Sergio Marchionne (CEO Fiat and Chrysler ) management style and CIOs

SERGIO MARCHIONNE

Image by SOCIALisBETTER via Flickr

“Things don’t have to change the world to be important.”

Steve Jobs (1955 – 2011) co-founder and CEO of Apple

Sergio Marchionne (1952 -) CEO Fiat and Chrysler

Today’s article is the eleventh in a series of articles (1st Steve Jobs, 2nd Michael Dell, 3rd Warren Buffet, 4th Bill Gates, 5th Larry Ellison, 6th Eric Schmidt, 7th CIOs and the ideal management style, 8th Louis V Gerstner, 9th late Steve Jobs and Tim Cook’s, and Richard Branson), analysing current and past leaders to ascertain how senior management including  Chief Information Officer’s (CIOs) can learn better management by applying the management practices of leadership, practiced by these leaders.

Sergio Marchionne (mar-key-OWN-ee) also won the 2011 Deming Cup (and other accolades) and regular readers will know that I am a big Deming fan and as such, I really wanted to find out more….

PS: CIO is a generic term and other analogous titles are Head of IT, IT Director, Director of IT etc.

The Management Style

Sergio Marchionne is a chartered accountant and barrister and holds a Bachelor of law (LLB) and MBA. Although he was born in Italy, he emigrated to Canada at 14 and his first job was with Deloitte and Touche. He has a pretty unconventional management style (According to European CEO, “His management style is to manage his companies. Not to control them.”) that he has used with great effect at various companies, in particular to turn around the fortunes at Fiat and Chrysler. According to Money CNN, “The principles of his management style are simple: He values merit over rank, excellence over mediocrity, competition over insularity, and accountability over promises. Marchionne presents himself like a ’60s intellectual from a Fellini movie, with his baggy sweaters, longish hair, and cigarettes. He rations his public appearances and gets movie star treatment wherever he shows up. Marchionne says his job as CEO is not to make business decisions — it is to push managers to be leaders. What other CEO can you think of who likes to characterize himself as a “simple, homeless, ever-wandering metal basher?”

Let’s see what CIOs and general management can learn from this ‘turnaround’ specialist. (In no particular order and a few other sources utilised):

1.When the going gets tough, investment in people always pays:

“We flattened the organization out. We reached out and brought people on the management team who had been buried underneath the classical hierarchy of corporate America,” says Marchionne. “They were given an opportunity to play. These are people who had been two or three layers down from the senior leadership.”-SM- Time Mag –America24

In another article by Money CNN, Sergio said, “The hardest job is getting personalities to mesh. Some people become dysfunctional — their egos become blown out. It is like having an evil spirit in the house.”

According to Money CNN, “Marchionne runs Chrysler with 26 direct reports, an unusually large number, because he believes it flattens the organization and leads to faster decision making. He demands complete openness, fast communication, and accountability. Marchionne arrived at Fiat from outside the auto industry, and doesn’t try to pass himself off as an expert. Instead, as he told the Harvard Business Review in 2008, “A lot of what I do is challenge assumptions — which often looks like you are asking stupid questions.”

In another article by Money CNN, “Marchionne hopes his round-the-clock zeal will become contagious inside the company. For the launch of the first new vehicle of his tenure, the all-new Jeep Grand Cherokee, Marchionne got deeply involved. Instead of laying off workers when the plant was revamped last fall, he kept them working, and they scrubbed the Jefferson North assembly plant in Detroit from top to bottom — it’s most thorough cleaning since it opened in 1991. When Marchionne showed up one Saturday to review their progress, the workers beamed, even more so when President Obama toured the plant a few weeks later and called it “this magnificent factory.”

The sign of a true leader is that he not only inspires and motivates but ensures that he is surrounded by the best talent, especially in the areas where he doesn’t excel. Sergio does this brilliantly by promoting the best talent and allowing them make their own decisions, coupled with clear, achievable targets. As an accountant he knows his figures and utilises that aspect to his advantage. Senior managers need to understand the importance of retaining and investing in people as displayed by Sergio.

2. Constant analysis:

“Once it’s execution, then you’ve got to look into your shorts and you’ve got to say to yourself, Do you actually have–do you–I mean I, as a person, do you have the wherewithal to get this done?”–SM- Time Mag –America24

One of the reasons for Sergio’s success is that he is constantly analysing his businesses to find out how further improvements can be made. He expects his managers to have their finger on the pulse of the business and failure is NOT an option.

3. Spotting opportunities:

According to European CEO, “We spit blood to clean up and restart Fiat. When I took over, there was a smell of death here,” Marchionne has said of the experience.

Marchionne refused to get bogged down in the engineering technicalities of running a car manufacturer. He took a more philosophical approach and modelled sales of the Fiat 500 on the iPod – when it broke into the UK’s top 10 selling vehicles in 2009, it became the car people didn’t think twice about buying. It became the iPod on wheels – practical, stylish and affordable.

Sergio was a big fan of Steve Jobs and used his philosophy with great effect in selling the Fiat 500. The Fiat 500 has not done so well in USA and it remains to be seen whether he can launch more cars akin to the iPod!

Certainly, like Steve Jobs, he needs to create an environment and culture that thrives on spotting opportunities.

4. Improve productivity: –

According to Forbes and Vecchio (Mediobanca analyst) “When Marchionne took over the company, he was literally firing one manager a day but there was a leadership problem and nobody wanted to take hard decisions. The communication from bottom to top in management was slow and wrong. He also changed that,” the analyst added. “He reduced the layers of management and gave his role a more direct view of what the business was doing. And of course his ego is very big and sometimes people who had clashes with him were basically fired. Looking at his style from outside it seems awful but he delivered.”

When profits are dwindling and an organisation is on the brink of producing losses, serious questions have to be asked of its management. Sergio, was quite right to question his management team and change the structure based to a performance related one (Based on meritocracy, as Deming envisaged). Something has to change, as in that situation if nothing changes, the organisation will cease to exist!

5. Success in general may be built on failure:

“I don’t think that people really understand what the implications would have been of a lack of decisiveness at that point in time,” says Marchionne. “It would have been a mess.”(Referring to the purchase of Chrysler) – SM- Time Mag –America24-.

Chrysler was on the verge of bankruptcy and decisions had to be made. Sergio did not shy away from such decisions and followed his instinct, just as Steve Jobs did (Sergio is a fan). The secret is to learn from your mistakes, put them behind you and move on.

6. Competitive advantage:

According to Money CNN, “Marchionne believes his competitive advantage is speed. By wiping out layers of management and making decisions more quickly, he’ll get closer to the market and bring out new models faster than his slower-moving rivals.

“They have access to me 24/7,” he says, and when they call or e-mail, he makes decisions in minutes — or seconds. While traveling, he stays in contact with one of his six BlackBerrys. “BlackBerrys are divine instruments,” he purrs.

Marchionne-style management is not for compromising types. He works all the time, subordinates say, and his wife has left Italy to live separately at their home in Switzerland (they have two boys). “The lifestyle I have today is the most abusive way to achieve a lasting impact,” he concedes.”

Sergio, clearly knows his own competitive advantage and he uses that with great effect for the benefit of his company. While other CEOs may reply to such emails a day or two later, he almost communicates with them in ‘real time.’ This allows the business to be very agile in terms of making crucial decisions. I covered this in my post, Leveraging IT for Competitive Advantage – Myth or Reality?

7. Succession planning and his reputation:

According to Money CNN, “Marchionne is trying to provide some clarity about his retirement plans. He’s announced that he plans to stay until 2015 or 2016, and that his successor will likely come from inside the company.”

Succession planning is paramount for businesses as without ‘nurturing’ successors businesses will run into difficulties and sometimes that can result in situations where the successor ‘fails’ to do his/her job effectively. So, while succession is paramount, so is the need to appoint the ‘most suitable’ candidate.’

8. Focus:

According to Money CNN, “ Marchionne takes an all-but-gleeful delight in reminding audiences about the deficiencies of the Western auto industry. He calls it a business of hand-me-downs and seldom let’s an opportunity go by to remind his audience that the autos have been “rigorously and methodically” destroying billions of dollars in shareholder value. He’s particularly critical of what he calls “M&A sprees” that have made automakers “into rambling ranch houses onto which one room after another was added — with no rational architecture uniting the whole.”

Senior management need to focus on the core activities of a business and shy away from getting involved in M&A’s that do not contribute or add value to that core perspective. In the car industry, failures have occurred when businesses have not produced cars that the public want to buy with features/quality that the public want to buy. Shy away from the projects that do not add value to the business but may just be a ‘nice have’ or appear to add value. Learn to say, ‘No’.

9. Successful innovation and success in general may be built on failure:

“What I look for in people is the ability to use that space intelligently, not to abuse the freedom,” he says. “It’s to remain absolutely focused on the objective but not to define the method of execution.”-SM – Time Mag –America24-.

Sergio did not have to buy Chrysler but he had the conviction that he could turn it around as he could innovate and launch cars that the public really wanted to buy. Some will inevitably fail but many will be huge successes. Many businesses lack of innovation is due to their fear of failures.

10. Earn respect:

“I told them, I said, ‘You’ve got more than money on the table,'” Marchionne recalls. “‘You’ve got me … You’ve got Fiat.'”–SM- Time Mag –America24

Prior to negotiating with the US administration, Sergio had already turned Fiat around and as such held the respect of Obama and his team and their belief that he could turn the ailing giant around. Unfortunately, such ‘respect’ can only be earned.

11. Quality management:

“Leadership is not a quantitative thing. People either smell it in you or they don’t,” says Marchionne. “People need to trust you that you’re going to pull them out and that they will follow you when you pull them out. If they don’t get that comfort, they’re going to drop you. This is true of organizations. It’s true of countries.”-SM- Time Mag –America24

12. Use numbers to season the points you serve — they’re not the main dish:

According to Money CNN, Sergio said, “I’ve always hit my numbers and will with Chrysler’s five-year profitability plan,” he told a group of dealers in June. “We told people we’d break even in 2010. We made an [operating] profit in the first quarter. It wasn’t a lot of money, but it’s black, and it is from selling cars. From what I can tell, we’ll do significantly better than zero this year.”

Sergio will drop references to his numbers but will not get carried away with them and only uses them ‘sparingly’ so that he can make convincing arguments while avoiding the detail.

13. Create and nurture ‘the correct culture.’ –

In a move that signalled where his heart is, earlier this year Marchionne became CEO of Chrysler Group. His office is on the fourth floor in the engineering department, not the executive penthouse, now sitting empty, where a chairman and three vice chairmen used to rule. “I don’t have an office of the chairman. Which is what used to run this joint,” he says, quickly adding, “with all due respect.”-SM- Time Mag –America24

Sergio wanted to break down the barriers between senior Management and employees and the ideal way to do this was to be closer to the action, i.e. the engineering department where cars were ‘visualised’ and eventually made.

14. Develop a Clear Vision–and Stick to It. –

“There were things that Fiat had, that I had, that if applied here could have pulled this out,” Marchionne explains. “I knew I could help technically. And I had a guy who was willing to fund it.”-SM-

A guy named Obama. (Time Mag –America24)

15. Be ‘shrewd’ and keep the team on its ‘toes.’ –

“It’s pretty intense, because he questions–and again, rightfully so–and there are times when you think you’re so prepared and ready and he’ll bring something completely that you weren’t thinking of,” says Laura Soave Time Mag –America24

This is a trait in common with other leaders, such as Bill Gates. Sergio, surrounds himself with smart people and ensures that when they present their information, they have investigated it thoroughly. Questioning the assumptions that they may have made, ensures that such information is ‘de-risked’ and provides a sound foundation for them to make progress.

More Info:

Fiat’s extreme makeover

Sergio Marchionne’s bad bet at Fiat

Columbia business school address by Sergio Marchionne – Recepient of Deming cup 2011

Columbia Business School’s Deming Centre

W. Edwards Deming Institute®

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About mubbisherahmed
I am passionate about IT and its ability to deliver cost effective, value for money solutions that can enhance performance and in many cases provide competitive advantage by using a range of solutions and approaches in innovative ways.

7 Responses to Sergio Marchionne (CEO Fiat and Chrysler ) management style and CIOs

  1. mubbisherahmed says:

    Mark Littleton said the following on a social media site:

    With his 24/7 mentality, which I believe encourages that type of work ethic in the professionals he surrounds himself with, will certainly continue the turnaround. I believe if he can take the “Mid-Life Chrysler” out of the minds of the consumers and appeal the brand to the 20 to 30 something crowd his legacy will certainly open the door for strong succession. Can he keep up the direct management style until 2015/2016? That is yet to be seen, however, his strategic vision is powerful. He must continue to surround himself with strong input from mid to senior leadership and build a strong technology portfolio internally that trickles down or preferably up to the consumer.

    I replied:

    Mark, thanks for your thoughts. Yes, it’s all about appealing to consumers who buy the products especially the 20-30 year olds. I just think that it is a shame that he will have to retire soon as it would have been good to see how well he could have done for the long term.

    Another milestone to watch would be his succession, as that is sometimes where many companies fail and I feel that he would have identified a good successor as he has already indicated that succession would be internally driven.

    It is going to be very interesting to watch Fiat and Chrysler over the next 5-10 years….

  2. mubbisherahmed says:

    Kevin Field said the following on a social media site:

    I like Maserati and Sergio has a few challenges ahead in terms of brand management and execution. He plans to scale up production from approx 6K cars each year to 55K and is releasing three new models (two sedans and the Kubang). For the person considering a GranTurismo convertible (nicely equipped at about $147K), would you pay that kind of money if there was a Maserati on every street corner. It will be interesting to see if he can maintain the exclusivity and premiumness of the brand, and commercialize it having them everywhere. (This is one of the same problems Mercedes ran into with their SL550). Another challenge is with the new Kubang. People may not want to spend a lot of money for a Jeep (although it does have some Maserati components and the Ferrari engine). Unfortunately, it’s already gotten a bad review. Sergio – Fix everything else but leave Maserati alone.

    I replied:

    Kevin, thanks for that unique insight and I have to say it is quite an interesting insight indeed!

    You are quite right, increasing production to 55K would indeed remove the exclusiveness and we will have to watch that space to ascertain whether that strategy actually works in either the short or long term.

    I would agree that it is certainly a pretty risky strategy for a brand re known for its exclusivity.

    As a fan of Meserati, I can certainly appreciate your viewpoint but as an ongoing sponge (and business student) in business management, I want to witness the impact and outcome of his decision….

  3. Pingback: Management style stories: Bad day in “Heaven” or the usual Hell? « The Puchi Herald

  4. Dianne Walbrecker says:

    Thanks very much. I heard Sergio interviewed on NPR about a week ago and was intrigued. I am copying your article to share with my Future Leader’s class, but have attributed it to you and posted the link on the article. I hope this is OK. Thanks very much.

    • mubbisherahmed says:

      Hi Dianne,

      I am happy for you to share my article with your Future Leader’s class & glad that you liked my article. It is always nice to be appreciated!

      Thanks very much for your thoughts.

      Kind Regards,

      Mubbisher Ahmed

  5. Ray Fischer says:

    I feel fortunate to be part of the Chrysler turn around and even more fortunate to work under Sergio and his management team.
    I am completing a paper on the Good to Great concept that Jim Collins writes about and this article along with first hand experience is well suited for this paper. As previous posts say, it will be interesting to see how the continued growth and succession works.

    • mubbisherahmed says:

      Hi Ray,

      Thanks for supporting my article. I would be very interested in reading your paper, once it is published. Please do let me know and best of luck writing it.

      Kind Regards,

      Mubbisher Ahmed

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