the Marchionne case study discuss and critically evaluate the role of leadership in setting strategic direction and formulating and implementing strategic plans in organisations . Furthermore, it requires students to critically analyse the role, context and principles for strategic leadership. Students will also be required to reflect on the skills, behaviours and personal and professional development necessary in strategic leadership practice . In each of the sections, try to apply concepts, theories, or models that you think are relevant. . Discuss and critically evaluate Marchionne's role in delivering the strategy in each organisation (Fiat and Chrysler). Consider in your answer the leader's articulation of vision, strategic direction, and strategic plans. (600 words) . Discuss the most challenging obstacles he faced to successful change management ateach of these organisations. (600 words) . Based on the information in the case study, critically analyse his leadership style. (600words) . Share your reflections on any aspects of his approach that you plan to adopt (or reject) inyour own style of leadership. (600 words) . Using empirical examples other than Marchionne's, argue which leadership styles, skills, and behaviours you think are the most valuable. (600 words)Sergio Marchionne motor of change In 2009. two of America's three largest automotive mak ers. General Motors and Chrysler. were bankrupt. General Motors was rescued by the US government. with loans and a substantial equity stake. Chrysler was rescued by an Italian company with a decidedly mixed reputation. Fiat. At the head of Fiat was Sergio Marchionne. an ltalian Canadian accountant with just four years' experience in the auto industry. Marchionne undertook radical change at Chrysler. but six years later ended up offering the company for sale to General Motors and was rejected. Nonetheless. Marchionne had transformed Chrysler \"hrough his energetic leadership style. He is famous for L1is constant smoking, his heavy consumption of espresso coffees and his informal dress sense. based on sweaters rather than traditional suits. At the same time. Marchionne 's a notorious workaholic: no lower than 42 executives report directly to him. he carries six mobile phones. and 're works 1418 hour days. seven days a week. Regarding eadership. he explained to the Harvard Business Review: 'My job as CEO is not to make decisions about the busi 'IESS but to set stretch objectives and help our managers work out how to reach them.'1 Marchionne at Fiat When lvlarchionne took over as CEO at Fiat in 2004. he was the fifth CEO since 2001. The company was unprof itable. the products had a reputation for poor quality. its most recent new car launch had been unsuccessful and relationships with the unions were poor. At Flat. Marchionne spent his first 50 days touring the business. listening to people and analysing the sit- uation. He found that senior executives were unused to taking responsibility for decisions; everything was referred upwards to the CEO. Executives communicated with each other via their secretaries and spent their time firefighting or avoiding problems. The company was dominated by engineers. who would work on new models in isolation. They then passed on their finished designs to sales and marketing. complete with sales targets and price. As well as being inefficient. this procedure caused fierce tensions between departments. Following initial measures to reduce Fiat's debt level. Ivlarchionne turned his attention to the leadership of the Sergio Marchionne. CEO Fiat Chrysler Source.- EloxhameATr'REKrShutterstock. business. Many senior executives were dismissed and 2000 other managers and staff were retired early. 0n the other hand. as he toured the company. he had identified young talented managers. often in areas such as market ing that were not the traditional routes to the top. or in geographic areas such as Latin America that were less influenced by head office and where managers tended to behave more autonomously. He drew on this 'talent spotting' to make 20 new leadership appointments as well as other promotions. Marchionne took a close interest in high potential talent and regarded his personal engagement with them as more valuable than more formal assessment. He also believed thatsuch personal engagement helped develop a top team with strongly held common values. His expectation of this new top cadre of leaders was that they should be given responsibility. He recognised that this was demanding: 'As I give people more responsibility. I also hold them more accountable. n leader who fails to meet an objec- tive should sufler some consequences. but I don't believe that failing to meet an objective is the end ol the world . . . (butlI if you want to grow Ieaders. you can't let explanations and excuses become a way of life. That's a characteristic of the old Fiat we've left Iar behind.'2 of $2bn (compared with a net loss of $652mn in 2010) and twice as much on capital investment. At the same and repay all government loans. Fiat increased its stake time, car prices were falling and worrying new entrants in Chrysler to 53.5 per cent and in September 2011, such as Google and Tesla were emerging on the margins. Marchionne became the company's Chairman as well as In 2015, Marchionne approached General Motors for a Chief Executive. Chrysler's share in the US automobile merger. He was turned down. Rumour had it that perhaps market rose from 8.8 per cent in 2009 to 12.2 per cent a Far Eastern manufacturer would finally take over FCA. in 2014. In 2014, Fiat and Chrysler merged entirely to form a new corporation, FCA, headquartered in London References 1. Sergio Marchionne, 'Fiat's extreme makeover', Harvard Business Review, and with Marchionne in overall control. December 2008, p. 46. 2. Harvard Business Review, December 2008, p. 46. 3. Harvard Business Review, December 2008, p. 47. The last lap? 4. Peter Gumbe, 'Chrysler's Sergio Marchionne: the turnaround artista', Time Magazine, 18 June 2009. The creation of FCA was marked by the launch in May 5. Resurrecting Chrysler, 60 minutes, CBS; interview with Steve Kroft, 25 2014 of a new five-year plan. Vehicle sales were due March 2012, http://www.youtube.com/watch?v=h3ppoyWNN7s. to rise from 4.4m in 2013 to 6.3m in 2018, building 6. New York Times, 18 September 2014. 7. Financial Times, 26 May 2015. particularly on the internationalisation of production and marketing of the famous Jeep line of products. However, a stagnant European market was weighing Questions heavily on FCA's performance, with losses at Fiat lead- 1 In relation to Section 15.3, what were the types ing to the accumulation of E10bn debt. Profit margins of change pursued at Fiat and Chrysler? Were even in the USA were low, at about four per cent, half these appropriate to the change contexts? those of rivals Ford and General Motors. In 2015, the influential J.D. Powers quality survey rated three FCA 2 How would you describe the leadership style of brands - Chrysler, Jeep and Fiat - amongst the worst Sergio Marchionne? Was this appropriate to the five automotive brands for reliability. change contexts? Quality requires investment, and investment requires 3 What levers for change were employed by Sergio scale. The Financial Times pointed out that, even after Marchionne? What others might have been used the merger, the new FCA was still half the size of world and why? leaders Volkswagen and Toyota.' Its US rivals General 4 By what criteria would you assess the Motors and Ford were each roughly 50 per cent larger effectiveness of the change programmes at Fiat than FCA. Volkswagen was spending more than five and Chrysler? times as much as FCA on research and development,To achieve greater integration and speed business up. Marchionne also took out several layers of management. eliminated committees and replaced them with a Group Executive Council that brought together executives from disparate operations such as tractors and trucks. To run Fiat Auto he also established a 24person team with the aim of getting all parts of the company to talk to one another. To further encourage the sharing of ideas. he also began to move executives from one part of the business to another and required his top managers to accept multiple responsibilities for different parts of the business. Marchionne saw one of his own major roles as the chal~ lenging of assumptions. He cites how he asked why it took Fiat four years to develop a new model. The question helped identify processes that could be removed. which meant that the new Cinquecento car was developed and launched in just 18 months in 2006. "fou start removing a few bottlenecks in this way, and pretty soon people catch on and begin ripping their own processes apart.'3 Such challenging of assumptions and processes was also aided by recruiting managers from outside the car industry and by benchmarking. not just against other car makers but also companies like Apple. At the same time. Marchionne introduced \"World Class Manufacturing'. the Japanese approach to lean production. In 2004. Marchionne's new team had produced a busi- ness plan with a stretch target of 2bn {1.6bn. $2.6an profits in 200?. Many thought the target unrealistic. but Marchionne believed that it forced managers to think dif~ ferently and challenge old ways of doing things. By 2006. Fiat was profitable again. In 200?. Fiat made over E3bn profits. Soon it would be Chrysler's turn to experience Marchionne's leadership style. Marchionne at Chrysler By 2009. Chrysler was bankrupt, with potentially 300.000 jobs on the line. Supported by the US government. Fiat Group formed a strategic alliance with Chrysler. taking a 20 per cent ownership stake. Marchionne was appointed CEO. while retaining his role at Fiat. His vision was that Fiat and Chrysler together could create a leading global player in the automobile sector. exploiting synergies in terms of purchasing power. distribution capabilities and product portfolios Chrysler's .Ieeps. minivans and light trucks and Fiat's small cars and fuelefficient engines. |When Marchlonne took over at Chrysler in 2009. not only did he inherit a $6bn high-interest government loan. he also found a fearful workforce and a company riddled with bureaucracy. One of his first acts was to point out. in a memo to Chrysler employees. the parallels with Fiat: 'Five years ago. I stepped into a very similar situation at Fiat. It was perceived by many as a failing. lethargic automaker that produced loquuality cars and was sty mied by endless bureaucracy."1 Like Fiat. Chrysler was highly hierarchical with managers reluctant to take deci- sions: This place was run by a chairman's office . . . the top floor (known as the Tower}. it's empty now . . . Nothv ing happens there. I'm on the floor here with all the engineers.'5 Again Marchionne changed the management. As well as bringing in three senior managers from Fiat. Mar chionne identified 26 young leaders from two or three levels below top management and made them direct reports in a new flatter organisation structure. 0ne brief for the new managers was to introduce the Japanese-style manufacturing processes that Fiat had already used in its Italian plants. Marchionne also emphasised cost control; for example. the 2009 plan identified savings of $2.9bn by 2014 by sharing parts and engines with Fiat. But there was also an emphasis on product development. Here he drew on the experience of his new executive team to focus on improvements to the product range: 'Everyone knew what was wrong with the cars. YIu ask any employee in the company. they could list ten things that they would dI better. And when you're given the chance to do thIse ten things better, you end up with a product that exceeds the sum of its parts." Another key ambition was to improve product quality. Chrysler had been organised such that each brand had its own quality department. These separate departments were merged and new ways to measure quality intro- duced to provide greater oversight across all the brands. This attention to product and quality improvement went hand-in-hand with plant modernisation. The result was improved quality ratings for 16 models in 18 months. An example of Marchionne's bold approach on the ground was the Ram pickup truck business. in 2009. it had been languishing as part of the Dodge car divi- sion. with just 11 per cent share of the US pickrup mar ket. While many expected him to merge brands to save costs. Marchionne made the Ram business a division on its own. A conference room in the basement of Chrys~ ier's headquarters was turned into a 'Ram war room'. Mr Marchionne met monthly with the Ram executives for detailed updates on progress. The Ram division could now approach the market as a truck business rather than part of a car business. and introduced innovations such as fuei~efficient engines. luxury interiors and superior trans mission systems that had been denied before. The new manufacturing methods gave a previously alienated work force a voice in operating decisions. By 2014. Flam held 33 per cent market share.E Ram's success was reproduced elsewhere. Already by 2011 Chrysler was able to announce an operating profit