Managing performance at Haier

(A)

Group A2
Aachal Garg
Ameeno Paul
Chaitanya Gandhi
Joe Kynadi
Kanika Bandooni
Sudipta Mondal

Problem Statement
How would Qingdao Haier implement the current successful management practices, across the other regions,
where it could face cultural and other differences.

Internal Analysis
SWOT Analysis
Strengths:
Product diversification with different product categories with different specifications
Product innovation to capture niche markets
Focus on product differentiation rather than price competition (which was followed by competitors), to

create competitive advantage

Penetrating international markets by grabbing globalization factor
Diverse management principles which includes Japanese management philosophy, American innovation

and Chinese cultural aspects

Effective human resource policy
Initiating various motivating steps like performance tools (coloured footprints, coloured face on board
etc.), talent pool, tracking individual through their earned (or penalized) revenue

Weakness:
Certain adoption of management practices from SOE such as:
o Inflexibility
o Working in comfort zone
o Inability of decision making
o Professionally uneducated
Opportunity:
More opportunities through international technology alliances and joint venture
Following niche marketing strategy would help them to identify more niche markets and hence creating

strong competitive edge

Training and development aspects such as Interactive Learning sessions would provide opportunity in

developing strategic point of view, operational efficacy among the managers

Job rotation would provide opportunity to employees to learn different aspects and areas of the company

Threats:

Certain human resource steps might not successful when implemented globally
Certain management practices inherited from state-owned enterprises such as professionally uneducated,
comfort zone working, decision making incapability etc. might result in efficiency failure in other

countries(especially in European countries)

Penalty from one employee which becomes extra income for other, might cause demoralization and
work aversion for that employee

External Analysis
PEST Analysis
Political
Different political culture may arise to from different norms and regulation, when implementing in
other countries
Economic
Became economically stronger owning to market competition factor. Revenue increased from RMB

3.48 million to RMB 104 billion

Export factor contributed economically by increasing export revenue by $1.7 billion and by existence in

European and American retail market

Miniature company (MMC) concept for each manager by managing his own profit and loss statement

Social

Motivating tool to have competitive work environment and to keep employee motivation and away

from status quo condition

Different approach for appraising and dealing low performers
Adoption of racetrack model for performance evaluations - promotions and demotions

Technological

International technological alliances helped in penetrating international market

Owning to technological aspects such as product diversification (categories and specification) and
product innovation

Cultural

Management policy adopted, is an amalgamation of Chinese culture, American innovation and Japanese

management philosophy
Cultural aspect (Chinese) is one of the important factors for success in china. Differences of the same
would be faced when implemented globally

Factors
1

Performance Evaluation Method

80:20 rule
Race Track Mode
Three Phase system

Motivation tools

Footprint model
Recording performance

Intense competition

Highly Transparent HR System

Cultural difference

Cost of implementation

Critical Factors
1. Intense competition:
Everyone at Haier were given set of goals to be completed on daily basis. Their performance was evaluated on
the basis of it. They expected their employees to improve each working day and set higher goals for themselves.
They linked the pay on their performance and created too much pressure on all the employees to maintain their
position.
2. Performance Evaluation Method:

80:20 rule:
Managers consisted of 20% of workforce and were responsible for 80% of the companys result. They
were responsible for the worker under them. This made managers more accountable for both good and

bad.
Racetrack model:
There were no permanent promotions. Winners had to keep defending the title and others could

challenge them for their position. Thus everyone had incentive to push and perform better.
Three Phase system:
The lowest performing 10% of the employees were dismissed based on this system. They were given
three chances. For the first time they were sent for training on companys expense. If again in the second
review, he was in bottom 10% he had to join training on his own expense. Even after third review, he
was in bottom 10%, he would be dismissed from the company.

3. Motivation Tools:

Footprint method:

They used tools such as green footprints from year 1999. Here top performer either worker or manager
would stand on footprints and explain how he achieved his job. This incentive helped them to innovate

and perform better on daily basis.

Board to record performance:
Each employee set his own goals for the day along with his supervisor and at the end of day they assess
how well the goals are fulfilled. On the basis of it, each employee receive a colored face, representing an
informal grade of the day. Thus encouraging them to do better each day.

4. Cultural Difference:
Haier integrated traditional Chinese culture, aspects of Japanese management philosophies, American
innovation and Haiers own learning. But Haier needs to ensure the work policy is well accepted across
different regions. Example: Paying fine due to failure to complete task may not be acceptable in other countries.

Alternatives
The various alternatives based on the above factors along with its benefits and drawbacks are as follows

Implementing a new global standardized performance management system

Haier need to develop and implement a new system for measuring, evaluating the performance of
employees and providing them with consistent feedback. This can help reduce work load and have a
consistent policy globally and allow for easy transfer of employees. The Main drawback is that it has to take
into account the diversity of cultures around the world. The system followed in China may not be
compatible with employees in the US. Also the system could involve high costs and could take time to be

implemented
Modify the existing system to make it suitable to be implemented across various countries
The existing system is highly successful. Haier could modify it to better suit it globally. It could take into
account the various cultural differences and make the performance system customized to the requirements
of different countries yet be similar in structure globally. The major drawback associated with this is the
necessary requirement of time to tailor the system according to each country. Another drawback is that there

is no surety that the system will be a success and also this will involve a high cost to the management.
Continue with the existing system
The existing system has been extremely successful with Haier and it would be suitable that it stays that way.
The system helped Haier reach its position today from edge of shutting down. The drawback associated is
that there exists cultural differences amongst various countries and the system followed in China may not be
suitable with cultures of other countries. There may be legal restrictions in different countries that may not
be go along with the system i.e. labour laws.

Recommendation
We would recommend that Haier modify the existing system to suit various countries. This would take into
account the cultural differences and also the various legal constraints that maybe prevalent there such as
labour laws. This would also form a part of a global structure on employee performance and evaluation at
Haier by retaining the crux of the existing system.

Plan of Action
First senior members of management along with senior HR staff should analyse the existing system in China.
Then the need to form a team consisting HR personnel from the various countries. They need to be explained on
the existing system and then they should plan on how best to tailor the system to suit their country. The
management should then implement it in few departments in each country to measure its success and then based
on performance and drawbacks improve upon it. Then when it is successful they should implement it across all
departments of the country.