Outgoing chairman credited for Mitsubishi Fuso turnaround

by

Special To The Japan Times

On arrival at Narita airport in 2009, the incoming chief executive of Mitsubishi Fuso Truck and Bus Corp., Albert Kirchmann, asked his assistant there to pick him up, “Tell me, what are ‘my people’ expecting?” Hesitantly, the assistant replied, “They are expecting you to defend Fuso by standing up for us at Daimler’s Stuttgart headquarters.” Daimler is the Japanese firm’s German parent.

Mitsubishi Fuso is one of the biggest foreign companies in Japan and among the largest foreign employers. Many of the firm’s then 20,000 mostly local employees had lost confidence, both in themselves and in their leaders. Kirchmann had been sent by the headquarters to turn the huge but ailing bus and truck manufacturer around.

Earlier, quality issues arising under previous owner, Mitsubishi Motors Corp., led to a public blaming of the firm in 2002 and a major product recall in 2004. Company morale sank as Japanese monotsukuri (craftsmanship pride) evaporated within Japan’s culture of shame. One year later, Mitsubishi Motors sold its controlling shares in Mitsubishi Fuso to Daimler (then DaimlerChrysler).

When Kirchmann took the helm, the Japanese maker was financially “nonperforming.” Besides being burdened with redundant costs, it relied too heavily on the domestic market. The firm competed in global markets where economies of scale matter. There would be no future budget for innovation if Mitsubishi Fuso failed to increase its overseas market share, as the Japanese market shrinks along with the nation’s population. By 2060, Japan’s population is projected to decline by one-third, down to 87 million people. Naturally, employees were pessimistic about the future.

At breakfast meetings and briefings, managers expressed their negativity. Employees said, “The situation is so difficult. Nothing can be done about it (shoganai).” In frustration, some expat managers on short-term assignment blamed “those damn locals” for not speaking up or pushing forward fast enough. Likewise, some local employees blamed “those bossy Germans” for the problems.

Kirchmann thought the lack of respect within his mixed team counterproductive. Following the company’s four guiding principles of effective change leadership — of which “respect” is cornerstone — Kirchmann forced his team to work together, rather than against one another. In addition, “passion,” “integrity” and “discipline” make up the remaining principles.

Mitsubishi Fuso received a one-off investment loan from Daimler’s shareholders. Within 18 months, the firm reduced locations, production and labor costs. No part of the organization was spared. With cooperation from Japanese board members, the company cut staff by 35 percent. Hardest hit were employees with families to support. “It was brutal, but there was no other choice to safeguard the remaining 12,000 employees and their families,” Kirchmann says regretfully.

The firm went from “nonperforming to performing,” from “local to global,” and from “nonconfident to confident.” “The joint journey would not have been possible without an aligned mixed board,” says Kirchmann. Had they failed to make the changes, Mitsubishi Fuso would not have survived as a going concern.

“I’m not a hero. The team did it,” he says, following the four guiding principles.

Passion

Without passion, change leadership is impossible. Leaders who have passion identify with their business. “It must be your business,” Kirchmann says, to push through difficult changes. “Acting because you’re hired to do so, because you have no other choice, or you wish a promotion, isn’t enough,” he says.

Be crazy to innovate. Make it your business to do what nonlocal employees either cannot do or would not do. As a foreigner, you are probably seen as being a little crazy anyway. There is always room for improvement. “Be crazy to innovate,” urges Kirchmann.

He wondered if workers might enjoy flexitime. Flexitime allows employees to choose the hours they work, within limits. For instance, a white collar employee can go home at 4:00 p.m. for any reason. He ran the idea by the head of human resources and others who thought the suggestion unworkable.

Some argued that employees would not use flexitime in fear they might burden others with extra work while they were out enjoying themselves. Kirchmann thought, “I’m a little different and crazy enough.” Flexitime offered only upside potential without downside risk. If nobody took it, nothing would be lost. After discussing the new idea with the unions, he introduced the program that might not have otherwise been seriously considered. Employees say they love it.

Expand your vision. Foreign executives, with so much new to absorb, expand their understanding of reality when they take advice from local leaders. Their vision becomes more mature. “It is important to get advice to adjust your framework to the wider realities,” explains Kirchmann. Don’t blinker yourself.

Respect

First and foremost, foreign managers must listen to locals. “Show respect for the local person — for every person,” Kirchmann recommends. When managers listen, employees feel respected. Relaxed, they freely share their problems and offer potential solutions that leaders need to improve the business.

Don’t act as if you know everything better. Let people speak, which is especially true for the quiet Japanese. Have the patience to listen. When people say nothing, encourage them to speak up. The more they speak up, the more relaxed they are. The more relaxed they are, the more they speak up, he says.

At meetings ask, “Do you have an opinion on that?” If they don’t, further ask on matters affecting them, “Don’t you think we should explore this issue more deeply?”

Encouraged, production line workers more freely share their problems with colleagues and quality experts. They must be able to say, “Ah! That’s not working!” Another needs to be able to say, “It’s also not working!”

After encouraging them to speak up — listen. Even if sometimes you can’t appreciate their comments (it’s not always a honeymoon), by listening closely, people start gaining self-confidence. Then they start speaking up. “Listen to your people,” Kirchmann advises. “You can learn a lot.”

Be reliable. Long-term locals, having seen expat managers come and go, soon realize when managers are playing games. “To gain trust, expat managers must fight for what they believe,” says Kirchmann. Reliability is another form of respect.

Respect people not deserving of it. Take them aside for a one-on-one talk. Typically nobody will have confronted them before in a direct, nonshaming way. It also gives you a chance to listen.

Integrity

Act with integrity to gain respect, raising the chances your ideas will be accepted by others, he says.

Be authentic by being yourself. Don’t dilute energy by acting as someone you are not.

Don’t prejudge people by stereotypically talking about “The Japanese,” “The Germans,” “The Americans” or any other nationality. Everybody is different.

A person new in a job may need guidance. Another person may be good at what he does, but still needs some control. A third highly reliable person may not need any instruction whatsoever. “If I would control a very reliable person, he would think, “Does he not trust me?” says Kirchmann. Rather, best treat each person in an individualized way.

Recognize that foreigners cannot effectively run the company in the long term. Expat managers must develop local leaders to be their successors.

Seek diverse opinions. Decisions lose quality if you haven’t heard differing arguments from the bottom up. You don’t need to hear every opinion, only those that might affect the business. People must feel they contributed to the decision making. If you haven’t heard their arguments, you’ll lose their acceptance — their buy in, he says.

Explain decisions. After listening to many opinions, good leaders make their decision and then explain why they chose it. “Explanation is for understanding,” suggests Kirchamnn. Perhaps they would have decided differently but they can live with a decision they understand. Once it is explained, people can more easily focus on execution.

Discipline

Effective leaders ensure decisions are acted upon.

It’s great to have ideas. Some get implemented and others do not. Able leaders systematically examine why previously agreed ideas were not acted upon. “In follow up, an organization needs the pain of implementation,” says Kirchmann. His follow up system is reported to be legendary.

Leaders who perform management based on all four values of “passion,” “respect,” “integrity” and “discipline” can make the difficult, needed changes to move the corporation forward. “If you offer respect without integrity, it doesn’t work,” Kirchmann notes.

Under Kirchmann’s leadership, Mitsubishi Fuso reduced its dependency on the domestic market to 20 percent from 50 percent to become global leader in their field — up from the fourth market position. The firm sells a wide-range of light- and heavy-duty buses and trucks to 163 countries. The investment loan was repaid in full and profits have increased yearly. In April 2015, Marc Llistosella succeeded Kirchmann as CEO. Kirchmann, who became chairman of Daimler Trucks Asia last year, is to retire from the firm on Dec. 31.

The story never ends. Llistosella continues to invest in product and people. “He has and wants to,” explains Kirchmann. Should Mitsubishi Fuso run out of time and money to invest in people and processes, the firm would return back to square one. “It is better to continuously improve, than to be forced into a painful restructure,” Kirchmann says.

Richard Solomon posts regular Beacon Reports at www.beaconreports.net.