Managing Performance at Haier
As a manager of an organization, it is recommendable to follow the example of Haier’s organizational culture that resulted to tremendous development since 1985. I am presenting this speech as a recommendation to organizations and managers on how to enhance performance of the especially through the organizational culture and strategic management approaches. The roots of Haier’s success can be cited back in 1985 after Zhang Ruimin was appointed as the CEO of the company. The reign of Zhang marked the end of the era that Haier produced substandard products. As a matter of fact, Zhang focused more on transformation of the company towards increasing its competitiveness in the market.
Indicators of Success
By the year ended 2007, Haier was among the top six producers of kitchens alliances and was in position two among the producers of washing machines in the global market. As a result, the global market share of the company was 4% being in position three among refrigerators producers. Haier moved from making RMB 3.48 million in 1984 to more than RMB 100 billion by 2006. The other indicator of success by Haier is that the firm expanded to international markets where its products were distributed across 160 countries including 12 of the top European economies and United States. Lastly, the company expanded its product line to air conditioners, home appliances, television sets, MP3 players, and washing machines among others.
Haier’s Success Factors
- Extended product line where the company offers more than 80 different product categories
- Innovation and invention to create niche markets
- Focusing on product quality and market research as promotional strategies
- Expanding to overseas markets through joint ventures, alliances, procurement networks and outlets
- Effective human resource management strategies which focus on employee motivation through incentives, transparency and justice
Organizational Culture
The organizational culture of Haier Group is dominated by strategic management approaches, management tools and policies. One of the principles executed in the performance of Haier Group is based on the state of urgency where the organizational goals are based on the internal and external competition. For example every department is deemed to be in a stiff competition with other departments within the firm towards achieving the overall organizational goals.
Management Tools
- OEC (Overall, Every, Control and Clearance)
This tool focuses on all dimensions of performance which is denoted by “Overall”, everybody, everything and everyday which are represented by “Every”, and end-of-work process with regard to the tasks assigned to every employee on the daily basis which is denoted by “Control and Clearance”.
- 80:20 Principle
According to this principle, 20% of the workforce in the company represents the managers who are responsible for 80% of the company’s performance results being positive or negative. For example, for the failure of a certain department, an employee is deemed as 20% responsible for the failure whereas the supervisor is held liable for the remaining 80%. As a result, the employees are fined with regard to that principle.
- Racetrack Model
Haier uses this principle for performance assessment and promotions for their employees. Citing from the concept of racetrack, this principle provides that after excellent performance, an employee will be temporarily rewarded through promotion but one has to keep performing in order to defend the reward. Precisely, this means that in Haier, there is nothing such as permanent promotions for the employees.
Therefore, the organizational culture of Haier Group enables the firm to continue performing excellently by ensuring effective management strategies and employees motivating policies. This culture provides that though the company is performing well currently, it has to withhold the principle of its success in order to continue dominating the market.
