Chapter 4a Homework Tensions Could Arise For Haier When Implementing

DPO

T-70-E

May 2014

Hailing a New Era: Haier

in

Japan (A and B)

:

Teaching

Note1

Case Summary

Founded in 1984 by Zhang Ruimin, currently the CEO of the company, Haier has rapidly grown from a

small refrigerator plant in Qingdao, China, to a global leader in the home appliances industry. As one of

the most valuable brands in China, Haier designs, manufactures, and sells various home appliances,

In addition to addressing potential cultural differences between China and Japan and retaining former

Sanyo employees after the acquisition, Haier needed to instill the new management system that CEO

Zhang put in place in 2007. Haier has always promoted a performance-driven culture emphasizing

individual responsibility and meritocracy. Recently, Haier developed a management system consisting of

an inverted organizational triangle with self-managed units. This structure puts people in direct contact

with clients and empowers them to take the initiative to serve the market instead of responding to orders

This teaching note was prepared by Professors Carlos Sánchez-Runde, Yih-teen Lee, and Sebastian Reiche as an aid

Audience and Learning Objectives

This

two-case series

can be taught

as

a

seg

m

e

n

t

in

C

r

os

s

–

Cu

ltu

r

a

l

Management,

International

Management,

International

Bus

i

n

e

ss,

and International

Human Resource Management

c

o

urse

s

as

well

as

in

advanced modules

in

leadership.

It is suitable for MBA,

executive

training, or

graduate programs.

Spec

if

ic

al

l

y

,

the

case offers

rich

ma

ter

i

a

l

s

that can

shed

light on

(1)

the

emergence

and growth of

Chinese

multinationals; (2)

emerging

More specifically, the

case

can serve the

following

teaching obje

c

tives

:

 Help

students

understand the historical background of

C

h

i

n

ese

business

and its evolution in the

past

decades;



Illustrat

e

the

emergence

of

Chinese

global

competitors

and their

strengths

and potential

weakn

e

sses

;

Suggested Assignment Questions

1. How far

has Haier come since

its

creat

i

on

in 1984?

2. What is special about Haier’s current

management system?

Why did

the

company

create

this

system?

3. What role has

CEO

Zhang played in

Haier’s development?

How would you

describe

him

as

a leader?

Case

Analy

s

is

Introduction

The

case gives students the

opportunity to

take

a

closer

look at emerging

Chinese

global

players such as

Haier.

Many

students

may not have direct

experience

working with

C

h

inese

multinationals, nor are they

familiar with how

these companies

are

managed

—and yet

th

e

likelihood of working for a

Chinese

company

How Far Has Haier Come Since Its Creation in 1984?

Haier has emerged as

a

leading

global player in the

home appliances

industry,

back

from the brink of

bankruptcy,

in

l

e

ss

than 20

years.

It is striking to

see

how

basic

the 13

rules are

that Zhang introduced in

I

n

stru

c

t

or

s

can

then

draw a

comparison between

Haier in 1984 and

Haier

today,

as

it has

become

a

successful leading

multinational with a global presence.

What

Is Special About Haier’s Current Management System? Why

Did

the Company

C

r

eate

This

Sy

stem?

According to

the case, there are

se

ver

a

l

important

features

in

Haier’s management system, as described

in detail

in

the

case (see

pp. 4–7).

1. ZZJYT and the inverted triangle Zhang structured

Haier

into over 2,000 self-

managed

uni

t

s

(ZZJYT)

and an inverted organizational triangle.

Each

unit is given a

2. Win–win mode and individual-goal combination Each

employee

has very specific

personal

3. Catfish

mechanism

and negative entropy At Haier, a leadership position is not

guaranteed

;

those

Instructo

r

s

can lead

the discussion

toward a more

detailed understanding

of

thi

s

system

to

see the

complexity and

interconnection among

the different

pie

ces

.

Despite

its evolution over various

stages, one

key recurring component in the

design

of

Haier’s

management

sys

t

em

has to do with holding

people accountable

when serving their clients. When the

quality of

w

orke

r

s

improves,

they take on

more

autonomy

so

that

t

h

e

increased responsibility

is

matched

with

increased decision-making

power.

What Role Has CEO Zhang played

in

Haier’s development? How Would You Describe Him as

a

Le

ade

r

?

CEO

Zhang is definitely the

v

i

s

i

o

n

ar

y

thinker and leader

behind

the creation of such an innovative

system

and, in a

broader sense,

behind

Haier’s success.

As

described

in

the

cas

e

,

as

a diligent autodidact and

think

e

r

with a high level of

int

e

ll

ectual

curiosity, Zhang read a wide

range

of both

Chinese

and

Western

philosophical

thinking and

management theories,

which in turn

influenced

his thought

process

and his

design

What Kind

of

Tensions Could Arise

for

Haier When Implementing Its Management

Sy

s

t

e

m

in

Japan?

It is fairly

straightforward

to identify

areas

of

ten

s

i

o

n

between Haier’s system

and

t

r

aditi

o

nal

Japanese

cultural

values.

For

exampl

e:

based rewards, where members

of

the same

team

ar

e

treated

equally.

 Merit

vs.

sen

i

ority-based

promotions:

In

Haier’s system,

capability and

m

e

rit

can lead to a

leadership

position,

whereas the

traditional

Japanese system values re

spe

c

t

and seniority.

Promotion

is normally

based

on

one’s

se

nior

ity

rather than on

one’s

actual performance.

It would be useful to bring up

the

fact that the

challenges

facing Haier also involve managing

the

differences between

two organizational

cultures

(in acquiring Sanyo),

in

addition to national cultural

differences. The

fact that Sanyo was a much more

established

brand, with its own culture and

management

system, renders the

adaptation even more difficult.

Furthermore, there

was also a factor of national pride:

How Did Du Manage the Tensions During His Leadership

of

Haier Japan? Please Assess Du

in

Terms

of

How

He

Goes About Reconciling Cultural Differences.

In

Which Aspects Would You

Agree with Him and

in

Which

Would You

Not?

Instructo

r

s

can start by listing the actions that Du took in handling

the

cultural

differences.

Concrete

examples

include:

 Drinking and trust-building with

Japanese workers (over

a

period

of two

y

e

ars);

Assessing

Du



Some students

might

f

ee

l

that

Du’s approach

is too

time-consuming. Can companies

spend

two

years

having drinks with local

employees before implementing the d

e

si

red

system?

Instructors can open a

debate

over

e

f

fici

ency

versus effectiveness

in handling cultural

diff

e

r

en

ces

.

Leading by

E

x

ample

The

way Du

encouraged the

Aqua

sales team

to

reset

the

sales

target for 2012 is fascinating.

One

key

feature

is that Du

embodied

the

v

e

ry

spirit of

Haier’s ZZJYT system,

not by

impo

s

ing

his own

numbers as

a

sales

Du’s Personal and Cultural Competencies

One interesting

line of

discussion concerns Du’s competencies.

What

are the key

facto

r

s

that allowed Du to

lead

the Japanese

operation with

success?

The following

resources

and

competencies seem

c

r

itic

al:

 Du’s

close

relationship with

CEO

Zhang and a

deep understanding

of

Haier’s

cult

ur

e

and

management

philosophy: When

asked

how he was able to

manage Haier

Japan so well, Du

always gives

credit to

Should Haier Ddapt

to the

Japanese Culture and Change

its

Management System? Or

S

h

ould

Haier Impose its

System

in

Japan?

It is

curious

to

see

that, in

the end,

Du

has successfully implemented Haier’s system

in Japan without making

compromises.

In this

sense, Haier has

not

adjusted

to the

Japanese

culture. How can it claim to

respect

Japanese culture? Essentially,

Du

has respected Japanese

culture in terms of

processes

and communication,

building up mutual understanding and trust. However, this does not mean that multinationals need to

single-mindedly adapt their

management systems

to local practices.

What

Types

of

Cultural Challenges

Might

Haier Face

in

Other Cultures?

What

Would You

Suggest That Haier

Improve

in

Order

to

Better Manage

the

Cultural Complexity

of its

Global

Footprint?

This can

be

an optional question to be

discussed

if additional time

i

s

available. The discussion will be

based mainly on students’ experiences rather than on the

con

c

ret

e

information

presented

in

the case.

If

the

students

possess

rich cultural

knowledge

and

experiences,

the exploration may

be

stimulating and

insig

h

tful.

Teaching Plan

Outline

This teaching plan is

designed

for

one

75

–

minut

e

class session.

Instructo

r

s

may adjust the length of the

Introduction (5 Minutes)

In

st

ructo

r

s

can set

the stage

to

connect

the

discussion

with other

components

of the course, such

as

cr

oss

–

Probing Questions



Had

you

heard

of

Haier

be

f

o

re

reading

this

c

a

s

e

?

Haier’s Development and Current System (25 Minutes)

It is critical for students to obtain a clear idea about Haier’s management system and to understand its

specificity.

Probing Questions

 What

was Haier

lik

e

in

1984?

What

i

s

Haier

like today?

Cultural Tensions for Haier in Japan (15 Minutes)

I

n

s

t

ru

c

t

or

s

can

refer

to

va

r

i

ou

s

frameworks

of cultural

d

i

mens

io

ns

or

more

s

p

ec

if

ic

s

t

u

die

s

o

f

Japanese

culture in

l

e

adi

n

g

this

discussion.

As

mentioned above,

what we find to

be

most effective is mobilizing

the knowledge

of

students

who have direct

experiences

with Japan and

Japanese

compani

e

s.

Probing Questions



Where

do you

see possible problems

in

imp

lem

e

nting

such

a

system

in Japan?

The Role of a Culturally Competent Leader—Du (15 Minutes)

I

n

s

t

ru

c

t

or

s

can

guide

the

d

i

sc

u

ss

i

o

n

toward

the concrete

actions Du

engaged

in, analyzing their

e

ffe

ctiv

enes

s.

Probing Questions

 How

does

Du

handle

cultural

differences

with

re

spe

c

t

?

 What is

the

real

meaning

of

respecting another

culture?

Case (B) can be handed

out at this

tim

e

.

Leading Global Organizations & Conclusion (5–10 Minutes)

The discussion can be concluded

with the following ideas:

Relevant Readings



Hofstede,

G. H. (2001). Culture’s

Consequence

s

:

Comparing

Values,

Behaviors,

Institutions and

Organizations across Nations

.

Sag

e

.



Fitzsimmons, S. R., Lee,

Y.-t., and

Brannen,

M.-Y.

(2013).

“Demystifing the Myth about Marginals:

Implications for Global

Leadership,”

European

Journal of International

Management

,

7(5), pp. 587–

603.