable and timed. We kept communications simple and clear to promote understanding among all the different languages and cultures within our company.
We follow the same practice today. We are specific and focused on our priorities. We measure performance and profitability. We attempt to say what we will do and to do what we say.
Ultimately, performance and value creation is what business is all about. No matter what significant measure you choose – whether it is value in terms of wealth created, or attractive, competitive products or services, or employee pride, or customer satisfaction or social contribution – performance matters in every global market.
For the Renault-Nissan alliance, performance can be measured. By looking at objective external measurements, it is easy to determine whether value is being created or destroyed.
Shareholders are seeing increased share value. On April 1, 2000, the official start of the Nissan Revival Plan, Nissan’s share price was ¥406 per share. On November 6, 2003, when we published our fiscal year 2003 half-year results, Nissan’s share price was ¥1,285 – three times greater than the 2000 price over a period when the Nikkei stock index went down 30%. In the same period, Renault’s share price went from c46 per share to more than c57.
Other measures make a similar case. Market capitalization for both Nissan and Renault has increased dramatically. Customers are being offered more attractive, competitive products. Brand power is strengthening.
In the worldwide marketplace, the Renault-Nissan alliance is creating significant value. The alliance is a global business model that works.
Carlos Ghosn
Carlos Ghosn is president and chief executive officer of Nissan Motor Co and serves on the boards of Renault, Alcoa and Sony.
