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Zhang Ruimin – the would-be unknown leader

Zhang Ruimin took the helm of a struggling refrigerator manufacturer in 1984 when he was just 25. As a leader he won the confidence and goodwill of his workers and reversed the company’s dismal quality record. Since then, Zhang has turned the Haier Group into the world’s fastest growing appliance maker with the largest market share in white goods world wide. 1

Management without bosses

“A leader whose existence is unknown to his subordinates is really the most brilliant one.”
(Ruimin, Zhang)2

Zhang Ruimin

Prior to 2005, Haier’s 80,000 or so employees worked in traditional functions like manufacturing, sales and marketing. However with the advent of the internet, Zhang knew that the existing departmental/functional/silo organisation would be too slow to respond to customer needs into the future. So he began reorganising the way employees worked. 3

Zhang believed that if the company wanted to intimately understand and meet consumer needs, staff needed to be directly connected with the customer. Instead of complying with rules and following a manager, he decided that workers should have the freedom to make decisions led by the users of the things they make – the consumer. 2

ZZJYT’s

No, I’m not cursing in code.

Zhang split staff up into self-managed work units call ZZJYT’s (zi zhu jing ying ti – which roughly translates to independent operating unit) and by 2012 had almost done away with middle management completely. Today each ZZJYT comprises 7-10 people from various functional roles.

These microenterprises operate as independent ventures. Each is responsible for its own hiring, procurement, strategy, production and ultimately profit and loss.

The ZZJYT’s are not permanently assigned to a particular product or role. Instead they are formed through internal competition. If an employee identifies an opportunity for a new product or service, they are free to propose their idea. A vote involving employees, customers and suppliers determines whether the project goes ahead. The winner becomes the project leader.

Once a leader is appointed they can independently handpick a team and find their own manufacturers and distributors (either internally or externally) to produce and sell their product. 3

Beware the catfish

The project leader must work hard to stay ahead of the catfish. That is what the firm calls the person with a rival idea with the second highest number of votes. 3 Once a leader is in place, his or her team appraises the leader’s performance every quarter and votes whether they want to keep them in the position or replace them. 4

Zhang believes this structure creates competition in the organisation while also fuelling entrepreneurship. 3

Remuneration

Zhang believes that employees in traditional organisations tend to focus too much on what their bosses say or think because their pay is determined by them. This is why there is no position-related remuneration at Haier. 5 Instead employees are paid solely based on performance and the results their team achieves.

Ecosystem of talent

In the new generation Haier, talent is provided through an open labour market. Each ZZJYT is given the freedom to innovate by reaching out to customers, prospective employees, collaborators and even competitors.

Employees are free to leave or join ZZJYT’s, however a unit will dissolve after the project is over and talent goes back to the marketplace.

Whilst many businesses will find this concept foreign and unmanageable, for industries like Hollywood, bringing skilled workers together for the length of a project is nothing new. (See http://www.cognology.com.au/are-terms-like-hollywood-and-gig-spelling-the-end-for-the-traditional-employment-model)

The platform

Instead of offering jobs, Zhang says Haier offers everyone a continuing series of opportunities to find jobs via an entrepreneurial platform.4

By definition, platform companies form ecosystems by partnering with, and incorporating technology from multiple corporations to drive innovation and performance. Haier’s powerful internet platform enables limitless collaboration with suppliers, customers, universities, competitors, and other stakeholders.

According to Zhang, eventually there won’t be employees at all. There will only be a platform. 1 (I feel like Keanu Reeves might pop up any second now….)

A natural evolution in the internet age

Zhang Ruimin has been lauded for his accomplishments in management innovation, and yet by some he is still seen as a radical. Haier’s goal of becoming a facilitative platform without traditional employees seems consistent with broader global trends towards open collaboration, greater connectivity and on-demand workforces. I wrote about this last year in my blog http://www.cognology.com.au/what-skills-will-be-most-in-demand-in-2025

We are seeing the dawning of a new age of organisational agility and innovation. Employers and skilled workers alike have much to gain from embracing new ways of working. But it will take a willingness to change and adapt.

References

  1. Kleiner, Art. “China’s Philosopher-CEO Zhang Ruimin.” Strategy Business. 10 Nov. 2014. Web. 08 May 2017
  2. Ruimin, Zhang. “Raising Haier.” Harvard Business Review. 31 July 2014. Web. 08 May 2017.
  3. “Haier and Higher.” The Economist. The Economist Newspaper, 11 Oct. 2013. Web. 08 May 2017.
  4. Mahajan, Neelima. “How CEO Zhang Ruimin Reinvented Haier – Three Times Over.” CKGSB Knowledge. 28 Sept. 2015. Web. 08 May 2017.
  5. “Haier CEO Zhang Ruimin: Challenge Yourself, Overcome Yourself.” Founding Fuel. 18 Oct. 2015. Web. 08 May 2017.
  6. Fischer, Bill, Umberto Lago, and Fang Liu. “The Haier Road to Growth.” Strategy Business. 27 Apr. 2015. Web. 08 May 2017.
  7. “Zhang Ruimin: Driving Haier’s Innovation.” Zhang Ruimin: Driving Haier’s Innovation | CEIBS. Web. 08 May 2017.

Walt Disney and the 4 Performance Management Tools

Walt DisneyThe Performance Management King

I recently picked up the very brilliant The Illusion of Life by Frank Thomas and Ollie Johnson. For those of you who don’t know, it’s a colourful investigation into the origins of our favourite Disney characters. Written by two of the nine animators who made Walt Disney into a household name, it very aptly demonstrates what a visionary Disney was – and not just in the field of animation.

Way back in 1923, when performance appraisals, 360 feedback, and employee evaluations weren’t established (and certainly weren’t Googleable), this guy was blazing a performance management trail that leaves many modern businesses in the dust. It’s an approach that took his fledgling studio from two employees to over 1000 in only sixteen years¹. Let’s take a look at exactly how he did it.

1. Alignment

“Of all the things I’ve done, the most vital is coordinating those who work with me and aiming their efforts at a certain goal.” – Walt Disney

Over the last 20 years, we’ve seen a huge amount of research published on the topic of employee alignment. We now know that employees who are aligned with organisational goals and objectives have higher engagement and job satisfaction, while their employers enjoy significant advantages over competitors². Disney was way ahead of us, using three key practices to actively aligning his workers:

Leading by Example

Disney had a firm creative vision, and he made sure his animators shared it. In story meetings he would act out the scenes, demonstrating the gestures and attitudes he wanted to see in the final cartoon. It’s a philosophy the Disney Company maintain today, and leaders are expected to behave according to their values and vision, which must align with organisational values³.

Team Effort and Ownership

‘Everyone has to contribute, or they become laborers.” – Walt Disney

Disney believed that each person connected to a film had to feel that they were vital to its success. As such, he involved everyone in the collaboration and evaluation process throughout production.

Engagement

To get his team excited about an upcoming production, Disney would bring in a well-known artist to create unique drawings or paintings long before any actual story work began.

2. Transparency and Collaboration

When animation was in its infancy, skills gaps were commonplace. Studios did not share techniques, and it was difficult for beginners to learn the skills and tricks other animators had already discovered, even within their own studios.

Disney turned this model on its head. He insisted on an open atmosphere and encouraged each artist to share their views and discoveries. The studio effectively created a mentoring program which, by pooling insight from newbies and experienced professionals, allowed Disney animators to remain at the cutting-edge of their field.

Believing that good ideas came from everyone⁴, Disney did away with the concept of seniority. All the animators worked together in one large room to encourage discussions and problem solving. It wasn’t until 2012 that knowledge management (the process of transforming individual knowledge into organisational knowledge) was proven to contribute positively to organisational performance. At the same time, we also discovered that a collaborative culture enhances the benefits of knowledge management⁵, something Walt Disney had recognised nearly nine decades before.

Regular feedback infographic

3. Recognition

With the power to increase engagement, encourage development, enhance alignment and reduce turnover, recognition is critical to talent management (check out my article on recognition programs for a re-cap). Disney knew this only too well and made sure to praise great work – calling everyone together to discuss a drawing he particularly liked.

Recognition still plays a pivotal role at The Disney Company – Florida’s Walt Disney World alone boasts 180 different employee recognition programs. One of the most coveted at the park is the Spirit of Fred Award. Named for a long-term employee who made his way up the ranks by exemplifying Disney values, Fred makes the awards himself, which include The Lifetime Fred Award and the annual Spirit of Fred Awards⁶.

4. Frequent Feedback and Training

Quality was everything to Disney, but so was skill. If an animation was clumsy or poorly staged, he wouldn’t delegate the work to an animator with more proficiency. Instead, he would pair the original artist with a more experienced teammate to provide guidance.

Despite this focus on mentoring and on-the-job training, by the 1960s, Disney’s studio was suffering from a skills gap. His original nine animators – trained in 1929 at the Chouinard Institute – were starting to retire, and those coming up lacked the technical expertise to take their place. He needed a new approach to training, and his long-term association with Chouinard provided it.

Disney’s vision for a specialist college led to the incorporation of CalArts (a merger between Chouinard and the Los Angeles Conservatory of Music) in 1961. There, students studied animation under the tutelage of his nine retired animators, and the company cherry-picked the best graduates⁷. It’s an approach we see more and more of in China and India, where companies sponsor existing colleges or create their own to guarantee the graduates and skill sets they need⁸.

To Sum Up…

One word crops up over and over again when investigating The Disney Company’s people management processes; genuine. Disney genuinely cared about his business, his worker, and his product. His understanding of alignment and company values ensure his attitudes to training, recognition, and collaboration are still at the heart of the company today.

References:

¹Disney Institute. Undated. Leadership excellence.Disney Institute

²Gottschlag and Zollo, 2007. Interest alignment and competitive advantage. Academy of Management Review. 32 (2). pp. 418-437.

³James, 2014. Leadership lessons from Walt Disney: how to inspire your workforce.Disney Institute.

⁴Jones, 2013. Leadership lessons from Walt Disney: building relationships.Disney Institute.

⁵Rasula, et al., 2012. The impact of knowledge management on organisational performance. Economic and Business Review. 14 (2). pp. 147-168.

⁶BH Engagement, undated. Exploring employee incentives. Black Hawk Engagement.

⁷Wikipedia, undated. California Institute of the Arts. Wikipedia

⁸Capelli, 2014. How Disney solved its skills-gap problem. Human Resource Executive Online.