The Role of Leadership in Successful International Mergers and Acquisitions: Why Renault-Nissan Succeeded and Daimlerchrysler-Mitsubishi Failed

THE ROLE OF LEADERSHIP IN
SUCCESSFUL INTERNATIONAL
MERGERS AND ACQUISITIONS:
WHY RENAULT-NISSAN SUCCEEDED
AND DAIMLERCHRYSLER-
MITSUBISHI FAILED
CAROL GILL
This article compares and contrasts the Renault-Nissan and DaimlerChrysler-

Mitsubishi mergers to consider the relative and combined effects of national
and organizational culture on the performance of Nissan and Mitsubishi.
It also examines the reasons why the Renault-Nissan merger was success-
ful and the DaimlerChrysler-Mitsubishi merger failed. It finds that Japanese
national culture influenced organizational culture and HRM practices, which
created organizations that had no sense of urgency, profit orientation, or ac-
countability and led to poor market and financial performance. It also finds
that leadership was a major factor impacting on the success of the turnaround
efforts of these two organizations. These findings have implications for lead-
ers and human resource management practitioners engaged in international
business and are of particular relevance to Western organizations working
with organizations in high-context countries with a collectivist rather than
individualist orientation. © 2012 Wiley Periodicals, Inc.
Keywords: human resource management, culture, leadership, authentic

leadership, mergers and acquisitions, change
Introduction employee effort (Burt, 1999) and lead to com-

petitive advantage (Kotter & Heskett, 1992).
here is substantial evidence indicat- Second, organizational culture is important to
T ing that culture is important to orga-

nization performance. First, a strong
organizational culture can reduce
an organization’s costs by coordinating
organizational change, which is a frequent
necessity in modern organizations. Jones,
Jimmieson, and Griffiths (2005) attribute
high change failure rates to change resistance
Correspondence to: Carol Gill, Melbourne Business School, 200 Leicester Street Carlton, Victoria 3053, Australia,
Phone: ⫹61 3 9349 8404, Fax: ⫹61 3 9349 8404, E-mail: c.gill@mbs.edu
Human Resource Management, May–June 2012, Vol. 51, No. 3. Pp. 433–456
© 2012 Wiley Periodicals, Inc.
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI:10.1002/hrm.21475
434 HUMAN RESOURCE MANAGEMENT, MAY–JUNE 2012
cultures, and Hackney and McBride (1995) organization culture through the alignment
find that a lack of attention to organizational of HRM practices and processes to the cul-
culture is often cited as an important reason tural capability required to meet the organi-
for change failure. Third, organizational cul- zation’s business strategy and environment.
ture is also of particular importance during Consequently, a greater understanding of
mergers and acquisitions, with the inability managing organizational culture in cross-
to extract expected value being attributed to country contexts is likely to be of interest to
cultural factors (Cartwright & Cooper, 1993). both leaders and HRM practitioners in a glo-
Specifically, a KPMG (2009) study that inter- balized world where mergers and acquisitions
viewed over 100 senior executives involved in in cross-country contexts are becoming in-
700 deals from 1996 to 1998 found that 83 creasingly common.
percent of all mergers and acquisitions failed One country context of increasing impor-
to produce any benefit for the shareholders, tance to global business is the Confucian
and over half actually destroyed value. The Asian societal culture, because it accounts for
overwhelming cause for failure was people 25 percent of the world’s population and 26
and cultural differences. This percent of the world’s gross national product
study found that difficulties en- (GNP). This is likely to increase given the
This study found countered in mergers and acquisi- high rate of growth in Mainland China and
tions were amplified in cross-cul- most of the developing markets in the world
that difficulties
tural situations, where the (McAfee et al., 2002; Nguyen, Heeler, & Taran,
encountered companies involved are from two 2007; Sartain & Finney, 2003; Ueltschy,
or more different countries, find- Ueltschy, & Fachninelli, 2007). The Global
in mergers and ing that organizations from similar Leadership and Organizational Behavior Ef-
national cultures1 were more suc- fectiveness Research Project, known as GLOBE
acquisitions were
cessful. For example, a UK/US com- (2008), includes China, Hong Kong, Japan,
amplified in cross- bination was 45 percent more Singapore, South Korea, and Taiwan in the
likely than average to be successful, Confucian Asian societal cluster. The Confu-
cultural situations, while a US/Europe merger combi- cian Asian, or what is often referred to as East-
nation was 11 percent less likely ern, societal culture is distinctively different
where the
than average to be successful. from its Western (countries of European ori-
companies involved The link between organiza- gin) trading partners because it is high rather
tional culture and organizational than low context, with a collective rather
are from two or performance has significant im- than individual orientation, which impacts
plications for organization leader- significantly on its management and HRM
more different ship, who play an important role practices (Nguyen et al., 2007). In contrast,
countries, finding in the management of organiza- low-context countries in the GLOBE “Anglo,”
tional culture through role model- or Western, country cluster (Australia,
that organizations ing and the implementation of Canada, Ireland, New Zealand, white South
human resource management Africa, the United Kingdom, and the United
from similar national (HRM) practices, which are the le- States) minimize social interdependence in
vers by which culture is changed their interactions with others, causing a more
cultures were more
(Schein, 2004). It is also important transactional “win-lose” approach that
successful. to HRM practitioners because HRM puts business before relationships (Griffith,
is influenced by organizational Myers, & Harvey, 2006; Hofstede, 2001). All
culture (McAfee, Glassman, & countries in the Confucian Asian cluster have
Honeycutt, 2002; Pudelko, 2005; Schneider, been heavily influenced by China, including
2006) and can influence organizational cul- Japan, which shares rich cultural interactions
ture (Ulrich & Brockbank, 2005). In particu- with China despite its geographical distance
lar, Ulrich and Brockbank (2005) propose (Gupta, Hanges, & Dorfman, 2002). For in-
that the HRM function plays a significant stance, Japan’s collectivist society maintains
role in embedding and maintaining strong, long-term social ties among societal
Human Resource Management DOI: 10.1002/hrm

ROLE OF LEADERSHIP IN INTERNATIONAL MERGERS AND ACQUISITIONS 435
members, leading to harmonious interdepen- coauthored by Ghosn (Ghosn & Ries, 2003).
dence. In particular, Japanese people have a The information on DaimlerChrysler-
preference to belong to groups and place Mitsubishi is more limited, partly because
group interests above their own individual Ghosn was considered a celebrity in Japan
interests and as a society have developed sys- and Eckrodt very rarely gave interviews. In-
tems of mutual monitoring and sanctions to formation on the DaimlerChrysler-Mitsubishi
curtail self-interested behavior (Griffith et al., alliance and Eckrodt’s leadership was largely
2006). based on press releases until Froese and
The Japanese automotive industry pro- Goeritz (2007) supplemented in-
vides an opportunity to study the relation- formation in the public domain
ship between national and organizational with semistructured interviews
Japanese people
culture and performance in the Confucian with Japanese and non-Japanese
Asian culture. While the Japanese automo- managers who were involved in have a preference
tive industry has dominated world markets the merger-and-acquisition pro-
and has been held up as an exemplar, in more cesses at both organizations. This to belong to groups
recent times, there have been performance is- article draws on all these sources
and place group
sues that have led to Japanese organizations to answer the following research
being acquired by Western organizations. questions: interests above
This has created naturally occurring compar-
ative case studies, which create an excellent 1. What were the relative and their own individual
opportunity to examine the management of combined effects of national
culture in the context of cross-societal and and organizational cultures on interests and as
cross-national operations in general and in the performance of Nissan and a society have
mergers and acquisitions in particular. Nissan Mitsubishi?
and Mitsubishi required international bail- developed systems
outs by Renault and DaimlerChrysler, respec- 2. Why was Carlos Ghosn’s trans-
tively, due to dysfunctional organizational formation of Nissan successful of mutual monitoring
cultures dominated by the Japanese national while Rolf Eckrodt’s efforts and sanctions
country context and appointed leaders were unsuccessful?
charged with changing the dysfunctional to curtail self-
organizational cultures of these two organiza- To answer these questions,
tions. Carlos Ghosn was successful in chang- I begin this article by examining interested behavior.
ing Nissan’s organizational culture, which extant research on the relation-
had a positive impact on organizational per- ship among societal, national,
formance, but Rolf Eckrodt was unsuccessful and organizational culture and organiza-
in changing Mitsubishi’s organizational cul- tional performance. First, I will look at re-
ture, and the organization failed to turn search on the role that culture plays in orga-
around its deteriorating performance. A com- nizational performance in general and in the
parison between Mitsubishi’s failed turn- Japanese context in particular. Second, I will
around and Nissan’s spectacular success is examine Nissan and Mitsubishi’s problems
viable given they were both midsize automo- and the role that the Japanese national cul-
tive companies in similar circumstances. This ture played in creating HRM practices and an
article uses extant literature on culture, lead- organizational culture that had a negative
ership, and HRM and published material on impact on organizational performance. Third,
the Japanese automotive industry to better I will compare and contrast the changes that
understand how leaders can more effectively Ghosn and Eckrodt implemented at Nissan
manage organizational culture in cross-coun- and Mitsubishi, respectively, that delivered
try mergers and acquisitions. such different outcomes under similar condi-
There is a large body of information on tions and contexts. To do this, I will look first
Renault-Nissan, including extensive media at the changes that were made to HRM prac-
articles and three books, one of which was tices and then at their leadership behaviors

that influenced organizational culture. In the Rowley’s (2004) research failing to find an
final section of this article, I draw conclu- Asian model of HRM and concluding that
sions that contribute to understanding on there is a weakening of national HRM prac-
the role that national and organizational cul- tices. This implies that a lack of fit between
ture and the fit between them plays in orga- national and organizational culture does not
nizational performance and the role that have a detrimental impact on organizational
HRM and leadership can play in successfully performance and that leaders and HRM prac-
changing organizational culture in a different titioners can implement change to organiza-
national context. I conclude with the impli- tions without reference to the cultural con-
cations of this for HRM practitioners as they text.
work with organizational leaders to deliver In contrast, the divergence debate pro-
change in cross-societal and cross-national poses that societal and national culture have
cultural contexts. a significant impact on organizational cul-
ture and performance, proposing that leaders
The Importance of National and HRM practitioners should actively man-
age differences across societal and national
There is mixed Culture
boundaries. Essounga (2009) summarizes the
There is mixed evidence on the research on international organizations,
evidence on
importance of societal and na- which has shown that organizational cul-
the importance tional culture to organizational tures do reflect national cultures; different
performance and there is little national culture types have been related to
of societal and guidance on how much attention organizational effectiveness; and culture in-
leaders and HRM professionals fluences management attitudes.
national culture
should pay to culture when doing It is proposed that leaders should take ac-
to organizational business internationally. The con- count of human and cultural factors in merg-
vergence debate argues that orga- ers and acquisitions (Cartwright & Schoenberg,
performance nizational culture and HRM 2006; Kavanagh & Ashkanasy, 2006).
practices are converging and be- Kavanagh and Ashkanasy’s (2006) research
and there is little coming more homogenous across found that managers responsible for driving
guidance on how national boundaries, which im- the merger process were not equipped with
plies that differences in societal communication or change management
much attention and national culture are irrelevant. skills, which had a detrimental effect on the
The rationale for this position is ability of individuals to embrace change. In
leaders and HRM that global organizations share addition to this, Essounga (2009) attributes
best practices through benchmark- the rate of American business failure in for-
professionals should
ing and mergers and become eign operations to a lack of country-specific
pay to culture when increasingly homogenous and ef- training.
ficient. Some recent studies sup- While there is evidence that organizations
doing business port this conclusion. First, there is influence the way their subsidiaries operate in
evidence that national culture has different countries, Essounga (2009) proposes
internationally.
a limited impact on organizational that, despite increasing globalization trends,
culture, with Gerhart’s (2009) re- corporate culture remains a reflection of na-
search finding that country differ- tional culture. In addition to this, Schneider
ences had a minor impact on organizational (2006) proposes that national culture may
culture and Naor, Linderman, and Schroeder’s hinder the acceptance and implementation
(2010) finding that organizational culture of human resource practices such as career
has a greater impact on manufacturing per- planning, appraisal and compensation sys-
formance than national culture and the fit tems, and selection and socialization prac-
between them. Second, there is evidence that tices in subsidiaries of multinational compa-
national culture does not have an impact on nies. As a precursor to his study, Cooke
HRM practices, with Warner, Benson, and (2006) cites research by Child (1994) that

found that multinational corporations’ and slowly through multiple channels before de-
joint ventures’ HR policies were not em- cisions could be made and that high-ranking
braced by their employees with enthusiasm. Japanese managers did not focus enough on
In 30 joint ventures Child studied, he found planning and spent too much time apologiz-
that there had been various attempts to intro- ing for service failures. In contrast, European
duce Western personnel tools with varying, managers were more focused on the short-
but never significant, degrees of success. term costs. Finally, the GLOBE study of 62
A common complaint among Western man- societies found that cultural practices have a
agers in China was that staff were reluctant to relationship with economic prosperity, pro-
accept personal responsibility. This is consis- ductivity, and world competitiveness (House,
tent with an earlier study by Ilari and Grange Hanges, Javidan, Dorfman, & Gupta, 2004).
(1999, as cited in Cooke, 2006) on a Sino- Consistent with the divergence hypothe-
Italian joint venture motor company in sis, it is proposed that leadership effective-
southern China that found that the Italian ness is influenced by national culture, and a
partner found it difficult to transfer its fit between a leader and culture is important
firm-specific advantages because of cultural for successful mergers and acquisitions (Den
differences in the two employment systems. Hartog, House, Hanges, Ruiz-Quintanilla, &
According to the managers they interviewed, Dorfman, 1999). In particular, the GLOBE
these initiatives received only moderate study found that culture influ-
enthusiasm from shop-floor workers, who dis- ences the effectiveness of leader-
played compliance rather than commitment. ship behavior (House et al., 2004). There is evidence
What they seemed to resent the most was the For example, masculine national
performance-related pay system and the se- cultures are more likely to be tol- that authentic
crecy of bonuses. Cooke (2006) concludes erant of strong, directive leaders.
leadership is less
from these studies that the difficulties in inte- In addition to this, cultures that
gration were caused by differences in national hold the expectation that power likely in collectivist
culture and that the cultural difference be- will be distributed unequally have
tween the West and the East is most distinct. a more positive attitude toward cultures that
Several studies have reported a link be- authoritarian leadership where
tween national culture and performance. dominance and displays of power emphasize values
Naor et al. (2010) propose that societal and are considered appropriate. Even of harmony, fitting
institutional collectivism should improve op- the universal characteristics of
erational performance because it improves leadership that are valued across in, propriety of
teamwork, increases employee involvement, all cultures, such as charisma, are
and breaks down barriers between depart- expressed differently in different behavior, politeness,
ments. These cooperative relationships and cultures. This idea is reminiscent
conformity to social
cross-functional teams have lower costs, less of contingency theories of leader-
scrap, and higher productivity, as demon- ship and the meta proposition hierarchy, and
strated in initiatives developed by Japan, such that to be effective, leaders need
as Quality Circles, that improve quality and to engage in behaviors that com- community, where
decrease defects. However, Fahy and Taguchi plement subordinates’ environ-
being authentic may
(1995) argue that the traditional concepts of ments and abilities (House, 1996).
service, flexibility, and quality in the Japa- Similarly, there is evidence that be subordinate to
nese approach contribute to weak perfor- authentic leadership is less likely
mance, and the Japanese emphasis on service in collectivist cultures that em- the primary societal
and quality is not always cost-efficient be- phasize values of harmony, fitting
value of harmony.
cause it requires time and human resources in, propriety of behavior, polite-
and may sacrifice productivity. Their study of ness, conformity to social hierar-
Japanese management practices in Europe chy, and community, where being
found that in Japanese organizations, non- authentic may be subordinate to the primary
Japanese staff reported that proposals moved societal value of harmony. It is argued that

authentic leadership behaviors in this con- they choose to do so, they may not be clear
text, such as giving subordinates the right to on the best way to implement these practices.
question a leader’s actions and decisions, will This article will assist HRM practitioners and
invite ambivalent responses. In particular, the leaders to answer these questions by examin-
collectivist cultural practice of guanxi, or con- ing the impact of national cultural context on
ferring privileges and favoritism to an in-group, HRM practices and organizational behavior
may promote unethical actions. If the diver- and performance at Nissan and Mitsubishi.
gence debate is accepted, this has practical
implications for leaders and HRM practition-
Nissan and Mitsubishi
ers operating internationally. In particular, it
implies that HRM practitioners and leaders In 1999, Nissan was number two in the global
should be aware of, carefully consider, and and Japanese automobile industry, with
actively manage societal and national culture 140,000 salaried employees, but it had failed
when implementing change. to produce a profit for eight years, had a
This article will focus on the differences 26-year decline in market share, and was near
between Western individualistic and Confu- bankruptcy. Nissan’s financial situation was
cian Asian collectivist societal cultures, with critical, with continuing losses resulting in
a specific focus on Japan. Specifically, there is approximately $22 billion in debt. Specific
evidence of divergence between US and Japa- problems leading to this position included
nese leadership practices, with Smith, Misumi, low margins (it was estimated that Nissan
Tayeb, Peterson, and Bond (1989) finding gave away $1,000 for every car it sold in the
that American managers were more likely to United States); high purchasing costs (15 per-
provide directions to subordinates on a face- cent to 25 percent higher at Nissan than at
to-face basis, while Japanese managers were Renault); and underutilization of assets (its
more likely to use written memos. They also Japanese factories were operating at half their
found that in the United States subordinates capacity and were able to produce one mil-
usually receive negative feedback directly lion more cars than were sold). A takeover by
from their supervisors in face-to-face interac- Renault in 1999 put Carlos Ghosn in the posi-
tions, while in Japan feedback is usually chan- tion of chief operating officer. While it looked
neled through a peer of the subordinate. They as though Nissan’s problems were financial,
concluded that the global etic, or culturally Ghosn proposed that Nissan’s most funda-
neutral, behavior dimension referred to as mental challenge was cultural and announced
“performance-oriented leadership” is enacted Nissan’s Revival Plan in October 1999.
with different emic, or culturally specific, be- In 1995, Mitsubishi accounted for 11.4
haviors in Japan and the United States. These percent of Japan’s automobile market; how-
differences in behaviors reflect the US individ- ever, in 2000, Mitsubishi’s share declined to 8
ualistic norm of “brute honesty” and the Japa- percent and it lost $750 million on sales of
nese collectivistic norm of “saving face.” $31 billion. Mitsubishi had forecast a $660
In conclusion, extant research is contra- million net loss for the 2000 financial year;
dictory on whether HRM practitioners and the had $14 billion in debt; had operating mar-
leaders they advise should pay attention to gins less than 1 percent; and had launched
the societal and national cultural context they only one car in this year. Consequently, in
are operating in. There is also mixed evidence 2000, the cash-strapped Mitsubishi sold a
on the relationship between Confucian Asian third of its shares to DaimlerChrysler, who
collectivist cultural practices and perfor- took a 37.3 percent stake in Mitsubishi
mance. This gives little direction to HRM Motors Corporation, which was just less than
practitioners and leaders operating in coun- the 37.5 percent stake owned by Mitsubishi’s
tries with collectivist cultural values. In par- keiretsu network (affiliated organizations
ticular, they may wonder whether to intro- that are characterized by close and long-term
duce Western and US-centric management relationships). Rolf Eckrodt was appointed
practices in different cultural contexts, and, if CEO in 2002 to lead a turnaround.

Ghosn achieved a successful turnaround At the organizational level, the Japanese

at Nissan. In particular, Nissan halted its ero- government’s tradition of bailing out large,
sion of market share in 2001 and launched a troubled employers led to a lack of account-
small car that became third on the list of ability, no profit focus, and no sense of ur-
best-selling cars at the end of 2002, and gency at Nissan and Mitsubishi. Nissan man-
Ghosn became a national hero. Eckrodt, on agers were unaware of their own results and
the other hand, was less successful. had no quantified goals, and information
DaimlerChrysler-Mitsubishi continued to ac- was based on limited data. The Nissan chief
cumulate losses. In 2004, shareholders and financial officer lacked experience and had
corporate analysts were calling the no power or access to information. Nissan
DaimlerChrysler-Mitsubishi alliance a disas- was selling cars without knowing
ter. For the fiscal year 2003–2004, Mitsubishi if they were making profits. A
lost between $650 and $946 million. Eckrodt subsequent analysis of costs It has been
stepped down as chairman and CEO of Mit- showed that of the 43 different
proposed that the
subishi and retired in 2004. DaimlerChrysler models marketed, only four made
sold its stock in Mitsubishi in 2005, and own- money, and the entry-level vehi- Japanese emphasis
ership was returned to the Japanese keiretsu. cle crucial to sales volume and
market share showed a negative on collectivism leads
profit margin that exceeded 15
How National Culture Impacted
percent. Nissan’s engineering de- to a focus on mutual
on the Performance of Nissan and partment was large and dominant interdependence, or
Mitsubishi and had a culture of quality that
It has been proposed that the Japanese em- was stricter than those of its com- reliance on others
phasis on collectivism leads to a focus on mu- petitors and resulted in supplier
costs that were 20 percent higher in the community,
tual interdependence, or reliance on others
in the community, resulting in less friction, with no discernible performance
resulting in less
greater cooperation, and more synergistic out- difference. The product planning
puts, but also a desire to be cared for with be- process was a closed system that friction, greater
nevolence (Palaneeswaran, Kumaraswamy, & did not consider the customer
Ng, 2003). This section demonstrates how and market. Consequently, there cooperation, and
this cultural value contributed to an organi- was a tendency to repeat existing
more synergistic
zational culture that led to diffused account- models or copy the competition
ability, no profit orientation, and a poor sense by duplicating Toyota’s successful outputs, but also
of urgency that resulted in poor performance formulas. Designs reflected qual-
at Nissan and Mitsubishi. ity cars rather than stylish, inno- a desire to be
vative cars and were not aligned
cared for with
to customer opinion. In the past,
the Japanese culture had been benevolence.
Avoiding Accountability Through
successfully used to deliver qual-
Government and Keiretsu Partnerships ity and productivity through total
The Japanese cultural value of collectivism quality management and just-in-time pro-
resulted in unlimited public support for non- duction. However, these same national cul-
competitive sectors and companies, which tural norms at Nissan and Mitsubishi led to
led to poorly disciplined financial markets inhibited risk taking and too much time
because the Japanese government channels spent on concepts and details with no ur-
Japan’s vast savings to corporations at low in- gency to implement. A poor sense of urgency
terest rates and bailouts troubled organiza- meant management and employees failed
tions based on a long-standing partnership to address Nissan’s problems and struggled to
with business to ensure employment and ex- implement their goals. In particular, there
pand exports into world markets (Ghosn & was complacency with their market position,
Ries, 2003). decision making was delayed, and deadlines

were up to ten times longer than necessary. Collectivism also produced a tradition of
Complacency and lack of accountability also lifelong employment that was only threat-
led to poor planning. Nissan’s plans were qual- ened by mistakes that employees made and
itative and had no priorities, timetables, dead- conflict between employees. To avoid mis-
lines, allocated resources, or accountabilities. takes and dissipate accountability, consensus
Similarly, Mitsubishi had production decision making and complacency became
overcapacity, excess employees, and no profit a norm. Nissan and Mitsubishi employees
focus, to the extent that Eckrodt was able to would poll opinions before meetings to test
cut 64,000 jobs in his first year to facilitate a propositions, selecting those that were most
profit for the 2001–2002 fiscal year for the popular and aligning positions with the ulti-
first time in three years. Mitsubishi’s history mate decision maker so that no one individ-
of selling almost exclusively to government ual could be identified later for originating a
meant it was badly equipped to sell cars to faulty position. This also resulted in risk aver-
other markets. Mitsubishi’s materials were sion through Ringi, a written proposal circula-
sourced from traditional suppliers, which re- tion system, used to make decisions through
sulted in high costs. Finally, Mitsubishi’s en- consensus. In this system, oral communica-
gineering dominance was at the tion was not regarded as an important
expense of a commercial focus, method of exchanging opinions, and Japa-
At Mitsubishi, and engineering priorities were nese employees tend to use vague expressions
given priority over the interests of in their conversations. Employees also used
there was a culture customers. informal meetings and coalitions to avoid
failure. It has been reported that “yes” in
of ignoring and
Japan often means “yes, I heard you,” not
hiding bad news. “yes, I agree.” Consequently, employees con-
Avoiding Accountability
sider that matters can only be examined pre-
Managers were so Through HRM Practices cisely by written documents, which slows
Collectivism also influenced orga- decision making.
reluctant to relay
nizational HRM practices of re-
bad news upward cruitment and selection, perfor-
Avoiding Accountability Through
mance management, promotion,
that they squelched and dismissal at Nissan and
an Absence of Debate
Mitsubishi. The belief was that At Nissan, there was a norm of “saving face,”
complaints about performance is a collective enter- and employees felt they could not criticize
quality defects for prise in which no one should be their own products. Debate was absent, and
abandoned and there should no one raised questions or objections because
decades. be no winners and no losers. Pro- proposals were carefully worked out prior to
motion by seniority resulted in a meetings through the Ringi system of pro-
poor connection between perfor- posal circulations. At Mitsubishi, there was a
mance and promotion. This practice encour- culture of ignoring and hiding bad news.
aged hierarchical subordination at the expense Managers were so reluctant to relay bad news
of individual initiative. A norm of placing upward that they squelched complaints
power in the hands of the most knowledge- about quality defects for decades. Mitsubishi
able and experienced meant that when some- had been covering up its design flaws that had
thing went wrong, the most senior person caused many of its automobiles to malfunc-
accepted responsibility, and accountability tion since the 1970s to avoid costly recalls. It
at the lowest levels was diffused. Specifically, at has been reported that 450,000 vehicles had
Nissan, young graduates were recruited after defects that the organization knew about but
university, often based on the recommenda- didn’t publicly report. It ultimately had to re-
tion of alumni. Their starting salary was low pair 26 mechanical defects, from defective air
because promotion and reward based on se- bags to faulty hoses that it had failed to report
niority guaranteed future raises to retirement. since 1993, despite an obligation to do so

FIGURE 1. How National Culture Influenced Organizational Culture at Nissan and Mitsubishi
under Japanese law. In one notable incident, Mitsubishi to address the problems outlined
a quality defect in wheel hubs on heavy in this section.
trucks resulted in wheels suddenly coming
off the vehicles. Mitsubishi maintained that
this problem was due to poor maintenance
Leadership and Change at Nissan
but ultimately acknowledged a hidden prob- and Mitsubishi
lem with fractured clutch housings that In this section, I will examine why Carlos
caused the transmission part to fall off vehi- Ghosn’s transformation of Nissan was success-
cles, leading to 73 accidents and two fatalities. ful and Rolf Eckrodt’s efforts were unsuccessful.
This resulted in massive losses. A cover-up To do this, I will examine the similarities and
was revealed in 2000, and such blatant disre- differences between the two leaders. In par-
gard of customer safety alienated consumers ticular, I will demonstrate that structural and
and bureaucrats against the company, im- HRM changes were not sufficient to create
pacting on market share. change and that leadership behavior was piv-
In conclusion, this section has provided otal to the success and failure of the two cross-
evidence that the Japanese cultural context cultural mergers. In doing so, I will consider
has had a significant negative impact on Nis- the alignment of the two leaders’ behavior
san’s and Mitsubishi’s organizational culture, with the national and organizational cultural
leading to poor organizational outcomes. context using the GLOBE framework (House
Specifically, it has demonstrated how the et al., 2004). I will also examine how the lead-
Japanese national culture, which valued col- er’s authentic leadership behavior (Walumbwa,
lectivism, contributed to an organizational Avolio, Gardener, Wernsing, & Peterson, 2008)
culture that led to poor outcomes at both facilitated their alignment with context.
Nissan and Mitsubishi. First, it led to the
practice of the government bailing out orga-
nizations that failed, resulting in a poor sense Both Leaders Introduced Cost-
of urgency and profit focus at both organiza- Cutting Measures
tions. Second, it resulted in the human re- To achieve drastic cost reduction, Ghosn and
source practice of promotions based on se- Eckrodt both turned their attention to suppli-
niority. This in turn led to a desire to avoid ers who, because of the keiretsu system, had
mistakes through hierarchical subordination, increased the cost of purchasing through in-
a lack of initiative and innovation, poor efficient coordination and cost controls with
transparency, diffused accountability through suppliers. Second, in both organizations, un-
consensus, and a culture of blame. Figure 1 derutilization of factories was problematic.
summarizes the relationship between na- Nissan reduced its production capacity by
tional culture and organizational culture. closing five factories that had 50 percent uti-
The next section compares and contrasts lization. This was a taboo in Japan’s depen-
how Ghosn and Eckrodt introduced organi- dent society because factories support the
zational cultural change at Nissan and people who live around them.

Similarly, Eckrodt succeeded in initiating them more frequent and considerable bo-
a program to cut material costs by 15 percent nuses linked to the organization’s perfor-
by 2003 by closing a factory to reduce capac- mance. There was a substantive shift to focus
ity; reducing the number of platforms by 50 on results, which encouraged transparency
percent; dumping inefficient suppliers; cut- and execution, improving accountability.
ting costs more aggressively; and selling as- Mitsubishi’s turnaround plan mimicked
sets. By the end of 2003, Eckrodt had slashed Nissan’s. Eckrodt eliminated the traditional
Mitsubishi supplier costs by 15 percent, cut system of promotion based on seniority, re-
the workforce by 16 percent, doubled re- placing it with a system of rewards for good
search and development spending from 2000 performance. Eckrodt also created a new
levels, and hired top-flight designers. “turnaround promotion” office reporting di-
rectly to him. In this way, Eckrodt signaled
his desire to break with the Japanese tradition
Both Leaders Changed HRM of promotions based on seniority.
Practices Second, Nissan challenged the cultural
Consistent with recommended culture norm of guarantees of lifelong employment
change strategies, both leaders used HRM by reducing Nissan’s workforce by 14 percent
practices as a change lever. Schein (2004) pro- (21,000 jobs). Nissan also ensured that new
poses that the HRM processes of selection, hires were credible and aligned to the changing
dismissal, and rewards embed and reinforce Nissan. For example, when product planning
organization culture. The Japanese approach needed to break free from its subordinated
to these processes was based on collectivism. role to engineering, Shiro Nakamura was se-
Both Ghosn and Eckrodt introduced Western lected to manage this change because he
individualistic HRM practices. symbolized Nissan’s revival. He was Japanese,
First, Ghosn and Eckrodt used allocation so he was accepted by Nissan’s employees,
of rewards to break with Japanese cultural tra- but he also had a history of working outside
ditions based on collectivism and address ac- the company and in other countries, so he
countability issues at Nissan and Mitsubishi was not affected by Nissan’s past. He had self-
that contributed to no sense of urgency or confidence, an international vision, strong
profit orientation. At Nissan, a performance- industrial experience, and an open mind, so
based incentive system replaced pay and pro- he could instill confidence in the product
motion based on work attendance, tenure, planning design teams. Ghosn selected
and age rather than actual performance, employees who promoted his change vision
which bred complacency and rewarded con- and were able to execute his plan to address
sensus and cooperation delaying decision a lack of accountability and organizational
making and diffusing accountability. In addi- silos. This signaled a break with the past and
tion to this, cash and stock options that are a desire to create a new organization while
quite rare in Japan were given for perfor- being sensitive to the cultural context. Eck-
mance, linked to operating profits and reve- rodt also broke new ground at Mitsubishi. In
nues. Cash incentives could amount to more 2004, to meet cost-cutting targets, Eckrodt re-
than a third of annual pay packages, which duced Mitsubishi’s workforce by 14 percent
benefited the organization’s bottom line be- (9,500 jobs from a total of 65,000) over a
cause variable pay linked to company perfor- three-year period, breaking with Japanese
mance does not add to fixed costs. Managers norms of lifelong employment. In addition
were allocated incentives at the beginning of to this, Eckrodt replaced five top Japanese ex-
the year with clear criteria and rewards. Most ecutives with Germans. Four of these new in-
of the criteria were quantitative so there cumbents were under 40 years old. This
were no debates about whether the goals were shocked Mitsubishi veterans, because it was
reached and there was a sense of transpar- unusual to appoint young people to senior
ency and fairness. Nissan also started to hire posts. It was even more unsettling because
employees at higher entry salaries and gave the promotions coincided with the forced

retirement of 11 of the 38 senior Japanese ex- CFTs were established to drive change and
ecutives. In contrast to Nissan, Eckrodt sig- give a sense of ownership and responsibility
naled change but did not gain commitment for turning Nissan around. Teams meant that
to the change because he was not sensitive to employees were fully engaged in the change
the cultural context. process. The teams also provided a mecha-
In conclusion, both Nissan and Mitsubishi nism for explaining the necessity for change
broke with the Japanese collectivist tradi- and for communicating difficult messages
tions by addressing inefficiencies and elimi- across the entire company. The CFTs reported
nating lifelong employment and promotion to Nissan’s nine-member executive commit-
through seniority. However, while these tee, and while decision-making power was
changes were important, they do not in retained by Ghosn and the executive commit-
themselves explain the differential outcomes tee, they had access to all aspects of the com-
in Nissan and Mitsubishi. The following parts pany’s operations, so nothing was off-limits.
of this section will look to leadership behav- Five hundred employees were involved in
ior for explanations. nine CFTs from July to September, focusing
on business growth in new prod-
ucts, services, and markets;
purchasing; manufacturing and
Ghosn’s and Eckrodt’s Different logistics; research and develop- The contrast
Approaches to Implementing Teams ment; sales and marketing; general
The contrast between Ghosn’s and Eckrodt’s and administrative services; fi- between Ghosn’s
leadership approach is most apparent in the nance; phasing out of products,
and Eckrodt’s
way Ghosn and Eckrodt used teams in their equipment, or services; and orga-
respective organizations. Ghosn focused on nization value add. Team selection leadership approach
the implementation of permanent and tem- was based on both vertical and
porary cross-company teams (CCTs) and horizontal representation. This is most apparent in
cross-functional teams (CFTs) as the main in- was a powerful tool for getting line
the way Ghosn and
tervention for change. Results developed by managers to see beyond the func-
these teams were binding and executed. This tional or regional boundaries, Eckrodt used teams
approach modeled teamwork and focused on think in new ways to challenge ex-
bottom-line performance and was the main isting practices, and focus on total in their respective
mechanism for addressing Nissan’s cultural business success. The involvement
organizations.
problems of lack of accountability, no profit of managers also meant that they
orientation, and no sense of urgency. In con- were motivated to communicate
trast, Eckrodt used few teams and failed to relevant information to subordi-
empower them. These two approaches will nates and coworkers, because collectivist cul-
now be examined in more detail. tures value participation (Froese & Goeritz,
At Nissan, a committee was built to pro- 2007). A pilot was appointed to each CFT.
mote joint strategy and synergies. This in- This was a role for a senior manager with
cluded the CEO of Renault and Nissan and frontline experience who had competency
five vice presidents of each organization that linked to the team goals and who was in
met on a monthly basis. In addition to this, charge of the agenda and led discussions. An
11 CCTs with managers from various levels executive with potential and high credibility
overcame the hierarchical and divisional was appointed to this role. These teams also
structure enhancing communication and had two team sponsors from the executive
collaboration between divisions. CCTs were committee whose role was to broaden the vi-
implemented to focus on specific aspects of sion, ensure access to information that was
automobile manufacturing and delivery, such needed, smooth the way for the team as it
as product planning, manufacturing, and conducted its work, and remove any institu-
logistics, to maximize opportunities for tional obstacles. Two senior voices meant that
synergy. it was less likely that the team would focus its

efforts too narrowly, and these two senior managers, who did not communicate the in-
voices would balance each other so no single formation they received to their subordinates
function’s perspective would dominate. as expected. Many German managers were
Ghosn gave his attention and resources only on short-term contracts to Japan and
to this initiative and was also an active role perceived as temporary guests rather than
model. He was personally involved in the se- committed to the Mitsubishi organization. As
lection of CFT pilots to ensure they had high a result, Mitsubishi managers criticized Daim-
credibility. This demonstrated the impor- lerChrysler managers for their lack of com-
tance of the teams and the values they pro- mitment to the alliance and accused them
moted. Second, he paid attention to the of acting opportunistically in the interest of
cross-functional regional committees, chair- DaimlerChrysler and their personal careers,
ing the Japanese committee, and attending which conflicted with the Japanese cultural
the European and North American committee value of collectivism. In contrast to Ghosn
meetings at least four times a year. Third, and his approach, Eckrodt and his leadership
Ghosn engaged in frequent meetings with team were considered inauthentic. This will
cross-functional teams and management and be discussed in the next part of this section.
made lots of visits to the field to
listen to employee views. This com-
Ghosn’s and Eckrodt’s Fit With Organi-
Mitsubishi managers municated that cross-functional
integration was important. zational and National Culture
were treated as In contrast, DaimlerChrysler The GLOBE study of 62 societies (House
relied on its own managers to plan et al., 2004) provides a useful framework for
junior partners,
and execute changes. When sev- analyzing the impact of the two leaders in
and no Japanese eral small cross-company teams of the context of national and organizational
line managers were established, no culture. GLOBE found that national cultural
executive was one was clearly delegated respon- practices relate to country economic health,
sibility for executing these proj- including economic prosperity, productivity,
involved in top ects, with the exception of the and world competitiveness. It is proposed
management research and development depart- that a positive relationship with economic
ment. Mitsubishi managers were health is delivered through higher consump-
decisions. treated as junior partners, and no tion and growth, higher economic productiv-
Japanese executive was involved ity, government support for prosperity and
Mitsubishi had an in top management decisions. economic progress, and societal support for
inflexible divisional
Mitsubishi had an inflexible divi- business competitiveness, which reflects the
sional structure but did little to general societal attitudes toward competitive-
structure but did change this. The need for quick re- ness. The definitions next to each GLOBE
sults meant that cross-functional cultural criteria in the second column of
little to change this. projects were not completed and Table I give some indication of the way in
sometimes cancelled, and partici- which they impact on economic health.
pation and communication was Table I also compares the societal cultures of
restricted. A target-specific information pol- several countries of interest to this article and
icy was put in place, and important informa- the organizational culture of pre- and post-
tion was restricted to top-level management merger Nissan and Mitsubishi based on an
so that Mitsubishi employees did not know analysis of the case data. Columns four to
what was going on. Mitsubishi managers were seven show existing “as is” practices and
not included in decision making and “should be” values, respectively, for Confu-
were often working toward different goals. cian Asian societies, which are relevant to an
A series of formal meetings was implemented analysis of Japanese culture; Latin European
to enhance participation and communication, societies, which are relevant to the French
but large numbers of participants meant they culture in which Renault is based; Germanic
were inefficient, which irritated Mitsubishi Europe societies, which are relevant to the

TABLE I GLOBE Societal Culture Scores for Countries of Interest (Standardized Scores)
4 5 6 9
Confucian Latin Germanic 7 8 Mitsubishi/
3 Asian Prac- European Europe Prac- Anglo Nissan/ Daimler-
Relationship to tices/Values Practices/ tices/Values Practices/ Renault- Chrysler-
Country Eco- Japan Values Germany Values Nissan Mitsubishi
1 2 nomic Health (Nissan and France (Daimler- (United Cultural Cultural
GLOBE Criteria Definition Practices Mitsubishi) (Renault) Chrysler) States) Practices Practices
Performance Performance improvement positive H/L M/M H/M H/M L/H L/L
Orientation and excellence are encour-
aged and rewarded
Assertiveness Assertiveness, confrontation, none M/H M/M H/L M/M L/H L/L
and aggression in relation-
ships with others
Future Delaying gratification, plan- positive M/M M/M H/L M/M M/M M/L
Orientation ning, and investing in the
future
Humane Being fair, altruistic, gener- none M/M M/M L/M M/M H/M H/L
Orientation ous, caring, and kind to
others is encouraged and
rewarded
Institutional Collective distribution of re- positive H/M L/M M/M M/L H/H H/H
Collectivism sources and collective action
is encouraged and rewarded
In-Group Expression of pride, loyalty, negative H/L M/M L/L L/H H/H H/H
Collectivism and cohesiveness in organiza-
tions or families
Gender Minimization of gender in- none M/L M/H M/H M/H N/A N/A
Egalitarianism equality
Power Distance Expectation that power will negative M/M M/M M/M M/M H/L H/H
be distributed unequally
Uncertainty Reliance on social norms, positive M/M M/M H/L M/L H/H H/H
Avoidance rules, and procedures to al-
leviate the unpredictability of
future events
Note: H = High, M = Medium, L = Low.
German culture in which DaimlerChrysler is The GLOBE framework indicates that

based; and Anglo societies, which are relevant Ghosn was a good fit with the needs of the
to the United States, from which much man- Nissan organization. First, Ghosn effectively
agement theory is derived and to which, introduced cross-functional, divisional, and
some theorists are proposing, global manage- regional teams that gave employees a voice
ment practices are converging. Columns that they had not had before. This increased
eight and nine provide an assessment of the assertiveness and performance orientation
pre- and postchange cultural characteristics and reduced power distance while maintain-
in the two organizations of interest. They ing collectivism. All of these changes in cul-
show the culture at Nissan versus the culture ture resulted in improved performance, as
at Renault-Nissan and the culture at Mitsubishi would be expected by House et al.’s (2004)
versus the culture at DaimlerChrysler- conclusions (shown in Table I). In contrast,
Mitsubishi. Eckrodt was only able to implement a veneer
The fourth section of this article proposed of teams and put power in the hands of
that collectivism produced low assertiveness, home-country expatriates. This modeled high
high power distance, and low performance ori- power distance and in-group collectivism at
entation at premerger Nissan and Mitsubishi. the expense of the merger and reinforced
Table I indicates that, according to many of the negative cultural characteristics
Extant research has the GLOBE studies, these cultural of premerger Mitsubishi. Extant research has
practices do not have a positive demonstrated that high power distance is not
demonstrated that relationship with economic per- compatible with authenticity, or being and
formance, which is consistent expressing one’s “true” self, because it results
high power distance in employees who are less willing to ques-
with the poor performance at Nis-
san and Mitsubishi. Second, it tion, challenge, and express disagreement
is not compatible
shows that premerger Nissan and with their supervisors (Pekerti & Sendjaya,
with authenticity, Mitsubishi are not an exact match 2008). Based on this, it is not surprising that
with the Japanese cultural con- Mitsubishi employees engaged in passive re-
or being and sistance and failed to overtly express that
text. In particular, institutional
collectivism at the societal level is they were not on board with the changes
expressing one’s
not consistent with low perfor- Eckrodt was introducing. According to House
“true” self, mance, which may indicate that and his colleagues (2004), these cultural crite-
collectivism manifests differently ria have a negative impact on economic
because it results at the organizational level. Third, health. The old Mitsubishi culture of low
it shows that postmerger Nissan assertiveness and performance orientation re-
in employees who
and Mitsubishi do not mirror the mained unchanged, reinforcing its poor-
are less willing to cultural characteristics of their performing culture.
home-country corporate offices.
question, challenge, For instance, Renault-Nissan’s cul-
ture does not seem to have been Differences in Leader
and express Authenticity
influenced by Latin European so-
disagreement with cietal practices or values and Recent literature on leadership indicates that
DaimlerChrysler-Mitsubishi’s cul- leadership behavior will not be effective if fol-
their supervisor. ture is not influenced by Ger- lowers do not perceive the leader to be authen-
manic Europe practices or values tic. Authentic leaders generate trust through
(although this could reflect an ineffective transparent and consistent behavior between
change process). Finally, this table indicates words and deeds. As a consequence, followers
that neither organization’s culture was influ- accord the leader legitimacy to promote cul-
enced by Anglo practices or values, which in- tural values. Followers of authentic leaders are
dicates that homogenization of corporate more likely to identify with the leader and
cultures toward an international best-practice their workgroup, trust their leader, and de-
Anglo model has not occurred here. velop positive affect, including optimism,

hope, self-efficacy, and resilience, regarding non-Japanese, he did not take on the role of
the leaders’ proposed changes (Avolio & missionary and become determined to in-
Gardener, 2005). This section proposes that volve Nissan’s employees in a revival. Al-
Ghosn succeeded where Eckrodt failed in though a culture clash between what the
implementing positive change because he media has labeled Ghosn’s “French leader-
displayed the competencies of authentic lead- ship style” and Japanese employees was an-
ership. Walumbwa et al. (2008) used four fac- ticipated, it did not happen. Self-awareness
tors of self-awareness, ethical/moral conduct, enabled him to establish a better fit with the
balanced processing, and transparency to op- Japanese culture. This is in sharp contrast to
erationalize the concept of authentic leader- Eckrodt, who misread the Japanese response
ship and were able to prove the reliability and to his change process. While Eckrodt had
validity of this measure. Cross-cultural stud- been warned not to be too willing to believe
ies have supported the reliability and validity Japanese managers when they promised to
of these four factors in countries outside the fix a problem because their “yes” means
United States (Caza, Bagozzi, Woolley, Levy, “I heard you” rather than “I
& Caza, 2010), including China (Walumbwa agree,” he falsely assumed that
et al., 2008). Significant relationships have Mitsubishi managers were com- Eckrodt’s inability
been reported between authentic leadership mitted to the changes he was try-
to see how his
and a range of positive organizational out- ing to make. Walumbwa and his
comes, such as follower job performance, op- colleagues also propose that self- actions impacted
timism, engagement, trust in leader, organiza- aware leaders also know when it
tional climate, enthusiasm, creativity, and is time to re-evaluate their posi- on Japanese
organizational identification (Caza & Jackson, tion on important issues.
2011; Walumbwa et al., 2008; Walumbwa, Eckrodt’s muted and delayed re- employees and
Luthans, Avey, & Oke, 2009; Walumbwa, sponse to the failed strategy to other stakeholders,
Peterson, Avolio, & Hartnell, 2010; Wong & boost US sales, which were down
Cummings, 2009). An analysis of Ghosn’s 20 percent in 2003, was criticized together with a lack
and Eckrodt’s behavior indicates that they dif- strongly by analysts and media.
fered on these four factors. It is proposed that His extremely generous financing of awareness of the
Ghosn’s self-awareness and balanced process- deals, which involved no money
Japanese tendency
ing allowed him to be sensitive to the national down or repayments for a year,
and organizational cultural context and, con- resulted in young buyers default- to hide their
sequently, become a better fit with this con- ing. These US losses undermined
text. This, together with his transparency and Mitsubishi’s global recovery plan. dissension, blinded
ethical/moral conduct, developed follower Ghosn’s self-awareness enabled
him to the reality
trust in him and identification with his new him to successfully implement
cultural values. The behavior of each leader initiatives that changed Nissan’s that employees
on each competency of authentic leadership dysfunctional practices. He in-
and the consequences of this behavior for cul- volved Nissan employees in the were engaged in
tural change at Nissan and Mitsubishi are ex- change process, which leveraged
passive resistance.
amined in this section. the positive aspects of Japanese
Walumbwa et al. (2008) propose that collectivism, and held employees
self-aware leaders accurately describe how individually accountable, which
others see them and understand how their minimized the negative aspects of collectiv-
actions impact on others. Ghosn demon- ism. This then encouraged a high perfor-
strated he was aware how his actions would mance orientation that is consistent with
impact on Nissan employees. From the be- national Japanese cultural practices. This
ginning, he was clear that Nissan had to be demonstrates that Ghosn’s awareness of how
changed from the inside. Understanding his actions would impact on Nissan employ-
that Nissan employees would see him as an ees was a good fit with the national and or-
outsider because he was non-Nissan and ganizational context. In contrast, Eckrodt

was a poor fit with the Mitsubishi and na- but while Eckrodt spent time communicat-
tional Japanese context. His implementation ing, he did so in a way that neglected impor-
of pseudo teams and concentration of power tant information, such as management and
in the hands of expatriate managers alien- employee passive resistance, which under-
ated Mitsubishi employees. Eckrodt’s actions mined structural change. This indicates that
were in conflict with Japanese collectivism he was not sensitive to the cultural context
and reinforced in-group collectivism and and did not adapt his behavior to accommo-
high power distance, which had created so date it. Ghosn role modeled the cultural val-
many problems at Mitsubishi and are linked ues he sought to instill at Nissan, and Eckrodt
to poor economic health practices. Eckrodt’s role modeled the behaviors that needed to
inability to see how his actions impacted on change at Mitsubishi. In this way, Ghosn was
Japanese employees and other stakeholders, a good fit with Nissan and Eckrodt was not a
together with a lack of awareness of the Japa- good fit with Mitsubishi, because he did not
nese tendency to hide their dissension, use or model balanced processing.
blinded him to the reality that employees The third dimension of authentic leader-
were engaged in passive resistance. ship is transparency, defined as the degree to
The second aspect of authentic leadership which the leader reinforces a level of open-
is balanced processing, defined as the degree ness with others that provides them with an
to which the leader reinforces a level of open- opportunity to be forthcoming with their
ness with others that provides them with an ideas, challenges, and opinions. Ghosn was
opportunity to be forthcoming with their more transparent than Eckrodt. Ghosn in-
ideas, challenges, and opinions, soliciting sisted from the very beginning that Nissan’s
sufficient opinions and viewpoints prior to transparency would be total and that they
making important decisions. Ghosn used bal- would speak openly about problems and re-
anced processing more than Eckrodt. To ad- sults. The teams moved Nissan from a con-
dress Nissan’s avoidance of reality, Ghosn sensus culture where dissent was not voiced
spent most of the spring of his first year ex- to active consensus through new meeting be-
amining Nissan from every angle. In addition haviors. In this new approach, at the begin-
to this, he held executive committee meet- ning of a meeting goals were clarified. As the
ings on test tracks where management tried meeting progressed, if someone disagreed,
out their competition’s cars. Ghosn was the meeting was stopped because it was worth
friendly and open and wanted to talk to peo- hearing dissension even if it took time to get
ple and learn. For example, he walked around a better decision. The dissenter was then re-
the entire company to meet every employee quired to suggest an alternative. The options
in person and initiated long discussions with were then discussed until the superiority of
several hundred managers to discuss their one approach was recognized. This ensured
ideas, meeting more than 1,000 people in that everyone could be heard and have an
this period. Balanced processing was ex- opportunity to shape the decision so that an
tended into the teams that Ghosn introduced optimal decision could be reached. The CFT
throughout the organization, which had pro- approach created transparency and allowed
cesses that ensured that a range of voices the entire organization to know what every-
were heard. In contrast, Eckrodt had numer- one else was doing, addressing the cultural
ous meetings with factory workers and problem of accountability. Ghosn approached
employees, inviting them to present ideas to the change with complete transparency,
improve the company but failed to gather in- which embedded the cultural value of ac-
formation that alerted him to the fact that countability and responsibility and chal-
Mitsubishi managers were not committed to lenged the old cultural values of blame and
his changes. As a consequence, he falsely as- complacency. He also modeled transparency
sumed that Mitsubishi managers were on the through his communications with the press.
same page. Ghosn used balanced processing In contrast, Eckrodt seldom gave interviews
to gather information to inform his actions, and failed to create transparency at Mitsubishi.

When a German manager gave an assign- and not finish a speech on time. This was at-
ment to a Japanese subordinate, he/she would tributed to Eckrodt’s “Brazilian leadership
often reply “yes” without taking any action, style” by the media. He was criticized for not
because it was perceived that the German having a clear postmerger integration strat-
managers were a storm that would pass egy because he just had a general intention
quickly. Instead of cooperating with the turn- that the merger would improve Mitsubishi’s
around team, Japanese managers partly ig- prospects in the Far East markets and that
nored decisions, and a shadow board of Mit- DaimlerChrysler would benefit from access
subishi managers continued to be in charge to small car technology. Ghosn defined the
of real decision making. For example, despite roles of all Nissan managers so that everyone
announcing the dissolution of the supplier’s could see exactly what their contributions to
council of Mitsubishi’s keiretsu, Mitsubishi Nissan were. In contrast, under a new organiza-
continued to buy supplies within the kei- tional structure adopted through the turn-
retsu. In summary, Ghosn won trust through around plan, Eckrodt aimed to clarify
transparency, which further promoted ac- operational rules and responsibilities for
countability, teamwork, and integration of each job, but this plan was not executed. At
Renault and Nissan. In contrast, Eckrodt and Mitsubishi, decisions were not
his German management team were not made quickly enough, which did
trusted, and Mitsubishi managers and em- not role model a needed sense of The final factor
ployees were kept in the dark and were not urgency. Eckrodt needed approval
of authentic
committed to change. In summary, Eckrodt from headquarters in Stuttgart
role modeled Mitsubishi’s old cultural values and did not have a direct report- leadership is ethical/
and failed to generate the trust required for ing line to the DaimlerChrysler
transformational change (Jung & Avolio, CEO, which slowed decision mak- moral conduct.
2000), while Ghosn was a good fit with Nis- ing. Mitsubishi managers com-
Leaders who
san because he role modeled the organiza- pared German managers to mari-
tional cultural values that were needed to onettes directed by Stuttgart demonstrate this
overcome a culture that was characterized by headquarters. This mirrored exist-
poor accountability. He also generated fol- ing cultural practices at Mitsubishi quality demonstrate
lower trust in, and identification with, the that had led to poor performance.
new cultural values. Second, Eckrodt did not role behavior consistent
The final factor of authentic leadership is model accountability. In compari- with their values, or
ethical/moral conduct. Leaders who demon- son to the old culture at Nissan,
strate this quality demonstrate behavior con- Ghosn was very precise, extremely “walk the talk.”
sistent with their values, or “walk the talk.” factual, and highly quantified in
This is consistent with Schein (2004), who relation to performance and dead-
proposes that leader role modeling and be- lines. He made it clear that every number
havior consistent with the desired culture proposed had to be thoroughly checked and
embeds and reinforces organizational culture. did not accept any report that wasn’t totally
Ghosn’s words and actions were consistent, clear and verifiable. He expected people to
but Eckrodt’s were not. When Eckrodt arrived personally commit to every observation or
at Mitsubishi in early 2001, one of his first claim they made. In a vertical society like
acts was to give top executives fist-size chunks Japan, employees expect guidance from su-
of the Berlin Wall, each emblazoned with the pervisors (Froese & Goeritz, 2007), and Ghosn
words “Leave no stone unturned,” but provided this. He role modeled this behavior
Eckrodt did not do this and Mitsubishi em- when he announced the revival plan, which
ployees did not take this message on board. had the specific and measurable goals of re-
First, in contrast to Ghosn’s clear strategy and turning to profitability in 2000, achieving an
rigorous execution, Eckrodt was accused of operating profit of 4.5 percent by 2002 and
being too laid back and informal, illustrated reducing net debt from 1.4 trillion to less
by his tendency to wander off on tangents than 700 billion yen by 2002, declaring that

FIGURE 2. The Impact of Leadership on Organizational Culture Change
he and the whole top management would re- teams in contrast to Ghosn’s authentic im-
sign if he failed to accomplish any of the plementation of teams. Eckrodt also failed to
commitments that had been set. Ghosn won walk the talk of integration. DaimlerChrysler
the trust of Nissan’s managers and helped appeared to not be committed to sharing
motivate the rest of organization by putting power with Mitsubishi and did not engage
his own job on the line if targets were not Mitsubishi managers and employees in the
met. In contrast, while rumors were rife that change process, which resulted in passive re-
Eckrodt would resign because of the 2003 sistance.
American loan disaster, which created losses In summary, Ghosn built trust through
of between $375 million and $420 million in ethical/moral conduct. He walked the talk
bad American loans, Eckrodt said that he and role modeled the behavior and values he
would leave his position only if Mitsubishi’s wanted to change, such as accountability.
shareholders asked him to do so, despite a Consequently, there was follow-through on
prior commitment to resign if the company the initiatives he introduced. In contrast,
didn’t break even in 12 months. Eckrodt also while Eckrodt spoke of accountability with
failed to model and promote accountability his dramatic opening symbol of the Berlin
at Mitsubishi. Even though Nissan employees Wall, he failed to be accountable or hold Mit-
were aware of the problems they faced and subishi managers (German and Japanese) ac-
the solutions required, they never carried countable. Consequently, there was little fol-
them out. low-through. This demonstrates that Ghosn
Third, Eckrodt and his expatriate manag- was a good fit with Nissan because he role
ers failed to role model a sense of urgency, modeled the required organizational cultural
and this was modeled by Mitsubishi’s Japa- values that the organization needed to adopt
nese managers, who believed their keiretsu and generated the trust that followers need to
would bail them out so they did not need to identify with and adopt these values. In con-
respond to DaimlerChrysler’s changes. In trast, Eckrodt role modeled Mitsubishi’s old
contrast, Ghosn role modeled a sense of ur- cultural values, which had led to its many
gency. He was advised to take his time in problems and did not generate follower trust.
Japan and exercise moderation but was skep- Figure 2 summarizes the positive impact
tical, because Nissan’s state of deterioration of authentic leadership on effective cultural
required an intense response. However, it change.
should be noted that Ghosn has been criti- This section has demonstrated that lead-
cized in France for his management style, ership was important to the success of Nissan
which generated so much employee stress and failure of Mitsubishi. Ghosn was high on
that he was named in one employee’s suicide the four aspects of authentic leadership and
note (Rothfeder, 2008). Eckrodt also did not Eckrodt was lower on these aspects. While
walk the talk when he introduced pseudo extant theory anticipated that authentic

leadership behavior would be a poor fit with freedom that Ghosn and Eckrodt were
the Japanese collectivist national culture, given to transform Nissan and Mitsubishi.
Ghosn was successful at Nissan, indicating DaimlerChrysler is a German organization,
that authentic leadership may be valued and Table I shows Germany is high on asser-
across all national cultures. Self-awareness tiveness and uncertainty avoidance, medium
and balanced processing equipped Ghosn to on power distance, and low on humane ori-
be aware of the national and organizational entation. This profile is most likely to lead to
culture and his own capacity to lead in this a desire by head office to tightly
context. Consequently, there was a fit control operations in Japan and
between Ghosn’s approach and Japanese so- not consider the impact of this While extant theory
cietal values, which House et al. (2004) pro- behavior on Japanese nationals.
anticipated that
pose are most important to leadership In contrast, the French home of
acceptance (see the fourth column of Table I Renault is medium on all of these authentic leadership
for Confucian Asian values). First, he success- characteristics, which may have
fully implemented teams that promoted in- led them to give Ghosn more behavior would
dividual voice, which struck a balance freedom (see the fifth and sixth
be a poor fit with
between collectivist and individualist prac- columns of Table I).
tices. This was a good fit between Confucian In summary, Ghosn was a bet- the Japanese
Asian “as is” practices, which manifest collec- ter fit with the national and orga-
tivism, and “should be” values, which indicate nizational cultural context than collectivist national
a desire for less collectivism. Second, Ghosn’s Eckrodt. Ghosn’s success and Eck-
culture, Ghosn
ethical/moral and transparency behaviors re- rodt’s failure can be attributed to
sulted in his being clear about his expecta- the ability of these leaders to ad- was successful at
tions and the consequences for not meeting dress the relative and combined
them, which is consistent with the Confu- effects of national and organiza- Nissan, indicating
cian Asian high-assertiveness value. tional culture. Ghosn’s authentic
Eckrodt, in contrast, was not a strong leadership behavior gave him the that authentic
leader and was controlled by DaimlerChrys- capacity to be aware of himself leadership may be
ler. This hierarchical approach meant that ex- and his impact in the Japanese
patriate German managers were given leader- context and understand how best valued across all
ship roles and did not role model commitment to change the Nissan culture.
to Mitsubishi. Eckrodt’s lower self-awareness national cultures.
and balanced processing behaviors meant
Discussion
that he was unaware of how this approach
generated passive resistance in Mitsubishi This article began with two research ques-
managers and employees. Eckrodt’s lower tions. The first question concerned the rela-
ethical/moral and transparency behavior led tive and combined effects of national and
to the introduction of team initiatives that organizational culture on the performance of
did not elicit changes in behavior and sup- Nissan and Mitsubishi and the second asked
ported the existing cultural practices of not why Carlos Ghosn’s transformation of Nissan
voicing opinions upward. This resulted in the was successful while Rolf Eckrodt’s efforts
resistance to change being hidden, which were unsuccessful. This discussion will focus
would explain Eckrodt’s misperception about on these two questions.
the change process. In addition to this, these The Japanese collectivist culture influ-
behaviors conflicted with the collectivist and enced organizational behavior directly
assertiveness values of the Japanese national through its influence on organization culture
culture. and indirectly through its influence on HRM
It is also likely that the home country of practices, which also impacted on organiza-
Renault and DaimlerChrysler played a role in tion culture. This supports the divergence ar-
the success of the mergers. The French and gument that proposes that national culture is
German cultures may have influenced the important to organizational performance and

HRM. Based on this, leaders and HRM practi- sensitivity to the cultural context and under-
tioners need to be aware of differences in na- stand what needs to be changed and how
tional culture and be skilled in identifying best to introduce the change. This results in a
when national culture is having a negative “cultural fit” with national and organiza-
impact on organizational behavior and per- tional culture and leads to trust and identifi-
formance. In particular, when introducing cation between the leader and follower. If
change, leaders need to be aware of the fit of leaders also use transparency and ethical/
their leadership style with the context in moral conduct, follower trust will be rein-
which they are operating. Eckrodt’s lack of at- forced and followers will further identify with
tention to the influences of national and or- the new cultural values and behaviors that the
ganizational culture at Mitsubishi played a leader is promoting and modeling, which will
major role in DaimlerChrysler’s failure to in- achieve the desired culture change. This arti-
tegrate the two organizations and achieve the cle has also suggested that the national cul-
desired synergies. Eckrodt’s “laid ture of the acquiring organization can impact
back” style role modeled the val- on the ability of a leader to introduce change
ues that were contributing to Mit- that is a good fit with the national culture of
Eckrodt’s lack of
subishi’s poor performance and the acquired organization. While this pro-
attention to the failed to provide the strong leader- vides support for the divergence proposition
ship that the Japanese valued. that leadership must be adapted to the cul-
influences of national However, this case also provides tural context, it also argues that authentic
some support for the convergence leadership is valuable in all national cultures,
and organizational proposition that a fit between na- despite extant theory that proposes that au-
culture at Mitsubishi tional culture and organizational thenticity is not valued in collectivist cul-
culture is not required for high tures. This supports the notion that there
played a major role performance. The Nissan and Mit- should be convergence toward “best practice”
subishi cases demonstrate that this leadership in all national culture contexts.
in DaimlerChrysler’s fit is not desirable when it creates The Nissan case also demonstrates that
a dysfunctional organizational HRM practices can be successful even when
failure to integrate
culture. The Nissan case demon- they are not consistent with national culture.
the two organizations strates that organization culture Western HRM practices work in a collectivist
can become independent of na- culture if introduced effectively. For example,
and achieve the tional culture, supporting Hofst- the introduction of contingent, individual
ede’s (1993) proposition that while pay to Nissan was successful despite the Japa-
desired synergies.
societal culture changes slowly, or- nese collectivist culture context. However,
ganization culture may be con- the Mitsubishi case demonstrates that with-
sciously changed. out associated cultural change driven by the
The fit between leadership behavior and leader, HRM practices alone cannot change
national and organizational culture has also dysfunctional collectivist behaviors. Follow-
been considered in this article. We can con- ers are not instrumentally driven to cultural
clude that a fit is valuable because it facili- change—neither the carrot of individual re-
tates employee identification with the leader wards nor the stick of plant closures and
and the changes that he/she is introducing. sacked management worked at Mitsubishi.
However, the relationship is complex. Clearly, Culture change is a matter of the heart, and
a fit with a dysfunctional culture is not con- the leader’s behavior is the most effective in-
ducive to change. A leader who inadvertently strument of change. This article attributes the
engages in behavior that reinforces the old success of Nissan and failure of Mitsubishi to
cultural values, regardless of the values that differences in leadership. Ghosn demon-
he/she espouses, will perpetuate the status strated commitment to the integration of
quo. Leaders who have self-awareness and Renault and Nissan and successfully intro-
balanced processing capabilities develop duced new cultural values to Nissan through

self-awareness and balanced processing, empirically grounded theory to explain dif-

which increased leader sensitivity to, and fit ferential leader behavior and effectiveness
with, the cultural context. Ghosn also used across cultures (Den Hartog et al., 1999).
transparency and ethical/moral conduct to This article has also demonstrated that
develop follower trust and identification dysfunctional organizational cultures and
with, and adoption of, desired cultural val- HRM practices can be changed even when
ues. All of these authentic leadership behav- they are inconsistent with national cultural
iors role modeled the new cultural values values. These findings have implications for
needed to overcome poor accountability, no international HRM in general and specifi-
sense of urgency, and no profit orientation in cally for HRM in high-context countries,
the old Nissan culture. Eckrodt was unable to which characterize many emerging econo-
do the same at Mitsubishi. This is most likely mies that are of increasing relevance to fu-
caused by Eckrodt’s leadership ability. His ture business.
lack of awareness of the impact of his actions The most important contribution of this
on employees; inability to pick up on em- article is the lesson it draws from the Nissan
ployee passive resistance; poor transparency, and Mitsubishi experience on the way in
leading to employee lack of trust; and role which culture should be changed to produce
modeling of old Mitsubishi behaviors re- an effective outcome. This article has dem-
sulted in reinforcement of the old Mitsubishi onstrated the importance of leadership to
culture. Eckrodt’s leadership may also have successful organizational culture change in
been constrained by DaimlerChrysler’s home- cross-country mergers. In particular, leaders
country management based on German need to be developed to understand cultural
cultural values, which maintained tight cen- differences and their impact on performance
tralized control, in sharp contrast to Ghosn’s and change. They also need to be aware of
freedom to devolve accountable decision their own style in the context of existing
making. This article stresses the importance of and desired cultural values. Developing the
leadership behavior and fit with the leader- capabilities of authentic leadership will de-
ship context in both the home and host coun- velop this awareness and lead to follower
try. Managing these contexts is an important trust and subsequent commitment and
leadership function, and self-awareness adoption of the cultural values required to
and balanced processing are ways in which achieve the hoped-for turnaround and syn-
leaders can facilitate their fit with these ergies. Finally, corporate head offices need to
contexts. understand that the leader needs the lati-
tude to create fit between organization
change and the organization and national
Implications for HRM Practitioners
culture context.
and Leaders
This article demonstrates that national cul-
Note
ture is an important consideration for leaders
and HRM practitioners to extract maximum 1. Hofstede (2001) defines national culture as the ho-
value from mergers and acquisitions in mogeneity of characteristics that separates one
competitive industries. National culture in- human group from another, stating that it provides
fluences organizational culture and HRM a society’s characteristic profile with respect to
practices, which also drive organizational norms, values, and institutions. More recently, na-
culture and associated behavior. When doing tional culture has been broadly defined as values,
business in or with Confucian Asian societal beliefs, norms, and behavioral patterns of a national
groups, leaders and HRM practitioners should group (Leung, Bhagat, Buchan, Erez, & Gibson,
understand that collectivism is likely to have 2005). This more holistic view includes values and
a substantive impact on organizational be- practices (Javidan, House, Dorfman, Hanges, &
havior. This article has responded to calls for Sully de Luque, 2006).

DR. CAROL GILL is an organizational psychologist who has specialized in the fields of
executive learning and development, human resource management, and organization
development/change as a practitioner, manager, consultant, and academic for more
than 25 years. Dr. Gill is currently on the permanent faculty of the Melbourne Busi-
ness School, where she teaches in the MBA program and conducts research. She also
designs, develops, and delivers executive education programs in leadership, change,
and human resource management and provides consulting services in strategic human
resource management and organizational change for the private and public sectors.
See http://works.bepress.com/carol_gill/ for her current research interests.
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The Role of Leadership in Successful International Mergers and Acquisitions: Why Renault-Nissan Succeeded and Daimlerchrysler-Mitsubishi Failed

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The Role of Leadership in Successful International Mergers and Acquisitions: Why Renault-Nissan Succeeded and Daimlerchrysler-Mitsubishi Failed

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THE ROLE OF LEADERSHIP IN

This article compares and contrasts the Renault-Nissan and DaimlerChrysler-

Keywords: human resource management, culture, leadership, authentic

Introduction employee effort (Burt, 1999) and lead to com-

T ing that culture is important to orga-

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Ghosn achieved a successful turnaround At the organizational level, the Japanese

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

German culture in which DaimlerChrysler is The GLOBE framework indicates that

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

FIGURE 2. The Impact of Leadership on Organizational Culture Change

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

self-awareness and balanced processing, empirically grounded theory to explain dif-

Human Resource Management DOI: 10.1002/hrm

References Culture speciﬁc and cross-culturally generaliz-

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

Human Resource Management DOI: 10.1002/hrm

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