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Performance Management Best Practice

Turning Around Financial Performance

by David Magee

Executive Summary

When financial performance lags, a full-scale, company-wide plan of action is required to get the best and longest-lasting results. Merely dictating cost reductions is not enough to foster true change within the organization. At Nissan, CEO Carlos Ghosn, who now runs both Nissan and Renault, implemented a grass-roots process designed to force employees to find cost-saving solutions. Ghosn drastically turned around the company’s performance over a span of two years using the following tools:

  • cross-functional teams

  • identifying root problems

  • eliminating costs the customer does not see

  • investing in product design


No business, big or small, is immune from needing to address and correct financial performance. Often the reason is obvious, such as when a once-reliable bottom line turns negative, placing employee jobs, ownership equity, and product or service quality at risk. Sometimes, however, the need and potential benefits are not so obvious.

Take General Electric as an example. This stalwart American blue-chip corporation, in business for more than 100 years, was considered one of the world’s best-managed companies when Jack Welch took over as company chairman and CEO in 1981. GE was profitable, but the period was recessionary in the United States, and the stock had languished for years. So, Welch made the assumption that good was not good enough.

He began drastic cost-cutting measures across the board, eliminating more than 100,000 jobs and millions of dollars in costs. At the same time, Welch put processes in place to strengthen the organization from within, focusing on human resources development, while investing heavily in leadership training. By the end of the 1990s, GE’s stock was recognized for its consistently high returns, and Welch was known as one of the 20th century’s top business leaders.

Listen Deeply

Typically, the need to address financial performance comes when that of a business has fallen below acceptability, either losing money or is not up to normal bottom-line standards. Such was the case with Japanese automaker, Nissan, in the late 1990s. A one-time industry leader, Nissan was losing millions of dollars annually, and teetering near bankruptcy, when French automaker Renault took a controlling stake in the company. Renault infused Nissan with much-needed capital, but that was the least of its contributions to the company.

A young, relatively unknown leader named Carlos Ghosn became the CEO of Nissan, and his mission was to turn around financial performance in three months. The company’s demise had taken years, so there were many skeptics, yet Ghosn formulated a turnaround strategy designed to deliver quick and lasting results.

First, he traveled to all of Nissan’s factories and facilities, spending most of his time with middle-management workers, asking questions about their jobs and facilities, and listening deeply. Management, he assumed, did not have the answers. He needed to listen to the core employee group of the company. Then, Ghosn returned to Nissan and implemented a plan designed to cultivate solutions to the company’s problems from the ground up.

Creating nine cross-functional teams to assess each area of the business, including purchasing, research, administrative, and finance, Ghosn challenged them to find, within 90 days, cost-cutting solutions worth hundreds of millions of dollars. Each team was assigned a top company vice-president as a member, but that person was not placed in charge, as Ghosn believed lower-level employees would not then speak up enough. Instead, middle- and upper-middle-level employees were named as pilots, charged with guiding the team on its mission.

Ghosn’s reasoning for creating a cross-functional structure for the task was simple: by creating teams with employees from different disciplines, members would be forced to challenge one another objectively and give answers honestly. And by forcing the teams to work to a tight deadline, he gave them less time to find excuses.

“Three months was the longest time I could imagine,” said Ghosn. “Multitask work is simply a question of exercise. If you work on trying to act quickly, you will be good at it. When you know that time is important, you learn to work faster.”

Many believed Nissan could not be fixed, because the company was part of Japan’s interlinked business network, or keiretsu, which dictated many banking and supplier relationships that were not necessarily in the company’s best interest, yet nobody wanted to break the long-held ties. For instance, the company had literally hundreds of bank accounts, spreading its wealth throughout its keiretsu, but finance had previously refused to consolidate them, thus saving costs, arguing it would end vital cross-company relationships. Ghosn did not buy that argument, however, giving the cross-company teams a firm directive: “No sacred cows, no taboos, no constraints,” he said.

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Further reading


  • Ghosn, Carlos, and Philippe Riès. Shift: Inside Nissan’s Historic Revival. New York: Currency/Doubleday, 2005.
  • Magee, David. Turnaround: How Carlos Ghosn Rescued Nissan. New York: HarperBusiness, 2003.


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