China Herald: Haier, taking the middle management out

Bill Fischer

Home appliances manufacturer Haier has become of of the leading forces in China's drive for innovation, says IMD-professor Bill Fischer in the People's Daily. "Reinventing Giants" is a recent book he co-authored focuses on Haier's transformation process: the middle management is taken out.

The People's Daily:

In the new structure, the customers' needs are learnt by the sales team and fed back to Haier's top managers, who make decisions about the company's strategies based on this information. The role of middle management is taken out of the model.

"Once customers are at the top, why do you need middle management? Is it to manage the top managers?" Fischer asks. "No. Many companies in the world say that they put customers first without knowing what it means. But Haier has executed it well."

At Haier, the company's management structure pivots around ZZJYTs (zi zhu jing ying ti,which in English means independent operation units).

Each new project or market opportunity leads to the formation of a ZZJYT, a dedicated small team of workers with a separate budget, functioning almost like an independent company. Fischer and his co-authors studied Haier's three-door- refrigerator ZZJYT in detail. First a leader is selected who is then responsible for recruiting the team. The ZZJYT model inspires entrepreneurial spirit in workers, Fischer says. It gives them decision-making power and motivation to work hard because their salary is directly related to the performance of the unit. The key benefit of the ZZJYT arrangement is fast response to customer needs, he says,but such a structure requires courage by a company's top management to implement it.

More in the People's Daily. Bill Fischer is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

China Weekly Hangout
Shadow banking is on the agenda of the +China Weekly Hangout for Friday 30 August, featuring shadow-banking expert assistant professor Sara Hsu . You can read or announcement here, ask questions, or register for live participation at our event page.

Discussion on the ability of China to innovate, by the +China Weekly Hangout on October 11, 2012, with political scientist +G. E. Anderson and China consultant at-large Janet Carmosky. Moderation by +Fons Tuinstra of the China Speakers Bureau.