Group Profit in 2014 was Twelvefold Pre-transformation Levels Just a Decade Ago
September 21st, 2015, Beijing – On September 19th, Haier held a conference to mark the 10th anniversary of its RenDanHeYi business model. A number of esteemed global management experts and academics paid homage to the company’s pioneering management approach at the event, where it was announced that Haier would commence phase 2.0 of the model.
Haier adopted RenDanHeYi – otherwise known as the Win-Win Model of Individual-Goal Combination – in 2005 as a business model to allow the company to transform in step with the impact that the Internet was bringing to the traditional economy. The model re-imagined the connections that should exist both between its employees and its users and between the company and the market. It did this primarily by providing greater autonomy and decision-making power to front-line employees to respond speedily to fast-changing user demands.
Among the methods to motivate its employees to shift their work processes in line with the tenets of the model, Haier has encouraged its employees to establish separate micro-enterprises. Almost 200 such internal start-ups have been established to date, with 77 percent of these micro-enterprises realizing more than CNY 100 million (USD 15.7 million) in annual revenue last year. Just nine years after the RenDanHeYi model was adopted, Haier Group’s 2014 financial year profits were twelvefold those made just prior to the transformation, amounting to a 28 percent compound growth rate over this period.
During the conference held on September 19th, Zhang Ruimin, Chairman of the Board of Directors and CEO of Haier Group, announced that Haier will enter phase 2.0 of the model to transform Haier into a co-creation platform comprised of micro-enterprises. Zhang said, “The traditional mission for companies is to pocket profits in the long term. Our mission following the transformation is to become a shareholder in our micro-enterprises. Under RenDanHeYi 2.0, all of our employees can become entrepreneurs with decision-making authority, able to distribute benefits and optimally unleash talent. Haier as a company is no longer providing jobs to employees; we are instead offering a platform to become an entrepreneur. The Internet will eventually win anyway, so we have to face it and grasp the opportunities it presents.”
A number of renowned global management experts joined Haier’s conference. These included Jeremy Rifkin, author of The Third Industrial Revolution; Marshall W. Meyer, Professor of Management at the Wharton School of the University of Pennsylvania who has studied Haier for 15 years; Bill Fischer, Professor of Innovation Management at IMD Business School and author of Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform; and Qin Wang, Director of the Institute of Industrial Economics at the Chinese Academy of Social Sciences.
Jeremy Rifkin stated at the conference, “Research was conducted on Internet users across 60 countries to find out who is most enthusiastic about the sharing economy. Whereas in Europe and the United States, a little over half of the population are sharing, China was the most enthusiastic at 93%. The sharing economy will have transformed capitalism in 25 years, and the business model that Haier is introducing will take us along the path and hopefully inspire other businesses and governments.”
Marshall W. Meyer explained at the conference what attracted him to study Haier’s management innovation, “First of all, [Haier’s RenDanHeYi] eliminated the command-control hierarchy and is going on to a platform micro-enterprise model structure. Every employee can become a CEO, where initiative flows from the bottom to the top of the organization.” Bill Fischer echoed these comments at the conference, adding that Haier is able to give up command-control and extend trust not just to people inside the organization but also trust and involve customers outside the organization.
Thinkers50, the premier ranking of global business thinkers, recently paid testament to the success and innovation of the RenDanHeYi model. Zhang Ruimin and Haier have been shortlisted for this year’s prestigious Thinkers50 Distinguished Achievement Awards, often described as the “Oscars of management thinking”, in the Ideas into Practice Award category. The nomination was given for Haier and Zhang’s “relentless change, team-working and destruction of middle management layers, combined with long-term dynamic leadership” and gave recognition to the RenDanHeYi model, which is now set to enter its second phase.
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