In a world where stakeholders are globalized, dramatic change is happening at unprecedented speed.
Human communication is global and instant, and leaders must now master public relations as the essential management skill by which they can achieve goals quickly, efficiently and consistently.
The importance of public relations as a management ability is illustrated by the case of Mitsubishi Motors. In 2000, the company had become part of the DaimlerChrysler alliance, but then Mitsubishi tried unsuccessfully to hide defects in its cars, rather than acting ethically by conducting a mass recall. By 2004, Mitsubishi was forced to leave the DaimlerChrysler alliance.
By the end of 2015, the automaker had introduced popular new products and finally seemed to have recovered customer and market trust. Then, on April 20, 2016, Mitsubishi President Tetsuro Aikawa resigned suddenly after admitting that his company had falsified its fuel-efficiency reporting. The automaker’s stock price fell from ¥864 to ¥434 (from $7.91 to $3.97) per share.
In 2010, Nissan Motor Company had contracted with Mitsubishi in a joint venture to design and produce minicars. But then the 2016 scandal forced Nissan to suspend selling those models. Moreover, Mitsubishi subsequently reported that the falsification included vehicles across its product line, and was a practice at the company dating back more than 20 years. Mitsubishi’s history of scandals suggested an unethical corporate culture.
Given that apparent lack of ethics — and the fact that Japanese companies are largely staffed with life-long employees, making it very difficult to bring in new blood and facilitate change — observers might have expected Nissan to simply cut its ties with Mitsubishi. But far from distancing itself from the troubled company, on May 12, 2016, a few weeks after Mitsubishi admitted falsifying its fuel-efficiency reporting, Nissan CEO Carlos Ghosn announced that his company would purchase a 34 percent controlling stake in its smaller rival Mitsubishi.
In hindsight, Ghosn — who is now chairman of the alliance among Renault SA, Nissan Motor and Mitsubishi Motors — had taken immediate and decisive action, turning what could have been a major setback into a successful strategic initiative that elevated his company to the pinnacle of the automotive world.
By July 2017, a little more than a year after that transaction, the Renault-Nissan group had become the largest global car manufacturer, ahead of Toyota and Volkswagen. By the end of 2017, the listed share price of Mitsubishi was ¥806 ($7.37), a 72 percent increase over Nissan’s purchase price of ¥468 ($4.28).
Turning stakeholders into supporters
How did Ghosn achieve this feat? During the May 12, 2016 press conference, he showed himself to be a master of public relations with his unscripted response to a question about why Nissan had purchased the stake in Mitsubishi. Without using the word “stakeholder,” he explained that Nissan understood the anxiety of its employees, communities, suppliers and dealers about the acquisition. He then spoke about quickly overcoming Mitsubishi’s problems and restoring its profitability through billions of dollars in savings that would result from sharing technology within the alliance.
Given the strong sense of loyalty that Japanese workers have to their employers, he purposely made the point that, although Nissan would provide help, he wanted Mitsubishi to be the one fixing its own problems, and to remain a separate company. In other words, by using the communications skills that he seemed to have acquired naturally throughout his business career, Ghosn created a win-win for stakeholders.
Fundamentally, public relations is about managing relationships, grounded in an ethical process of self-correction and two-way communication. With his credible assurance of bringing ethics and profitability to Mitsubishi, Ghosn turned stakeholders into enthusiastic supporters.
Nissan and Mitsubishi’s PR success story can be understood in terms of what I call the “three forces of hyper-globalization”:
- Economic force: This refers to expansive growth in global trade, and cross-border economic integration.
- Internet communication: Instant global connections through the internet and social media are changing norms of human communication and blurring sociocultural barriers.
- Technological disruption: New innovations driven by the internet of things, big data, and artificial intelligence are bringing massive economic and rapid social change, and leading to the hypothetical world of technological singularity.
With their design, production and sales operations spread across numerous countries, stakeholders of Nissan and Mitsubishi are now globalized and connected via the internet and social media.
Those viewing the May 2016 press conference were not limited to members of the media. Digitally connected global stakeholders could watch the event and broadcast their own responses. Nissan took that dramatic step because disruptive technology is bringing forth formidable new competitors that are producing electric and autonomous vehicles. Unless Nissan can become one of the top-three automakers, it might not be large enough to continue developing the technology required to survive in its industry.
Like many PR professionals, I used to argue that members of our profession should be included in an organization’s strategic decisions. However, we are now in a very different environment. The three forces of hyper-globalization make it essential that leaders of organizations be skillful at public relations themselves.
Takashi Inoue is chairman and CEO of Inoue Public Relations Inc. (IPR), in Tokyo, and a visiting professor at several major universities in Japan and China, including Kyoto University. In 2018, Routledge published his book Public Relations in Hyper-Globalization: Essential Relationship Management — a Japan Perspective.