The Haier Group is a Chinese electronics and household appliances company. With 10.2 per cent market share of the world’s white goods market (more than any other manufacturer) and a state‐owned enterprise, it is a formidable competitor in the electronics market. In the early 1980s, the group was merely a general refrigerator manufacturer in Qingdao, China. It was close to bankruptcy when it appointed a young assistant city manager, Zhang Ruimin. A customer brought back a faulty refrigerator and Zhang went through his entire inventory of 400 refrigerators looking for a replacement. Struck by a 20 per cent failure rate in its products, Zhang issued sledge hammers to staff with instructions to destroy 76 faulty refrigerators in the inventory rather than let them be sold.11 He introduced Western management theory to the plant, with a focus on quality and reliability. By 1992, Haier was a certified ISO 9001 organisation — a remarkable demonstration of establishing quality management principles in a very short time. 

Sales improved and by 2002 Haier was opening plants in the United States, Pakistan, Africa and India, as well as partnering with European firms and buying a factory in Italy. By 2008, it had surpassed the giant American manufacturer Whirlpool. Zhang’s management approach was summarised by the letters OEC — O (Overall), E (Everyone, Everything, Every day), C (Control, Clear). Haier’s Human Resource Management Director Wang Yingmin explained the acronym:

Performance measurement is crucial and tasks are allocated to achieve greatest efficiency across several departments with instructions so that all employees understand their jobs and how their jobs align with the corporate goals. Employees are shown how their wages are tied to market performance. Short production lines were created to ensure a close match between design and customer.

Daily control and clarity is the basis of fulfilling those objectives. Every Haier employee has a ‘3E card’, used to record each day that they have done everything required. This is combined with the plan–do–check–act cycle to check everything. The 3E card has seven criteria: job quantity, usage of parts, usage of materials, equipment, safety, work attitudes and labour discipline. Every staff member is required to constantly improve their work skills and ensure that they can achieve the 1 per cent increase in productivity each day.

However, not everything about the approach is positive: the emphasis on individual performance and incentives has created a competitive internal culture where teamwork suffers and synergy is problematic.

QUESTION

The numbers are difficult to dispute: Haier was the number one brand of major appliances in the world from 2009–14, with spectacular efficiencies and affordability. What do you think is the source of the organisation’s success?

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Haler Haier Chinese electronics company Haier achieved success by introducing Western management theory.