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.
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