Haier Group Case Study

Founded in 1984, Haier Group is a multinational consumer electronics and the world’s leading white goods home appliance manufacturers. It is headquartered in Quingdao, China and it designs, promotes, manufactures, and sells products such as washing machines, refrigerators, and air conditioners…  Hair Group is considered as a great example of a company that went from being unknown to an active company that earned its way to the international arena. At first, the company was in a poor condition: unskilled workers, inferior product quality, and low productivity. Financially, it was terrible. Haier Group success was not easy; it was a combination of hard work, initiatives and passion. Zhang Ruimin, Chinese businessman and Chief Executive Officer (CEO) transformed the nearly bankrupt company into a world-class brand name by establishing a corporate culture, rules, and improving the business strategy.

Haier’s development can be summarized into 4 stages: brand building, diversifying, globalization and global branding. The CEO started with paying his workers (who did not receive their salaries because of the previous management team), disciplining them and imposing “strict management control on product quality and after-sales service” (Lau & Han, 2007).  The company did not care about output volume but product quality, therefore products that did not check into that category ended up being destroyed by the workers themselves. Haier differentiated itself from the other Chinese manufacturers, which led to gaining customers’ trust. The company started facing market competitiveness in China and Zhang Ruimin decided to take the next step and expand it internationally “Margins are low here. If we don’t go outside, we cannot survive” (Lau & Han, 2007).  The expansion strategy to enter the global market was not traditional, yet its products arrived to Japan, Europe, Africa, the Middle East and North America. Moreover, in 2004, “Haier was ranked fourth among the global white goods manufacturers.”

When reading the case study, we notice that employees played an important role in Haier’s success. The CEO believed in creating strong teams by creating an employee handbook. Indeed, innovation was the core corporate culture. Contrary to other companies, Haier focused on “people” approach, which helped the company to grow internally. Transforming a “vertical organization structure into a horizontal market chain structure” (Lau & Han, 2007) was a very smart move. Zhang Ruimin treated his employees as entrepreneurs/partners, which I believe is motivating and productive. Their loyalty increased thanks to rewards/bonuses. It was not enough since the “10-10” scheme was created and consisted of firing the lower 10% and giving the opportunity to train the highest 10%.

The finance division also played an important role in Haier’s growth because it was providing different services such as “consulting, business support, and banking services to the SBU’s” (Lau & Han, 2007).  Zhang Ruimin even created a motto for his employees that consisted of developing self-respect, attaining self-discipline, respecting others, thinking outside the box, being honest…

What would I do? And why?

Haier was able to maintain a stable employee turnover and it also became within the most popular employers among university graduates. I agree that HR division sent out a monthly report to all employees indicating their performance level. However, I do not agree with the “10-10” scheme, which consists of firing the lower 10% and providing training programs to the top 10%.  It simply does not seem fair.  I do not believe a number demonstrates an employee’s intelligence and his abilities to generate extra income for the division. This scheme only creates hard feelings and unhealthy competition. Employees should be given the chance to prove themselves at least three times. If an employee is not able to generate an extra income for the division, but is still meeting expectations, we should focus on ways to exceed expectations.