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:
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.
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