Ghosn, Koizumi and Leadership for Japan

Jay Rajasekera (Dean, International University of Japan Business School)

Carlos Ghosn and Junichiro Koizumi are two well-known names in Japan. The trademark for Ghosn, the CEO of Nissan and non-Japanese, is the revival of the crippled company from the brink of bankruptcy in 1999 to one of the most profitable companies in Japan within a short period of 3 years. For Koizumi, the Prime Minister of Japan since 2001, the trademark is structural reform. Fighting what was called the factional-politics within his own Liberal Democratic Party (LDP) and promising to turn around the Non-Performing-Loan (NPL) burdened stagnant economy and "Change Japan", Koizumi won a landmark election, in 2001. His election platform, labeled Kouzou-Kaikaku, or Structural-Reform, promised creating 5 millions jobs and a powerful economy for Japan within 5 years.

While Ghosn has been at the helm of Nissan over three years, Koizumi's time as Prime Minister of Japan has been about two and half years. In three years Ghosn had turned around the decline of Nissan. A loosing car company with more than trillion yen in debt in 1999, today Nissan is considered the most profitable automobile company in the world. It had earned the respect of the car industry, increased its market capitalization five times, and Mr. Ghosn has just been named the "ideal business leader" in a survey conducted by the Japan Management Association. His face or name often adorns the major business publications of the world, including Fortune magazine, Harvard Business Review and the like.

A powerful message delivered by Carlos Ghosn recently at Nissan Head Quarters in Ginza, Tokyo, to an audience comprised of business school students and academics, from three leading business schools including the Business School of International University of Japan, prompted this author to make an assessment of what had happened in Nissan and its message to reform-minded Japan.

Though the scale is different, the similarities between Nissan's situation, when "outsider" Ghosn took over the chief position in 1999, and Japan's situation when "rebel" Koizumi became the Prime Minister in 2001 are interesting. For close to 10 years, till 1999, Nissan has being loosing its market share, leading to corporate debt of more than 100% of its annual operating income and anxiety among its employees of losing jobs. Likewise, for close to 10 years, till 2001, Japan has been in a recession and stock market has been in a constant decline, leading to government debt of more than 100% of annual GDP and record unemployment across the board. Though these similarities had lead academics and media people to liken the task of Prime Minister Koizumi to that of Carlos Ghosn, it is also interesting to note how they differ as well; not simply as an academic exercise but to shed lights to the critical challenges that Japan needs to tackle in the face of globalization and threats from competitors. And, what kind of leadership that the Prime Minister of the second largest economy of the world must exert to take the country forward under the increasing global challenges.

Running a country and running Nissan of course are quite different tasks. While Nissan's debt in 1999 was a fraction of the 700-plus trillion official government debt, the problems of unemployment, alarming number of corporate bankruptcies, the remnants of the collapse of the bubble economy, the deflation, the threat from emerging economic powers such as China and South Korea, the economic and defense issues with the U.S., the political issues with North Korea, and the like, make running Japan a formidable task. While only a several thousand jobs were at stake under the Nissan's CEO, the actions of the Prime Minister of Japan could impact millions of workers in Japan, including the employees of Nissan itself. Moreover, unlike a typical CEO the Japanese Prime Minister's executive powers are greatly constrained by the members of the Diet who belong to different factions and rival political parties. Prime Minister has to content with the politicians, stay tuned to the public approval ratings, and keep the country safe and economically vibrant under global threats. Nevertheless, when one listens to Ghosn and his powerful message on the strategy for Nissan, it makes quite difficult to distinguish the fundamental strategic difference between running a country, especially a country such as Japan, and running a corporation.

For taking Nissan out of crisis, Ghosn proposed "Nissan Revival Plan" which included the needed corporate reforms to reduce the huge debt, targets for profits within 3 years, and cost cutting measures including plant closings, among other things. What made Ghosn an icon in Japan was that he proved reform works in Japan and there is a way out of a crisis. Koizumi is the leader of Japan and with elections set for November 9, he is aiming to continue as the leader for another term. All that apply to Ghosn would apply quite well to the role that Koizumi needs to play if he is to take Japan out of the prevailing crisis.

Ghosn says that if a leader is to address a crisis, three steps must be taken. The first step is to have a vision, a strategy, and confidence. The second is to get the cooperation of support team, raise their moral, and lead them to challenge goals with a sense of responsibility. The third step is the respect for facts and accomplishing actual results. There is no sustainable leadership if results cannot be accomplished.

If Koizumi gets elected to be the Prime Minister at the November election he needs to show even greater leadership. A review of Koizumi's leadership record against that of Ghosn would provide vital facts that would help the next Prime Minister, whoever it may be, to take precautionary steps to implement reforms in Japan and take the country out of the lingering crisis.

Following Ghosn's strategy, if the Prime Minister is to lead, there must be a vision; let us take Koizumi's main vision, which is Kouzou-Kaikaku. Those familiar with Japanese politics would know that Koizumi's drive, in 2001, to be the Prime Minister started with Kouzou-Kaikaku or "Structural-Reform." Right after he was elected and when his popularity ratings were high, the name changed, perhaps by his close associates, to Koizumi-Kaikaku. Then, when the economy was not responding to his initial "shock-therapy" it became Bappon-Kaikaku or "Drastic-Reform." At present, the economy is showing some positive signs, Koizumi, in a recent policy speech to the Diet, re-iterated that Keizai-Kaikaku or Economic-Reform is the top priority. All these meandering reform statements and inconsistencies that can be attributed to Koizumi would lead one to believe that the Prime Minister lacks a vision, a strategy, and confidence, thus violating a key Ghosn step to be a leader.

How about second Ghosn step? Has Koizumi been able to boost the moral of his team and lead them to take challenging tasks? For the CEO of Nissan, the critical team is the team of Executive Vice Presidents. It is interesting to note that 80% of Ghosn's original team is still remaining after completing three years of the original strategic plan. Ghosn seemed to have selected his strategic team carefully from the beginning. For the Prime Minister, the key team is the cabinet. It is clear that Koizumi cabinet has been changed a number of times. During the two and a half year Koizumi administration, if one excludes the Chief Cabinet Secretary, only two of his cabinet members are continuing with their original cabinet posts as of now. Close to 90% percent of the cabinet has changed during two and half years, indicating either Koizumi's initial selection of the members were not carefully done or Koizumi did not like what the cabinet members were doing. Either way, the change of the cabinet members so often would not help boosting the moral of the members, especially the ones trying to do a good job. Thus, Prime Minister had violated another Ghosn step on leadership.

Now let us look at Ghosn's third step – accomplishing results. Ghosn, from the beginning of his plan set targets, stuck to them despite criticism, and then accomplished them. The company's stock price increased multiple times; profits are the envy of the industry; and, the corporate debt is all gone as he claimed it would. In the most recent Diet policy speech, Koizumi had stated that his "target is to create 3 million jobs over the next two years." This 3 million job target is also appearing on the recently announced LDP manifesto. Taking into account the 5 million job plan that he had stated before becoming the Prime Minister, in 2001, one would conclude that he had already created 2 million jobs over last two and half years; which is not true. Also, the economy is technically still had not improved when one compares to the time when Koizumi became Prime Minister -- stock market down 20%, the national debt gone up to 680 trillion yen from 670 trillion, and small and medium size companies are facing great difficulties due to financing problems. So, the accomplishments are few and the Prime Minister will have difficulty defending Ghosn's third leadership measure.

If Japan is to succeed in reforms strong leadership of the Prime Minister is a must. Ghosn had proved that reform can be done in Japan if right leadership is there. In fact there are other examples, like in Cannon, Toyota, etc. where strong leadership had accomplished great results. A look back of Ghosn's three year leadership at Nissan against Koizumi's two and half years would help the next Prime Minister, weather it be Koizumi or not, to put things in perspective from the very beginning and establish the strong leadership needed to carry out much needed reforms.