Haier: How can a 70,000 employee company stay successful sustainably?
Haier is the world’s #1 home appliance maker, being a $32 billion multinational with 70,000 employees. We met Mr Sam SUN, Executive President of Haier University, who made us familiar with their thoughts about how they want to stay successful in the future in times when many Fortune 500 companies disappear from the market. In 2005 they launched their model of transformation called “RenDanHeYi” of which Zhang Ruimin – founder and CEO of Haier – says: “With the RenDanHeYi model we truly enter the network age. But the network aspect is not even the most important. What is more important is that we should no longer try to delegate to or ‘empower’ employees. It’s now time for every employee to be his or her own boss.”
What is special about this model? The three visions of this model are:
- Build a platform-based business
- Provide personalized user experience
- Encourage employees to become entrepreneurs.
Build a platform business
Haier turned its traditional hierarchical organization into a platform-based business. They shifted the mission of the business from maximizing long-term profits to becoming a shareholder of micro-enterprises where Haier is only one of their shareholders but is the platform on which these micro-enterprises run. Haier does not command and control them, but helps everyone to collaborate to create best-in-class user experience. By doing this they want to stay small and focused – maintaining the entrepreneurship, intimacy and speed of a Start-up. Haier is actually a family of 200 micro-businesses, each largely autonomous and 70 % of them with revenues exceeding $ 20 million last year.
Provide personalized user experience
In the Internet era, the focus of the user is shifting from the purchase to the experience. To provide personalized user experience, it is necessary to rethink the separation of production and sales. Production and sales are disconnected because plants only produce and products are sold through separate sales channels. At Haier, they are building “connected factories” to create a transparent and visualized user experience. These connected factories enable seamless interaction with the user, provide transparency in its manufacturing processes and visualize these processes on the user’s mobile devices.
Encourage employees to become entrepreneurs
Haier is building an ecosystem for entrepreneurs and wants to encourage employees to become one themselves. Therefore they are reinventing employment practices. In the past, employees were hired by the company. Today they do not come to be hired, but to start their own business. It means that today Haier is not offering a job but an opportunity for people to start their own business.
Haier uses a nice analogy how they help everybody to fully realize their potential: “When an egg is broken from the outside, it becomes food for human consumption. But if it is broken from the inside, it witnesses the birth of a new life. Our task is to help every employee incubate and one day break away from their shells.”
Frankly spoken: what we heard from Mr. SUN did not fully fit our pictures we had about Chinese Management so far. The whole approach seems to be rather radical and we questioned how a Chinese company could successfully go this way, but the figures seem to prove that it works. Unfortunately there was not enough time to discuss all the details how the change on the levels of the organization, teams and individuals was supported.
Needless to say that Haier is not the typical Chinese company but of course outstanding – which they are proud of. Some food for thought at the end: Mr. Zhang Ruimin is convinced that this transformation more likely can happen in Asian countries than in the West: “Western companies are indoctrinated with old habits and outdated management thinking. The West looks at individuals. The East looks at the whole and has a much more holistic view.”
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Blog by Franz Schwarenthorer