As the leader of one of the world’s most innovatively managed global companies, Zhang Ruimin, CEO and Chairman of the Board of Directors of Haier Group, the world’s leading home appliance provider, was last week invited to speak in Vienna at the seventh Global Peter Drucker Forum, one of the world’s foremost management congresses that is held annually to honor the ideas of Peter Drucker. The Forum addressed essential questions relating to how businesses will change in an increasingly technology-driven economy. It focused on the theme of humanity and how digital technology can be leveraged to augment human capacity. Mr Zhang explained the innovative management strategies that Haier is undertaking in response to the disruptive changes brought about by the Internet to harness the enormous human capacity that it makes available.
Zhang Ruimin was the only representative of Chinese industry to speak at the esteemed forum, demonstrating the pioneering approach to management that he has employed at Haier. In 2005, in response to the elimination of the distance between companies and customers that the Internet was bringing, Haier adopted a disruptive management model that is now held up as an example of how to adapt to the changing dynamics of the Internet era. These innovative management practices have been consolidated into a case study by the Harvard Business School entitled Haier: Zero Distance to the Customer. In Mr Zhang’s speech at the seventh Drucker Forum in Vienna, he expounded on Haier’s more recent “networking strategy” management concept to give direction for how companies can restructure to become “human” 21st century corporations by better leveraging the Internet.
Mr Zhang stated that the Internet has given companies the opportunity to maximize both the value of the company and its employees by aligning their respective goals. To do this, he noted that Haier has undertaken three transformations. One is ‘enterprise transformation’. This involved breaking the traditional, company-centric pyramid structure of management, which is closed and isolates different teams into separate roles. Haier has done this by eliminating middle management and by forming a platform ecosystem of self-managing teams and micro-enterprises that are responsible for all aspects of a business from R&D to sales.
Another transformation is ‘employee transformation’. Rather than being implementers that do what is instructed, Haier is converting employees into entrepreneurs and partners. Employees are encouraged to find market opportunities to set up their own businesses that draw resources from the company and all around the world to support their work. This is done in a shareholding partnership with the company, with employee wages dependent on the results of their business. Haier’s third transformation is ‘user transformation’. Whereas a transaction used to be the only connection between a company and its customers, the Internet provides the opportunity to incorporate customers into a company’s value chain. A two-way connection is now possible in which customers or ‘users’ are able to provide suggestions for the company to develop products according to their specific needs.
Addressing the forum theme of humanity and enhancing human value, Mr Zhang said, “As long as employees feel they are being managed, there will always be a feeling of unfairness. Haier is giving employees a chance to start their own business and to give full play to their real value. Like German philosopher, Immanuel Kant said, people are the purpose not tools. It should be taken as a real fact that employees can create value for themselves. And, like Peter Drucker wrote, if the goals of employees and the company are aligned then the employee will contribute as much as they can and will, in turn, generate more value for employees and help the company develop.
Peter Drucker’s daughter, Cecily Drucker, said, “I totally agree with Mr Zhang Ruimin’s thoughts regarding a self-driven mechanism to inspire the potential of employees. His attendance at the forum was a great contribution to the spread of Peter Drucker’s thoughts globally.”
