Abstract: Haier Group constitutes a paradigmatic case of cultural transformation. A small company that manufactured low-quality refrigerators with several hundred employees in a remote location in China transformed into a leading organization in high-tech products with global-scale production and operations, a workforce of over 100,000 people, and a management model that has become a case study in prestigious universities such as Harvard, INSEAD, London Business School, among others. This case study aims to analyze Haier’s global growth through a cultural lens, understanding the specifics of Haier’s culture that contribute to its local and international success.
Introduction
The promise of a smart home, where the interconnection of devices enhances the quality of life for residents and the energy efficiency of buildings, is a reality. Thermostats that gather data on temperature preferences to adjust automatically according to the time of day, bulbs that can be turned on and regulated in brightness and color from a mobile phone, refrigerators that send alerts about expired food, enable inventory management, and turn on the oven just in time, washing machines that read garment labels to program the appropriate wash and start it at the time when the energy tariff is most convenient, are some examples that make domestic life easier.
These significant advancements in the field of the Internet of Things (IoT) are largely due to technological improvements, but other factors play a key role, such as changes in management models, open innovation, and the interrelation among players from different sectors organized in ecosystems. In this new landscape, the Haier Group has positioned itself as a pioneer. In fact, it is the only IoT Ecosystem Brand that has been ranked in the Kantar BrandZ Top 100 Most Valuable Global Brands for five consecutive years.
From a remote location, the city of Qingdao in northeastern China, Haier has expanded internationally, acquiring companies such as GE Appliances in the United States, Candy and Casarte in Italy, Fisher & Paykel in New Zealand, and AQUA, of Japanese origin, among others. Its strength is concentrated in 10 research and development centers, 71 research institutes, 35 industrial parks, 143 manufacturing centers, and a sales workforce of 230,000 nodes worldwide[1]. Its subsidiary Haier Smart Home is named among the Fortune Global 500 and World’s Most Admired Companies.
However, 40 years ago, it was just a small municipal refrigerator factory. In less than four decades, it made a quantum leap and led its industry locally and globally. What was the evolution process? What were the keys to its transformation? And, most importantly, how does it plan to address future challenges?
To answer these questions, there’s nothing better than immersing oneself in the sources and observing the phenomenon up close. That’s why I traveled to Qingdao, in the province of Shandong.
The Origin
Located in a bay, Qingdao is bathed by the Yellow Sea, which separates it from South Korea, 600 km ahead. Its port is the fourth most important in China; its skyscrapers, luxurious shopping centers, squares, and carefully adorned avenues attest to a prosperous and modern city, with monumental works such as the world’s second longest bridge spanning the sea, almost 42 km connecting it to the city of Jiaozhou.. In the architecture and beer, traces of its past as a German colony remain, but there are hardly any signs of Japanese occupation in the early decades of the 20th century.
Definitely recovered by China in 1949, it was “re-inaugurated” in 1984. This year also marks the beginning of what would later become Haier[2], when Zhang Ruimin, a 35-year-old young man took command of the Qingdao General Refrigerator Factory[3].
The Spring Festival was approaching when Zhang Ruimin took office. The financial situation was so critical that the new director had to request a loan to pay the payroll. In his calculation, he went a step further and included, in addition to the total salaries, an additional amount for each employee to have 2.5 kilograms of hair tail fish for the celebration of the millennia-old tradition.
What was the Qingdao General Refrigerator Factory like in 1984? A good way to visualize it is through the 13 initial management points established by Zhang Ruimin. Among them were “do not urinate or defecate in the work area,” “do not steal company property,” and “employees must remain on the premises during working hours.” Along with them, penalties for non-compliance were described. “The company had similar regulations, but until that moment, they had no effect. The new director kept his word, which surprised the employees and renewed their confidence in the company,” summarize the documents from that time gathered in the historical exhibition hall at Qingdao headquarters.
In addition to lax work discipline, other critical points were the low quality of products and a deficient production environment. For example, in January 1983, Department Store No. 3 in Shanghai reported that none of the 22 washing machines purchased from the factory were functioning properly. A year later, the inventory control recorded a surplus of 6,322 washing machines. Defective products were so many that they constituted a marketable category. In fact, many manufacturers offered four categories to sell them according to quality: first, second, third, and defective.
The most representative anecdote, marking the starting point of the commitment to quality that would become its hallmark, is the idea that came to be called “smashing refrigerators.” It happened in 1985. Irritated by the low quality of the products they manufactured, Zhang Ruimin gathered the employees and publicly smashed 76 defective refrigerators with a hammer. This symbolic act became a turning point for Haier and marked the beginning of the transformation. Simultaneously, Zhang Ruimin set out to win the national Gold Medal for Quality. From there, the director implemented significant reforms in management and corporate culture, focusing on product quality and customer satisfaction. For example, in 1984, he purchased a manufacturing line licensed from the renowned German refrigerator company Liebherr, a technology that allowed him to produce modern refrigerators with a four-star standard. The installation of Liebherr’s equipment and technology was accompanied by a rigorous commitment to quality. Zhang Ruimin introduced practices based on Six Sigma concepts and the goal of zero defects. At the same time, he implemented a management tool called OEC (O-Overall, E-Everyone, Everyday, Everything, C-Control Clear). It breaks an overall goal into everyday’s portion so that everything can be taken care of by everyone within control and clear vision. In 1984, Haier’s revenue was only 3.48 million yuan, but by 1987, it had reached 140 million yuan. Iin 1988, he won the first National Quality Gold Medal in the history of Chinese refrigerators, and Zhang went to receive the award in Beijing. Upon his return, the staff eagerly awaited to celebrate, but instead of that, the CEO conducted a “Nitpicking session,” exposing defective products and work to remind everyone to have a sense of humility and responsibility.
The Constant Expansion
In 1991, the Qingdao General Refrigerator Factory merged with the Qingdao Air Conditioning Factory and Qingdao Haier Group was established. It was renamed Haier Group in 1993. Since then, mergers and acquisitions have been recurring and have contributed to its domestic and international expansion.
Zhang Ruimin believed that three elements were needed to be the leading manufacturer of household appliances in China: good management practices, the acquisition of modern technology, and leveraging a fragmented industry to consolidate. Therefore, between 1995 and 1998, he acquired and activated 18 companies by introducing Haier culture, and expanded the product line to include other household appliances, offering everything from washing machines, stoves, and vacuum cleaners to televisions and video players. This way, Haier established itself as a home product brand and achieved operational synergies in manufacturing, acquisitions, and distribution.
In the late 1990s, Haier launched its international expansion program and in 1999, acquired a refrigerator factory in North Carolina, United States.
The main markets for household appliances in Europe, the United States, and Japan were in focus. Unlike many Chinese companies that targeted markets close to China, Zhang Ruimin explained that his strategy was to target the more challenging markets first and then enter the easier ones. In the early 2000s, he had opened offices that marketed products manufactured in China through a network of local distributors in most major European countries.
The next stage was to address the global brand strategy. According to Zhang Ruimin, “success in foreign markets is based on one thing: creating a localized brand name. We have to make Americans feel that Haier is a local American brand rather than a Chinese imported brand.”
In parallel, he implemented a localized design strategy to ensure that products adapted to the markets using the same concept he had applied in China: adapting products to meet local needs with popular products. For example, in Africa, in response to frequent power outages, Haier developed a freezer that did not defrost for 100 hours. And to supply the hotel market in the United States, they created small refrigerators that also served dormitories. With their localized products, Haier increased its presence in Europe and the United States. In 2019, Haier acquired Candy in Europe and entered a multi-brand operation stage in the European market.
In 2016, Haier acquired General Electric Appliances (GE Appliances). The acquisition of this company was a strong demonstration of its growth and evolution: “They wanted to buy us, and we finally bought them,” they still proudly recall in Qingdao. At that time, Haier’s size was already three times that of GE Appliances. After the acquisition, in a meeting with Zhang Ruimin, GE Appliances directors asked how Haier would lead them after annexation. The CEO’s response was clear: “I am not your leader. Our common leader is the user.” Immediately after the purchase, GE Appliances began its transformation, and thanks to the implementation of RenDanHeYi, four years later its revenue has grown more than 1.8 times and its profit had multiplied over three times the pre-acquisition figures.
The Organizational Reform: RenDanHeYi
The change in the cultural values of the organization, which began when Zhang Ruimin took over the company’s leadership, deepened in the following years and resulted in a management methodology that became another characteristic hallmark of Haier, the RenDanHeYi.
The pursuit of quality and close or “zero distance” contact with the customer were driving forces behind this methodology that originated in 2005 and evolved in the subsequent years. The hierarchical structure was replaced by small units called microenterprises (ME), and as a consequence of this change, 80,000 employees were organized into more than 4,000 MEs. MEs share functional services from Haier
Group Platform and they run daily business with three rights: the right to make decisions, the right to hire and fire people, and the right to distribute profits. Each ME is preferably composed of fewer than 10 people and is accountable for its performance.
In a later evolution, the MEs began to be grouped into the so-called “ecosystem micro-communities” (EMCs). Zhang Ruimin explained that: “EMCs are groups of MEs along an ecosystem value chain. All related MEs organize together to co-create and share value. The more value is created, the more profits there are to share. Of course, they assume any losses in such enterprises, and when losses reach a threshold, the community dissolves.”[4]
In Haier’s vision, it’s not about creating perfect products but “scenarios that iterate towards perfection” (interconnected products in specific contexts that solve a user’s need or experience, such as cooking, washing, etc.). “Consider the smart home. It is not the result of a single company or a single industry. It requires the involvement of different companies and different industries. That’s why we like to say that products will be replaced by scenarios, and industries by overlapping ecosystems.”[5]
Haier often refers to the reform carried out by Zhang Ruimin as “smashing the organization” (in reference to the hammer that crushed the defective refrigerators) and has eliminated 12,000 middle management positions since 2013. This drastic action to dismantle bureaucracy and transform completely into an open and networked platform drew attention in the global management arena, and management experts like Gary Hamel referred to it as “extremely difficult, almost a mission impossible.”[6]
However, through the strategy of “platform-enterprise, entrepreneurial employees, and customized users,” Haier has become a platform-based ecosystem where everyone becomes an entrepreneur. Its creator summarizes it as follows: “The hiring model of the RenDanHeYi ecosystem is completely different from the traditional organization. Our model is people-centered because each and every one can maximize or develop their individual values.”
As we move into a widely interconnected economy, more companies are making efforts and finding new ways to cooperate with the external ecosystem of startups. The open innovation strategies are becoming more important in large organizations worldwide. Haier has gone a step further with RenDanHeYi asi it builds an innovative entrepreneurial ecosystem inside out and in the same movement brings the outside in. I was familiar with the model since its novelty has captured the attention of management thinkers for the last decade. However, during my visit to Qingdao I saw how it works first-hand and discovered a much more powerful tool in practice.
RenDanHeYi clearly surpassed other open innovation models because people’s engagement and innovation are strongly centered on the customers needs. During my talks with employees that are leaders or members of the MEs, I could analyze how people’s engagement is fostered by Haier’s culture and how it is constantly assessed and nurtured.
The Key to Transformation
Haier Group constitutes a paradigmatic case of transformation. A small company that manufactured low-quality refrigerators with several hundred employees in a remote location in China transformed into a leading organization in high-tech products with globally scaled production and operations, a workforce of over 100,000 people, and a management model that has become a case study at prestigious universities such as Harvard, Insead, London Business School, among others.
The changes are numerous and remarkable. But all of them stem from and are attributed to the culture that Zhang Ruimin and his successor Zhou Yunjie matured over four decades.
Analyzing the culture involves first focusing on three dimensions: vision, values, and behaviors and strategic processes. Developing the vision is a complex task that must be grounded in a clear and authentic purpose. Values, on the other hand, are intimately connected with behaviors and strategic processes and form the basis on which people act and make decisions. Once established, achieving emotional adherence to these dimensions by the entire staff is crucial.
At Haier, there are no printed lists of values or cultural manifestos, as is common in most large Western companies that often highlight these points on their websites. On the contrary, Haier highlights its strategic pillars – which include technology, zero distance to users, and entrepreneurial spirit – and a phrase that encapsulates its core value: “Human Value Comes First.”
However, the strength of its vision and cultural values is evident in the behaviors of its people and in the processes created from its founding moment, continuously evolving. There are unique and distinctive behaviors, resembling companies like Pixar or Southwest Airlines, which have distinctive and exceptional practices in their industry. The following key cultural values are derived from these processes and practices.
Entrepreneurial Spirit: “Haier defines its employees as entrepreneurs,” explained Zhou Yunjie. “The group has more than 100,000 employees in the country and abroad. We hope that everyone can become entrepreneurs. In our view, entrepreneurs are related to at least three aspects. First, an entrepreneur must be a kind and honest person. Second, they must have the ability to change the status quo and make advancements through innovation. Third, an entrepreneur learns from what they do and continues to grow. Therefore, the employee development process drives them to become entrepreneurs,” explains Zhou Yunjie[7].
The entrepreneurial spirit is at the heart of the RenDanHeYi model. By eliminating intermediate hierarchies, flattening the organization, and creating micro-enterprises, the RenDanHeYi model empowers ME members to make decisions, including decisions about personnel selection and participation in benefits. At the same time, MEs are grouped into communities of interest or ecosystems (Community of Interest, COI), networks that facilitate the exchange of ideas and the discussion of new product features among different strategic units, users, and third parties (from suppliers to universities).
According to Haier, fostering the entrepreneurial spirit translates into tangible financial results. In 2014, the company created an incubation, investment, and acceleration platform for entrepreneurship, HCH Ventures, through which employees can propose business ideas and, if accepted, secure funding. The Haichuanghui platform has attracted more than 5,200 projects and incubated 8 listed companies, half of which are Haier and half are social. At the same time, more than 300 teams have received Series A investment. The incubation success rate is five times that of ordinary incubators. Once again, these results evidence the power of interconnecting strategy and culture at all levels.
Referring to the philosophy that drives entrepreneurship at Haier, Zhang Ruimin explained to me that, “when Schumpeter, the economist, proposed the idea of entrepreneurship, he was referring to leadership, the CEO, or another executive manager. But in the internet age, we need to transform this philosophy so that corporate leadership has the ability to empower people so that each employee can unleash their entrepreneurial spirit. Therefore, corporate leadership must establish a platform through which every young employee has the opportunity to become an entrepreneur. If we achieve that, we can put into practice Peter Drucker’s quote that says everyone should become their own CEO.”[8]
“The opportunities at Haier are enormous. Every employee is their own CEO,” says Wang Kechong, a branding specialist in the Haier Hainayun EMC, a unit that provides digital services for more than 50 cities worldwide.
Wang Kechong joined Haier in 2019. Previously, he had worked as a journalist. In July 2019, he joined the newly created Hainayun EMC. According to her description, Hainayun employs advanced technology to detect, monitor, and anticipate potential safety hazards within urban environments. In Qingdao, they have established a platform for comprehensively monitoring and early warning of the safety risk in the city, catering to nine scenarios including gas, water supply and drainage, road infrastructure, bridges, and elevators. For example, within the scenario of roads and bridges, Hainayun is safeguarding over 700 bridges and more than 2000 roads. To deliver these services, Hainayun leverages four cutting-edge technologies: Internet of Things (IoT), big data, artificial intelligence algorithms, and digital twins.
According to Wang Kechong, each employee can seek new opportunities on an internal website where job openings and training offers are posted. “To change positions, you need to update it with your ME owner , but they will always respect your choice. Everyone creates their own opportunities. Of course, you need to notify your ME owner to find a replacement for your current position,” concludes Kechong.
Innovation and “zero distance” with the customer: At Haier, innovation arises from close contact with the customer, listening attentively to identify their needs, and creating products that satisfy them. One of the first products designed in this way was born when a farmer complained to Haier’s call center that his washing machine was not working after use. After further investigation, the technician discovered that the dirt clogging the machine did not come from the clothes but from potatoes that had been rinsed in it. Instead of explaining that the washing machine was designed for clothes, the technician reported the incident to the headquarters. Subsequently, Haier launched a washing machine capable of washing both clothes and potatoes. Another example is the refrigerator designed for rural environments. Detecting that many customers complained that rodents entered the back of the refrigerators and sought shelter in the heat emitted by the compressor, Haier developed a “rodent-proof refrigerator” with metal plates covering the holes in the refrigerator and thicker, bite-resistant wiring.
The “zero distance” with the customer is one of the cornerstones of RenDanHeYi. By eliminating intermediate management, the model seeks to ensure that all members of the ME are in direct contact with market needs. A recent example of this methodology is the Washpass system developed by Haier Europe in collaboration with the Italian company Nuncas. It responds to the growing concern for environmental care and energy savings. The monthly subscription system offers a state-of-the-art washing machine (with artificial intelligence and the Internet of Things) that automatically selects the appropriate type and quantity of soap and softeners needed for the type of clothes to be washed. It turns on during cheaper energy hours and requests soap replenishment when it’s about to run out, among other things. The system includes the washing machine, installation, maintenance, and detergent replenishment.
Other examples of products tailored to customer specificities include refrigerators for “computer desks” for university students in the United States, large-capacity washing machines for the Middle East, where families are large, and the most commonly used attire, the tunics, is very voluminous (this product can process 12 tunics in the same washing cycle). On the other hand, refrigerators intended for the Indian market, where consumers are mostly vegetarians, offer the vegetable compartment at the top instead of having it at the bottom as is standard in most countries. This way, the vegetables are easily within the user’s reach, who does not need to bend every time they want to access them. The result of this adaptation was a success and made Haier’s refrigerator the best-selling model in India. Another product adapted to local needs is the three-door refrigerator for the Russian consumer, a population with a higher average height than in other parts of the world. In Africa, in response to frequent power outages, Haier developed a freezer that does not defrost for 100 hours.
Quality/Self-critical attitude that leads to constant improvement: Since Zhang Ruimin took a hammer and smashed the defective refrigerators, quality has become a central value of the company. In one of the early management meetings held with middle managers in September 1985, Zhang Ruimin set a clear goal for the organization: “to manufacture high-quality refrigerators and win the gold medal for quality in China.” Four years later, the goal was achieved. Among the actions that allowed Haier to win the coveted award was the training of people and the firm belief that the introduction of advanced technology is not enough to make high-quality products; it is necessary to have “high-quality people.”
“From the beginning, Haier focused its attention on people,” says one of the manifestos in the historical document exhibition room at the Qingdao headquarters. Therefore, in addition to acquiring machinery from Liebherr, Zhang sent more than 20 technicians to specialize in Germany. The result? With the new machinery and trained personnel, Haier’s factory speed and efficiency tripled between 1984 and 1987.
In 1988, just four years after its establishment, Haier won the first National Gold Quality Medal in the history of Chinese refrigerators, and Zhang Ruimin went to Beijing to receive the award. Upon his return, the staff eagerly awaited him for celebration, but instead, the CEO conducted a “critique session,” exposing deficient products and work to remind everyone to have a sense of humility and responsibility.
This anecdote is engraved in Haier’s cultural memory as a symbol of continuous improvement: high goals guide the effort, serving as the north that propels action, but once achieved, there is no resting on laurels. Instantly, new, higher, and more demanding goals emerge.
“There is a common feature in microenterprises, which is to achieve goals and go beyond those goals,” explains Wang Hongwei. Hailing from Mongolia, he joined Haier in 2001 and now oversees talent recruitment in Research and Development at Smart Home, leading a team of five people serving 5,000 employees (and 265 ME Owners). Additionally, he is responsible for hiring, training, performance evaluation, and career development for Air Conditioning, with a team of 12 people serving 1,650 employees (and 120 ME Owners). However, Wang Hongwei clarifies that, in reality, his teams support MEs by providing them with methodology, a database, and tools. The actual functions of hiring, training, and performance evaluation are carried out directly by the MEs.
In my research on corporate culture, I have found that the main drivers are its purpose, people-first values, soft skills, strategic alignment, brand & value proposition alignment, and talent participation & expectations. Hair’s values of entrepreneurial spirit, innovation& zero distance to the customer, and quality/self- critical attitude, foster a culture geared towards innovation and constant improvement which has become critical in today’s challenging and interconnected world. What’s more important, these values are ingrained in everyday behaviors and practices, they are reinforced through the historical lessons learned, and projected into the future.
The Engine of Successful Culture
In the previous section, we analyzed the three key dimensions of culture, assuming what it is. We can find countless definitions; my favorite is the one that states that “culture is everything that gives me a sense of purpose, passion, hope, a sense of community, self-esteem, trust, pride, commitment, happiness, and other positive moods.” Ultimately, culture is what ignites the heart.
Emotions and feelings play a key role in decisions and, ultimately, in results[9]. When people feel fear, nervousness, or unhappiness, they easily make mistakes, are defensive, and do not trust their colleagues. When the external environment is hostile and negative emotions prevail, our minds cannot focus. Positive emotions and feelings, such as joy, enthusiasm, pride, and confidence, have the opposite effect: they increase team cohesion, commitment to the company, dedication, and people’s energy.
Analyzing the predominant emotions and feelings in a company’s culture involves observing, detecting, and understanding the informal and formal processes that foster them, including foundational anecdotes and recurring rituals. These processes are varied and distinctive in each company. For example, Pixar stands out for processes that foster trust, such as BrainTrust meetings; Zappos, on the other hand, emphasizes joy through frequent celebrations.
The analysis of Haier’s culture reveals three prevalent emotions and feelings: pride, trust, and commitment to well-being, which are undoubtedly as crucial to the organization’s success as the strategic initiatives we saw in the previous points.
Pride: Pride solidifies the sense of purpose and belonging for individuals. Haier ensures that people take pride in being members of the organization by highlighting the qualities that make it unique and showcasing external recognition received since its founding. For instance, in the milestone exhibition hall in Qingdao, there are photographs and newspaper clippings from “Haier Street,” near the company’s U.S. factory, emphasizing it as “the only road in the United States named after a Chinese brand.” Another example is the prominent billboards in four of the world’s most expensive locations: Paris Avenue in the French capital, Times Square in New York, Ginza in Tokyo, and Victoria Harbour in Hong Kong, representing the pinnacle of its globalization and brand localization strategy.
Perhaps the proudest moment is the acquisition of a business unit from the iconic U.S. corporation, General Electric (GE), especially considering that GE had intended to acquire Haier a few years earlier. In 1992, General Electric Appliances proposed the acquisition of Haier, but the latter rejected the offer, realizing that GE intended to use Haier as a pawn for its development in China. In 2016, Haier completed the acquisition of GE Appliances. The anecdote reflects pride in the acquisition but concludes with a lesson in humility. After the purchase, GE executives asked President Zhang Ruimin, “How will Haier lead us after annexing us?” His response was, “I am not your leader. Our common leader is the user.” To conclude, he quoted a passage from the U.S. Declaration of Independence, emphasizing the idea that, like the declaration, RenDanHeYi allows everyone to develop their own value.
Another practice aimed at fostering a sense of belonging and continuous improvement is naming new tools after the employee who created them, such as “Qiming welding gun,” “Xiaoling wrench,” among others.
The pride felt by employees is evident during interviews and daily interactions. An example highlighting this sentiment was a statement by Sun Jiaze, a 25-year-old who graduated from McMaster University in Canada with a Bachelor in Business and Master in Economics, who is now a researcher at Haier in Qingdao. When touring the spacious reception hall of Haier’s central office, where large LED screens display faces of entrepreneurial employees successful in their areas, Sun exclaimed, “My dream is to be there someday.”
Trust: Communication has a significant impact on teamwork. It must be transparent and open to build trust. A practice at Haier that encourages idea exchange, setting aside egos and hierarchies, is the “Blue Army versus Red Army Battle.” Every six months, the company selects 20 topics related to the current organizational “headaches.” Teams of five to ten people are formed to argue for and against these headaches, with 40 people chosen as spectators. The debate rounds last for two months, during which participants learn to consider different perspectives and solve problems.
As an example of a debate and its outcome, Wang Hongwei explains that the goal was to turn uncertainty into a strategy and address a persistent issue in the Ecosystem Micro Communities (EMC) given a VUCA context. “In this case, the persistent problem or headache was the insufficient product competitiveness in terms of cost/quality, causing issues in the market positioning,” says Wang Hongwei.
The first step was to establish the topics (improving product competitiveness in terms of cost/quality) and outline tasks (the red army represents EMC solutions, and the blue army represents the user and the market). To achieve this, it was necessary to provide the blue group with elements that helped build critical thinking and practical capabilities.
The second phase was the debate or confrontation between both groups, focusing on how to avoid and reduce errors in important decisions (specifically in product, marketing, and competitive strategy solutions). For example, one aspect of the debate was how to reduce high costs preventing orders from being accepted outside China. This involved analyzing zero-cost models, benchmarking competitors (comparing nine main regional sales models, revealing up to a 14.3% difference with competitors), and seeking solutions for price reduction (such as changes in materials and increased collaboration with suppliers for innovation).
“As a result of this practice, we have unified goals throughout the process and reduced costs between August and October 2023, achieving the goal of foreign sales in those months. In addition to these short-term results, we have paved the way to meet medium and long-term product, market, and supply chain goals,” concludes Wang Hongwei.
Commitment to Well-being: For initiatives promoting the well-being and happiness of people to succeed, they must be supported by leadership. In Haier, Zhang Ruimin took the initial step with the famous act of taking out a loan to buy 2.5 kg of fish per employee for the Spring Festival celebration. This commitment continued when he defined the RenDanHeYi model as “centered on the value of people.”
The company’s current stance on this matter is summarized by CEO Zhou Yunjie when he says, “Haier cares about the well-being and happiness of employees. The sense of well-being and happiness changes over time. In this context, what have we done? First, we developed some scientific tools to measure and understand people’s sense of achievement and happiness. Based on this data, we have formulated many models to describe the happiness index. Furthermore, employee happiness comes from their feelings, so we have invited them to participate in the creation and measurement of the happiness index program and asked them to propose ideas to increase their sense of happiness. Last but not least, we have included the EMC ecosystem formed by our HR department and the culture department in the development of this program. The process is dynamic. Employee happiness is not a result; it is a process that is constantly perfected according to their changing needs.”
Haier’s participation in the creation and measurement of the People First Index has allowed it to scientifically detect the predominant feelings in the culture at any given moment. This enables the channeling of efforts to strengthen the most desirable behaviors, based on factors such as positive psychology, aiming to promote positive emotions. It acknowledges, as Yunjie pointed out, that this is a dynamic process that requires constant attention.[10]
As we move forward in the ecosystem era, team collaboration will become even more important. This includes teams that are geographically distant, work in different areas or have various specializations. In addition, the new generations have shifted their preferences and work habits. Now, they are prioritizing their well-being, taking care of the planet, and having a happy life. Talent retention has become critical in many countries. In this context, fostering a sense of belonging is key, and pride is the best emotion to do that. I was greatly surprised by the way Haier fosters pride, constantly building it in every detail, message and action. In addition this is further backed by trusting your teammates and leaders. The third piece in the emotion equation, commitment to well-being is a perfect match for the current worldwide necessity, particularly in young people. Of course that well-being and happiness are not easy to gauge. It is a challenging and ongoing process that still needs to be shaped and I look forward to seeing how this evolves in the future.
Next Steps
The future is becoming increasingly uncertain. However, some trends are clear. We are at the beginning of the Internet of Things era, and there is still a long way to go. Every day brings new challenges and technologies, such as AI, which promises to revolutionize all areas and permanently change many industries.
In this context, how will Haier continue to lead in technology? How will it maintain the commitment, pride, trust, and well-being of an interconnected workforce in increasingly complex and dispersed ecosystems? The questions are many, and there is no guarantee that solutions from the past will continue to work in the future.
Companies best positioned to face the upcoming challenges are those with a strong culture. Creating this culture takes time and consistency. It’s not enough to design processes and work methodologies; they must be integrated into day-to-day operations. Companies that achieve this can navigate calmly in turbulent waters. They make adjustments, adapt, incorporate new models, and continue their journey. They are in a state of constant observation and change. Haier knows; it has a 40 year history of continuous improvement.
Appendix: How Strategy & Culture Interrelate – Key Milestones
| Strategic Dimension | Cultural Dimension |
| 1985. Zhang Ruimin requests a loan to pay salaries | In the loan request, Zhang includes an additional amount to provide each employee with money to buy fish in preparation for the Spring Festival |
| Quality crisis. In January 1983, Shanghai Department Store No. 3 reported that none of the 22 washing machines bought from Haier worked properly. Later on, an excess of 6322 washing machines was detected in the inventory control. In 1987 Zhang introduced the Six Sigma methodology and declared the goal of “zero defect” production. | During a meeting with C-level managers in September 1985, Zhang Ruimin declared that the organization’s goal was to build high quality refrigerators and win the National Gold Medal for quality. In 1985, Zhang Ruimin gathered employees and smashed defective refrigerators with a hammer. |
| Zhang firmly believed that in order to build high quality products it was necessary to have “high quality people”. In 1984 he purchased a manufacturing line licensed from the renowned German refrigerator company Liebherr, a technology that allowed Haier to produce modern refrigerators with a four-star standard. The installation of Liebherr’s equipment and technology was accompanied by a rigorous commitment to quality. Zhang Ruimin introduced practices based on Six Sigma concepts and the goal of zero defects. 20 technicians are sent to Germany for further instruction and upskilling. | In 1988, Haier won the National Gold Medal for Quality and became the first refrigerator factory in China to earn this award. Zhang travelled to Beijing for the occasion. People expected a celebration on his return but, instead, he organized a meeting to expose defective work and products and remind everyone the importance of having a sense of humility, responsibility and a mindset of constant improvement. |
| In 1991, the Qingdao General Refrigerator Factory merged with the Qingdao Air Conditioning Factory and Qingdao Haier Group was established. It was renamed Haier Group in 1993. International expansion. Between 1995 and 1998, Haier acquired and activated 18 companies by its Haier culture, and expanded the product line to include other household appliances, offering everything from washing machines, stoves, and vacuum cleaners to televisions and video players. This way, Haier established itself as a home product brand and achieved operational synergies in manufacturing, acquisitions, and distribution. | Marketing campaigns are launched worldwide in other to promote the Haier brand in the world’s most expensive and admired spots (París in France, Times Square in the US, Ginza in Tokyo, and Victoria Harbour in Hong Kong). Haier gets press coverage for its international expansion and achievements, thus fostering the feeling of pride in its people. |
| In 1992, GE made a proposal to buy Haier Group. | In 1992, General Electric proposed the acquisition of Haier, but the latter rejected the offer, realizing that GE intended to use Haier as a pawn for its development in China. |
| Zhang Ruimin designs and implements RenDanYeHi. This methodology that originated in 2005 and evolved in the subsequent years. The hierarchical structure was replaced by small units called microenterprises (ME), and as a consequence of this change, 80,000 employees were organized into more than 4,000 MEs. The RenDanHeYi model fosters the entrepreneurial spirit. Each employee can propose a business idea and get funding. According to Haier, fostering the entrepreneurial spirit translates into tangible financial results. In 2014, the company created an incubation, investment, and acceleration platform for entrepreneurship, HCH Ventures, through which employees can propose business ideas and, if accepted, secure funding. The Haichuanghui platform has attracted more than 5,200 projects and incubated 8 listed companies, half of which are Haier and half are social. At the same time, more than 300 teams have received Series A investment. The incubation success rate is five times that of ordinary incubators. The other two cornerstones that get clearly proposed are innovation and zero distance to the users. | The deep organizational reform (often referred to “smashing the organization”) has eliminated 12,000 middle management positions since 2013. This drastic action to dismantle bureaucracy and transform completely into an open and networked platform drew attention in the global management arena, and management experts like Gary Hamel referred to it as “extremely difficult, almost a mission impossible”. “Each employee is his own CEO”. This message is communicated throughout the organization. People are encouraged to seek out new opportunities and look for job openings and carrer development in the company’s internal website. Communication has a significant impact on teamwork. It must be transparent and open to build trust. A practice at Haier that encourages idea exchange, setting aside egos and hierarchies, is the “Blue Army versus Red Army Battle.” Every six months, the company selects 20 topics related to the current organizational “headaches.” Teams of five to ten people are formed to argue for and against these headaches, with 40 people chosen as spectators. The debate rounds last for two months, during which participants learn to consider different perspectives and solve problems. Pride and the sense of belonging are strongly encouraged. An example is the practice of naming new tools after the employee who created them, such as “Qiming welding gun,” “Xiaoling wrench,” among others. |
| 2016. Haier acquires General Electric Appliances (GE Appliances) 2019. Haier acquires Candy in Europe and enters a new multibrand operation stage in the European market. | Promotes and communicates the GE Appliances acquisition with messages that excite the feelings of pride and belonging Some examples: “They wanted to buy us, and we finally bought them,” “When they proposed to buy us we were much smaller than GE Appliances; when we acquired them, Haier was three times the size of GE Appliances.” After the acquisition, in a meeting with Zhang Ruimin, GE Appliances directors asked how Haier would lead them after annexation. The CEO’s response was clear: “I am not your leader. Our common leader is the user.” Immediately after the purchase, GE Appliances began its transformation, and thanks to the implementation of RenDanHeYi, four years later its revenue has grown more than 1.8 times and its profit had multiplied over three times the pre-acquisition figures. |
[1] Data from: https://www.haier.com/ve/about-haier/haier-group/?spm=ve.home_pc.header_81966_20190530.1
[2] In February 1984, with the approval of the Light Industry Department of the People’s Republic of China, the Qingdao Trade Commission, and the Light Industry Office No. 2 of Qingdao, the Qingdao General Refrigerator Factory was established from the Domestic Electrical Appliances Factory.
[3] Until 1979, Chinese enterprises were state-owned (either directly owned by the state or collectively owned) and operated in a centrally planned economy. In that year, Deng Xiaoping, the leader of the People’s Republic of China, introduced a new economic philosophy, Socialism with Chinese Characteristics, stating that “socialism can also implement a market economy.” This allowed companies to integrate technical centers, factories, and distribution centers into an entity responsible for the entire value chain.
[4] Source: https://www.corporate-rebels.com/blog/next-influential-management-model-of-the-world
[5] Source: https://www.mckinsey.com/capabilities/people-and-organizational-performance/our-insights/shattering-the-status-quo-a-conversation-with-haiers-zhang-ruimin
[6] Source: https://www.haier.com/global/press-events/news/20160505_142587.shtml
[7] Interview done at the Prestigio Leadership Forum, September 2022.
[8] Interview with Zhang Ruimin carried out by Eduardo Braun during the Global Peter Drucker Forum, November 2021
[9] Emotions are psychophysiological reactions that occur spontaneously and automatically. Feelings are the interpretation we make of these emotions and can be regulated through our thoughts.
[10] The People First Index is based on the premise that we are at a crucial moment of shifting values and behaviors, to the extent that it represents a change of era, not just an era of change. Its purpose is to measure whether a culture prioritizes people and to what extent it does so. To achieve this, it relies on a methodology that scientifically correlates well-being and happiness indicators through a questionnaire covering five dimensions (vision, communication, decision-making, people, and culture).
