Managing Performance at Haier

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Concluding, there are things we can learn from Haier. Start with a clear vision of where we want our business to be: the organization capabilities required supporting our strategy; the behaviors we want people to exhibit; and the kind of HR practices we have to put in place in order to drive these behaviors. Then, we need to find differentiation. Competitive advantage does not come from copying others. HR practices must be differentiates in order to stay ahead of competitors (it is a question of HR leadership).

- What the potential pitfalls of Haier’s system?

- The evaluation process ignores other factors, such as motivational issues (career ambition, goals, satisfaction) and external constraints (problems in general work environment).

- Soft goals: relationships and trait based skills are not considered: effort, attitudes, loyalty, leadership and team work are marginally considered in the evaluation process

- Contextual goals: ignores situational factors: unhealthy competitiveness; unmet intrinsic need – money is not the only motivator; discourange collaboration and teamwork; harm employee morale

- Haier applied a more aggressive approach to get work done. With equity theory China’s cultural values were not being considered, which was not acknowledged by Haier.

- “Saving face” – X – Haier’s performance management contradicts this value: ranking of managers is openly displayed; open and transparent evaluation; poor performances lose face; quantitative approach to evaluation; less emphasis on informal relation

- Urgency was done in transforming the change as these changes were good but backtracking and long term perspective has to be considered first.

- No easy adoption as the previous system was in place for the past 18y.

- 80:20 rule was a clear cut indication of more pressure from managers towards employees and strictness and more vigilance.

- Race track model could induce sense of insecurity in the organization. Employees could not feel safe on their job as the chances of going up or down were high.

- incentive – related to target achievement – could add as an asset but the employee retention was not taken into consideration and ethical issue could come into consideration when going into unit wise target reached.

- The footprint method could bring issues as the person may feel insulted and end up by asking a layoff.

- Can Haier’s performance system work outside China?

- Think globally, act locally. Localization does no tmean that everything should be localized; a more appropriate explanation is that is endows a company to be more flexible in its HR management. A global company should focus on a combination of global integration and local adaptation, allowing its employees to think globally and act locally. You don’t have to choose between globalization and localization, but the optimal balance between the two. Any business is an organism; it needs to develop a global brand to ensure its organization characters in global expansion. However, a global brand itslf is never adequate for a multinational – it must see to it that employees in different locations convey to the public the same corporate image and have the ability to adapt to the corporate strategy, and that its resources and knowledge are shared and transferred effectively among its divisions. Operations strategy must be global but HR strategies must be local. People hired should have values consistent with the management policy and aligned with business strategy. To be effective in different geographies, the following factors should be taken into consideration:

- Differences in cultural dimension and change the reward system accordingly

- The nature of the industry/business

- Firm’s specific corporate culture

- Systems based on fairness/transparency may be well received despire cultural differences.

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