Strategic Leadership at Nissan and Costco


There are three popular types of leadership in the business world. They include visionary leadership, managerial leadership, and strategic leadership. Briefly, it is important to note that managerial leaders concentrate more on the daily activities of the firms they lead, and as such, may not have a future vision for the same businesses (Rowe & Nejad, 2009). Visionary leaders are defined as proactive risk takers, who are mainly future-oriented, and their actions are inspired by a future desirable state or beliefs (Rowe & Nejad, 2009). This paper will not delve into the first two types of leadership; instead, the paper will concentrate on strategic leadership and analyze two case studies based on the same. Notably, strategic leadership is defined as “the ability to influence others to voluntarily make day-to-day decisions that enhance the long-term viability of the organization, while maintaining its short-term financial stability” (Rowe, 2001, p. 83). From the foregoing definition, three things emerge: first it looks like strategic leadership is about influence. Second, it appears that strategic leadership has a future orientation. Third, it seems that strategic leadership remains cognizant of the important role that short-term activities play in shaping the firm’s future. As Rowe and Nejad (2009) note, strategic leadership seems to combine the strengths of both the visionary and managerial leaders.

Case Studies

The first case that will be analyzed in this paper is that of Nissan’s turnaround in the late 1990s as authored by Yukl (2012). In the case study, it is indicated that Nissan was on a serious decline and the appointment of Carlos Ghosn was meant to turn things around for the Japanese carmaker. Fortunately, through critical understanding of factors that were ailing the company and establishing strategic relations with the employees, Ghosn was able to bring the company back to profitability.

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The second case study is still authored by Yukl (2012) and indicates how Costco still makes profits despite low profitability in the retail industry. According to Yukl (2012), Jim Sinegal is the man who sits at Costco’s helm of leadership. Although Sinegal is reluctant to take credit for the firm’s impressive performance, the case study implies that he is the one who formulates and implements strategies that have led the company to success.

Analysis

Before commencing this analysis, it is important to indicate that there is varying opinions among scholars about what strategic leadership is. Most such opinions cannot be fully defined or used in this analysis. For the sake of clarity, therefore, the analysis will use Covey’s (1996) description of strategic leadership. According to Covey (1996), strategic leadership has to meet three functions namely, “Pathfinding, aligning and empowering (sic)” (p. 150). In relation to path-finding, the strategic leader identifies the firm’s value system and ties it to the firm’s mission, and vision. In the Nissan case study, path-finding efforts by Ghosn are evident through his actions before and after joining the Japanese company. As Yukl (2012) illustrates in the case study, Ghosn met with all of Nissan’s stakeholders prior to assuming his post as a chief operating officer. Resultantly, he was able to identify and understand the company’s values, mission and vision. Such an understanding might have enabled him, for example, to understand that dictating changes at Nissan would not be fruitful. Consequently, he chose to form cross-functional teams that determined the changes necessary to revive the company. The fact that the cross-functional teams identified the problems facing Nissan and even recommended solutions to their leader arguably supports the notion by Rowe (2001) that a strategic leader influence his subordinates to “voluntarily make day-to-day decisions” (p. 83). Notably, profitability was a key mission for Nissan and leading by example, Ghosn undertook to resign if the company did not make profits by a specific time. Through such an undertaking, Ghosn arguably illustrated how tying the values, missions and vision of Nissan should work out for the company and its stakeholders. On one hand, Ghosn illustrated the need to work as one big team and, on the other hand, he showed that without meeting the vision and profitability targets, no employee’s job was assured. In most businesses, short-term profit is what assures the firm of long-term viability. It thus appears that Ghosn was indicating to the employees that Nissan’s inability to make profits going forward would have been a collective failure by all employees.

The path-finding function of a strategic leader is also evident in Costco, where the chief executive officer (CEO) Sinegal understands his firm’s values and ties them to the company’s vision and mission. For example, the case study creates the impression that Costco is a retailer that does not compete on price. Rather, the retailer seeks to provide its customers with unique products, which are presented to customers on simple and standard displays. To tie the foregoing values with the company’s mission and vision, the company employs and retains talented employees, through a combination of careful recruitment and retention practices.

The second strategic leadership function indicated by Covey (1996) is aligning. The aligning function ensures that the processes, systems and structures in an organization all contribute to the attainment of the firm’s mission and vision. In Nissan, for example, the formation of cross-functional teams was arguably Ghosn’s way of accomplishing the aligning function. Additionally, the aligning function is evident in how he identifies all problems facing Nissan and together with the employees, identifies a solution to the problem and implements the same. Overall, it would appear that Nissan’s problems were multifaceted. Fortunately, Ghosn identified the manner in which different solutions would be implemented, after which the company started making profits. Arguably, Ghosn was able to accomplish his aligning function well, hence the turnaround that was registered by Nissan.

At Costco, the aligning function is evident in Sinegal’s handling of different systems and processes. For example, he values the employees, seeks the contribution of customers and managers, and insists on simple product displays. Additionally, Sinegal seems to understand Costco’s customer’s well and as such, he provides services that attract them. Arguably, all the foregoing practices by Sinegal and his team align the activities, processes and systems together in order to accomplish the retailer’s vision and mission, which one would assume (because it is not indicated in the case study) is to become a leading retailer in all the countries it does business.

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The third function of strategic leadership as indicated by Covey (1996) is empowerment. In the leadership context, Covey (1996) defines empowerment as a leader’s ability to ignite the creativity, ingenuity and latent talent possessed by employees in order to accomplish the firm’s mission and vision. Based on the foregoing definition, it seems that Ghosn has done well in the empowerment function. For example, one gets the impression that he helped employees at Nissan recognize their roles and responsibilities towards helping the company accomplish its mission and vision. The new human resources practices that he introduced in the company, also arguably helped inspire the employees dedicate more efforts towards helping Nissan accomplish its mission and vision. An example of the HR practices that may have ignited creativity, ingenuity and talent among the employees was the introduction of merit-based pay and promotions. The foregoing changes enhanced performance from employees. In Costco, empowerment is evident in the open-door policy that Sinegal has. Additionally as indicated by Yukl (2012), “Costco has generous pay, excellent health benefits, and a good 401(K) plan for its more than 120,000 hourly employees in the United States” (p. 304). Put together, the foregoing factors arguably ignite the employees’ talents, creativity and resourcefulness at work, hence helping the organization attain its vision and mission.

In addition to the three strategic leadership functions identified by Covey (1996), Schoemaker, Krupp and Howland (2013) indicate that strategic leaders anticipate what will happen in the future. Specifically, they “gather information from a wide network of experts” (p. 4). Additionally, they anticipate the reactions that competitors and buyers will have when a new product is released into the market. Nissan’s Ghosn is seen anticipating his time in the company, when three months prior to taking up his roles, he gathered information about the car maker and even started establishing what was wrong with the company. Additionally, the case study indicates that he streamlined the production operations, and even introduced new car model. The introduction of new car models was perhaps done because he anticipated and knew what would most likely appeal to the consumer market. Costco’s Sinegal is also good in anticipating because the case study indicates that he sometimes goes to the competitors’ stores to find out if the competition is undercutting the prices at Costco. In the latter part of the case study, Yukl (2012) notes that Sinegal is yet to embrace a new decision because he is not too sure of its effect on consumer purchase behavior. Arguably, the foregoing hesitation by Sinegal is an indication that he anticipates the future, and he understands that the new policy could save the company some money, but it could also reduce customers’ satisfaction levels.

Conclusion

The introductory part of this paper indicated that a strategic leader is able to influence his subordinates to volunteer in the daily decision-making in an organization, something that improves the chances of the organization becoming financially stable in the short-term and a feasible business in the long-term.

The two leaders featured in the Nissan and Costco case studies are arguably strategic leaders, because they have succeeded in inspiring their followers to perform their duties in a manner that has enabled the two respective companies live up to their missions and visions. Ghosn succeeded in turning Nissan’s economic fortunes for the better after the company experienced approximately eight years of poor performance. On his part, Sinegal has succeeded in leading Costco to profitability in the midst of intense competition, low profitability in the industry, and high industry turnover rates. Costco is unique in that its employee turnover is still very low; its profitability has not suffered much; and its employees are still among the very well paid in the industry. Arguably, therefore, both Ghosn and Sinegal qualify to be ranked as strategic leadership.

References

Covey, S. (1996). Three roles of the leader in a new paradigm, In F. Hesselbein, M. Goldsmith & R. Beckhard (Eds.), The leader of the future: new visions, strategies, and practices for the next era (pp.149-159). San Francisco: Jossey-Bass.

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Rowe, W.G. (2001). Creating wealth in organizations: the role of strategic leadership. Academy of Management Executive, 15(1), 81-94.

Rowe, W.G., & Nejad, M.H. (2009). Strategic leadership: short-term stability and long-term viability. Ivey Business Journal. Web.

Schoemaker, J., Krupp, S., & Howland, S. (2013). Strategic leadership: the essential skills. Harvard Business Review. Web.

Yukl, G. (2012). Leadership in organizations (8th edn.). Upper Saddle River, NJ: Prentice Hall.

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