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Leadership & Change: Sergio Marchionne Drives Culture Change to Turnaround Chrysler and Fiat

Jim Riley

27th February 2015

If business students are looking for a different example of how effective leadership can drive successful change, then they should add Sergio Marchionne to their research.Sergio Marchionne was initially best-known for leading the turnaround of the Italian automotive group Fiat. More recently, Marchionne has led the transformation of US automotive group Chrysler, taking Chrysler from the brink of bankruptcy at the lowest point of the financial crisis in 2008/9 to profitability.Marchionne took over as CEO of Fiat in 2004 and was able to return the struggling Italian car manufacturer to profitability with two years. He first connected with Chrysler when a strategic alliance was formed between Chrysler and Fiat (who took a 20% shareholding) as part of a US government-backed rescue of Chrysler as it tried to avoid bankruptcy. When Chrysler was able to pay off various US government loans in 2011, Fiat was left with a stake of over 50%. Since then, Fiat have been negotiating with a Chrysler employee trust in the US (which holds a substantial remainder of the shares in Chrysler) to complete a full takeover. A deal was finally agreed in early 2014

This combination of Fiat and Chrysler looks like one takeover/merger that might go from strength to strength. Now that the two businesses have finally merged into one, Marchionne has set a corporate objective of 130bn Euros in combined revenues by 2019, a 50% increase on the current level. This looks like a stretch objective. However, it looks like there the product portfolios of Chrysler (renowned for SUVs and wagons) and Fiat (a better reputation in smaller cars) are highly complementary.

There is no shortage of terrific materials for business students and teachers that help explain the key elements of Sergio Marchionne's approach to leadership and change management. I have picked out a selection of my favourites below.

An important point for students to appreciate is that the turnaround of Chrysler in particular contains so many relevant elements of a classic business strategy case study.

Marchionne's leadership style is particularly relevant. He has developed a strong reputation for challenging the traditionally bureaucratic nature of management in car manufacturing in the US and Italy. He has also succeeded in building effective relationships with key stakeholders (e.g. trade unions, governments) as part of two substantial change management programmes.

This article in The Guardian has some great insights into Marchionne's leadership style and also makes a link between Marchionne's approach to culture change and CSR. It highlights the commitment of Machionne to make sustainability central to the core values of Fiat and Chrysler.

The article quotes the Chairman of Chrysler commenting on how Marchionne move fast to challenge the tall hierarchy at Chrysler as he attempted to flatten the organisational structure, improve production quality, drive innovation and enable the business to become much more agile:

“Sergio crashed through the old culture. On his very first day at Chrysler, Marchionne moved the CEO's office from the penthouse to the middle of the engineering department. He then streamlined senior leadership and asked most of his remaining 15 direct reports to lead more than one function, knowing that the increased work load would yield faster decision making. Marchionne also gave his team full authority to take risks without bureaucratic barriers. People were trusted to make smart decisions and be accountable. Suddenly, we had this very flat organization, and guess what? The speed picked up immensely."

“Sergio was relentless about commitment, so in terms of the new culture, it was all about speed and risk-taking,"

This 15 minute video from 60 Minutes enables students to understand in more detail the personality of Sergio Marchionne and it is well worth watching a couple of times to pick up on the approach he took to change management at both Chrysler and Fiat.

Jim Riley

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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