China Herald: The organization of disorder at Haier

White goods producer Haier has an amazing story of change, where its CEO Zhang Ruimin reinvented the company, three times, tells IMD-professor Bill Fischer in CKGSB Knowledge. Fischer is co-author of Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform.

CKGSB Knowledge:

Q. One of the things Zhang Ruimin did was break the company into different bureaus, effectively creating internal competition. How does that work?

A. If you are moving from ‘responsiveness’ to ‘intimacy’, in ‘responsiveness’, you need to listen very well to the customer and respond quickly. With ‘intimacy’ you need to get so close to the customer that the slogan was ‘zero distance to the customer’. That means you need to change the way in which you go to market because you are now dealing with ideas rather than just customer responses to offerings. You need to have a factory system that is infinitely responsive because you don’t know what’s going to come out of this. You raise uncertainty multifold. You need to build an organization that’s capable of dealing with unforeseen uncertainty.

In order to do that [Zhang Ruimin] needed to really free up the skills of his workforce because they had no idea what the customers were going to tell them. They needed to have an organization that was fluid in terms of how it moved to changes in the marketplace. He recognized that the existing departmental, functional, silo-ed organization would be too slow to do that. So he had to hire new skills, and then he had to put them into an organization that was able to move quickly and coherently the way the customer wanted. He had to take out the existing organizational units because they were historical, rather than anticipatory. What they settled on was an internal labor market where you literally auctioned off opportunities. So the slogan is “Haier doesn’t offer you a job but offers you the opportunity to create a job.”

If you are going to do that, you need a labor market inside where people bid for work and then assemble teams to address that work. Those teams dissipate at the end, and go back into the labor market rather than remain in place because of historic success. If you do that, you need a mechanism for choosing a leader. So they use performance, they appraise business models and promises to pick leaders. But once that leader is in place and assembles a team, his or her team appraises their performance every quarter and votes [on whether] they want to keep them in position or not. Everything changes. It’s the organization of disorder that allows them to perform so well.

More (including a video interview) at CKGSB Knowledge.

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