Leading in the 21st century: An interview with Carlos Ghosn

By Rik Kirkland

Named CEO of Nissan in 2001, Carlos Ghosn has turned Nissan into one of the world’s most profitable automakers and has expanded aggressively into emerging markets and zero-emission vehicles.

Carlos Ghosn led one of the most dramatic turnarounds in the history of the modern corporation. Dispatched to Tokyo in 1999, with orders from France’s Renault SA to rescue its floundering Japanese business partner, Nissan Motor, Ghosn moved boldly. He slashed costs, closed unprofitable factories, shrank the supplier network, sold unprofitable assets, and rewired Nissan’s insular culture. Skeptics pronounced his efforts doomed. But within a year, Ghosn had returned Japan’s second-largest auto manufacturer to profitability and was widely credited with saving it from collapse.

Since then, Ghosn—who was named CEO of Nissan in 2001—has transformed Nissan into one of the world’s most profitable companies. Under his leadership, Nissan has pushed aggressively into emerging markets such as Brazil, China, India, Russia, and Southeast Asia and shifted production of many core models outside Japan. He has invested heavily to develop affordable zero-emission vehicles, including the Nissan LEAF, which was launched in 2010, and a full lineup of Renault electric vehicles.

The March 2011 earthquake and tsunami in northern Japan disproportionately damaged Nissan, which had to halt production at its biggest engine plant. Later that year, flooding in Thailand cut supplies for key parts needed at factories around the world. Nonetheless, Ghosn kept Nissan on track to fulfill its ambitious Power 88 six-year growth plan, committing Nissan to boost global market share and profits to 8 percent by 2016. He also vowed that Nissan would claim a 10 percent share of the world’s two largest markets, China and the United States. In announcing this new midterm plan, Ghosn declared Nissan ready to go on the attack: “This is the first time Nissan is starting a plan on the offensive instead of reconstructing something or defending something.”

Ghosn now juggles three leadership roles: as chairman and CEO of Nissan, chairman and CEO of Renault, and chairman and CEO of the Renault-Nissan Alliance. He spends approximately one-third of his time in France, one-third in Japan, and one-third traveling to Renault-Nissan operations throughout the world. Born in Brazil, raised in Lebanon, educated in Paris, and fluent in four languages, Ghosn meets the challenges of modern leadership with aplomb. He explains how he handles his far-flung duties in this January 2012 interview with McKinsey’s Rik Kirkland.

McKinsey: Since becoming a CEO, you’ve confronted many different kinds of crises. Do leaders face more volatility today than they once did? If so, how can they cope?

Carlos Ghosn: I don’t think leadership shows unless it is highlighted by some kind of crisis. There are two kinds of crises: first there are internal crises that arise because a company has not been managed well, and then there are external crises, such as the collapse of Lehman Brothers, the earthquake in Japan, and the flood in Thailand. In those cases, you are managing your company, and all of a sudden there is this thing falling on you.

Business schools may prepare people to deal with internal crises. But I think we need to be more prepared for external crises, where it’s not the strategy of the company that is in question—it’s the ability of leaders to figure out how to adapt that strategy.

We are going to have a lot more of these external crises because we are living in such a volatile world—an age when everything is leveraged and technology moves fast. You can be rocked by something that originated completely outside your area.

McKinsey: Is adapting harder or easier in an organization like Renault-Nissan, which straddles so many different markets and cultures?

Carlos Ghosn: The world has become far more diverse. As you try to manage in crisis, you have to take that new diversity into consideration. A lot of people have said that after the [March 2011] earthquake hit Japan, Nissan fared far better than its Japanese competitors. One reason for that may be that over the last ten years, we’ve had a lot more practice than others in coping with crises. In a sense, we have developed a capacity for responsiveness that our competitors perhaps do not have.

I also think Nissan has benefited from its greater diversity. Because we have people from so many different countries and cultures, we pay a lot of attention to how we communicate. As a result, when crisis strikes, our people in Japan know they can count on support and cross-functional work from people in many other different regions. Because we are more diverse, automatically, we respond to crisis differently. We don’t just sit around waiting for the solution to come from headquarters. We are accustomed to always looking around, trying to find out who has the best ideas. Our people in the United States talk to our people in Japan on an equal level. We have a lot more reference points.

McKinsey: Do leaders get more public scrutiny today than in times past? If so, is that helpful or harmful? Does it make for better leaders?

Carlos Ghosn: Well, certainly, media coverage of corporate leaders has become more critical. Ten years ago, you might get a lot of negative coverage, but there would also be some positive perspectives. Now the media has become a lot more negative. Small mistakes get blown up into huge things. In business, there are no more heroes.

I cannot imagine myself doing today what I did in Japan in 1999, when I stood up and said, “We’re going to get rid of the seniority system. We’re going to shut down plants. We’re going to reduce head count. We’re going to undo the keiretsu system.” I had a lot of criticism. But there were also people who said, “Let’s give him the benefit of the doubt.” Today, if I were to stand up and try to do something like that, I would get massacred.

McKinsey: Would that stop you from taking action—if it was something you knew had to be done?

Carlos Ghosn: No, I would still do it. But I would need much more emotional stability and certainty. Leaders of tomorrow are going to have to be incredibly secure and sure of themselves.

McKinsey: Does that suggest leading effectively in this new environment requires an ability to tune out critics and go it alone?

Carlos Ghosn: No. Leaders of the future will also need to have a lot more empathy and sensitivity—not just for people from their own countries, but also for people from different countries and cultures. They are going to need global empathy, which is a lot more difficult.

It is a paradox: on the one hand, you have to be more confident and secure, but on the other, you have to be a lot more open and empathetic. You need to listen, but when you make a decision, that’s it—you must be a very hard driver. Usually, these are not attributes you find in the same person.

Once you have done the analysis and made the decision, then you have to learn to simplify the decision in communicating it to others. Everything is complex, but sometimes you need to simplify the matter so much that it’s almost a caricature. You must say, “Nothing matters beyond this.” You must reduce everything to zeros or ones, black or white, go or no go. You can’t have too much nuance.

In a crisis, you have to be able to do all of these things—listening, deciding, and simplifying—very quickly. That is what makes leading in a crisis so interesting. And because you have to move so fast, you have to empower people to make decisions themselves. That’s the best way to restore calm.

McKinsey: Mentally, leaders have to balance toughness and empathy. What about the physical challenges of the role?

Carlos Ghosn: Leading takes a lot of stamina. I became CEO at 45, and I was working like a beast. You think, “So I work 15 or 16 hours a day; who cares?” But you can’t do that when you are 60 or 65.

Now companies are more global, and so you have jet lag, you are tired, the food is different. You have to be disciplined about your schedule and about organizing everything. Physical discipline is crucial when it comes to food, exercise, and sleep. I live like a monk—well, maybe not a monk, but a Knight Templar. I wake at a certain hour and sleep at a certain hour. There are certain things I won’t do past a certain time.

About the author(s)

This interview was conducted by Rik Kirkland, senior managing editor of McKinsey Publishing, based in McKinsey’s New York office.

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