China Herald: The China model: replacing middle management by competition

When Japanese ways to organize business like Just-In-Time hit the world, it changed how companies work profoundly. China has not yet produced such a disruptive model, but white-good producer Haier might just be on the way, says IMD-professor Bill Fischer in Business Week, by replacing middle management by internal competition.

BusinessWeek:

Instead of following a top-down organizational flowchart, the company—which has 80,000 employees—is subdivided into self-organizing internal units. Each unit has the power to vote out ineffective leaders. New projects are staffed via an internal talent pool, wherein employees are evaluated based on their interests, credentials, and past achievements.

“Everything is up for bids and competitive,” Fischer says. Employees are propelled from assignment to assignment based on their aptitudes and willingness to take on new responsibilities. He cites the example of a successful internal bid to launch a three-door refrigerator model; the winning bid was submitted by a 36-year-old who “never would have had the chance to lead in a normal Chinese company because he wasn’t senior enough.” Moreover, compensation is based upon competence, not seniority—as is the norm in China and elsewhere. “Now they’re trying to build an internal social media platform to determine who’s available for new projects and how well they’ve performed in the past,” says Fischer.

Haier’s other big management innovation is to view its customers as assets in product development, not simply as revenue stream. Thus, Haier employees who interface directly with customers have an elevated role in decision-making because they are seen as channeling valuable business intelligence. This turns upside-down the usual help-desk model, in which staffers answering the phones are usually the lowest on the totem pole, relegated to repeating prewritten talking points.

“We now take periodic product revolutions for granted, but not management revolutions,” says Fischer. “Most of us are still following the management principles of people long dead. Zhang is willing to experiment.” And it’s an ongoing experiment. As Zhang himself wrote in Harvard Business Review: “People respect the leadership of an organization for different reasons in different periods.”

More in Business Week.

Bill Fischer is the co-author of Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform

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

A discussion at the +China Weekly Hangout on June 6 on the way the EU and the US are dealing (of fail to deal) with China, with negotiation expert +Andrew Hupert from New York, Swiss lawyer +Nathan KAISER from Taipei and political analyst +Steve Barru from Denver, Colorado. Moderated by +Fons Tuinstra of the China Speakers Bureau.

Devastating pictures of tourist areas in the Golden week of October showed again that taking a holiday together with 428 million others is not always a good idea, even though a growing number might go abroad. The now adjusted system of Golden Week was introduced to encourage consumer spending - still high on the political agenda. But would a paid leave, where you can decide yourself your holidays, be a good alternative? Some love the ideal, others loath it. And what is worse, many Chinese would most likely not take their holidays, but try to cash in at the end of the year. That would cause consumer spending to drop. What would you do? How did you spend your holidays in October, and what would be a good alternative? Join the +China Weekly Hangout on Thursday 17 October, 10pm Beijing Time, 4pm CEST(Europe) and 10am EST (US/Canada). You can leave your remarks here, but during the event you can also ask questions and remarks using the Question tool at the event page here. At the event page you can also register for participation at the hangout. (You can read our initial announcement here.)