Managing Performance

Background

During the last two decades of continually improvement, Haier has transferred from a small refrigerator factory at the edge of bankruptcy to the world's sixth largest maker of large kitchen appliances, a Chinese worldwide brand which has occupied significant market shares in a global market. To achieve success, the company developed its corporate culture, business strategy, and a management-control system of work rules and discipline. (Lin, 2005).

Haier's performance management system

Haier developed innovative management-control system called OEC in the late 1980s. Its aim is an overall control of everything that every employee finishes on his or her job every day with a 1% increase over what was done the previous day. (Lin, 2005). Under OEC model, Haier instilled a sense of urgency to its employees by creating internal competition. Individual salaries/rewards are closely linked with individual performance, skills and position in order to generate motivation for greater production. This guiding principle has been embodied in the overall internal HR infrastructure like racetrack model for recruitment and promotion, 80-20 management responsibility principle for better team work, manager's monthly profit and loss statement for compensation and rewards.

Haier's HR management practices consist of the following parts. Firstly, employees have the self-assessment by grading themselves on a daily basis. Next is their performance will be shown on the board for every employee to see. 6S footprints by using different color footprints on the factory floor, recognizes the star and poor performers. Thirdly, the bottom 10% lowest performer will be dismissed if they continue to fail even after job trainings. Lastly, Haier also put a large amount of resources to training and development. The high potential employees would be selected from the internal competition. They are trained via job rotation and evaluated monthly to ensure performance consistency. The down side of these practices creates the in-fighting working environment. It focuses on the individual interests, finger-pointing at the other department's faults and lack of inter-departments collaboration and knowledge sharing since every employee is the potential internal competitor.

The sustainability of Haier's performance management system

The system worked effective in the 1980s when China was still at the early phase of economic growth. The practice in China was that top management played a dominant role in the employment relationship. The mindset of the employee was security, seniority and lifelong career in one company. More crucially, the old labour law protected employer interest over employee which made employer have more bargaining power than employee. However, Haier's Performance Management system faces challenges to