November 13, 2012
A few months ago the editors of Fortune asked me to create and share my executive dream team, as part of their annual fall feature on the world’s best business leaders. My team included people you might expect, like Tim Cook at Apple, Mark Loughridge at IBM, and Sheryl Sandberg at Facebook. Somewhat less expected was my choice for head of strategy, Zhang Ruimin, the CEO and Chairman of Haier, the Chinese consumer electronics and white goods company.
I recently visited Zhang Ruimin at his corporate headquarters in Qingdao. I have long admired him for his advanced management thinking, and his simply incredible history of results. I was eager to meet him to explore his thinking on the right direction for business and management theory and practice.
Haier is one of the great brand stories of the past 28 years. In 1984, Zhang Ruimin became director of the Qingdao Refrigerator Company, which evolved into the Haier Group. In the early eighties, Qingdao Refrigerator was in deep debt, made only about 10,000 refrigerators a year, and had deep, systemic quality issues. In one employee meeting that has now become company lore, Zhang Ruimin took a sledge hammer to 76 refrigerators that did not meet quality standards.
Today, Haier is the largest global refrigerator manufacturer, and has branched into a wide array of white goods. Their annual sales are roughly $24 billion, with 80,000 employees worldwide, and a reputation for innovation and quality. Zhang Ruimin has led Haier for nearly 30 years, inspiring this most remarkable brand story.
Here is what I learned from my intimate discussion with Zhang Ruimin:
–The future of organization design will be more self-managed. Mr. Ruimin is a student of organization theory and design (his first question to me was about P&G’s approach to open innovation), and he has been deeply influenced by Jeremy Rifkin’s “The Third Industrial Revolution.” We talked about how the internet has affected how we work, how lateral processes and distributed teams are outperforming hierarchal organizations, and about the importance of being close to the customer all the time.
Haier is experimenting with small, self-managed, contract-based teams, with no hierarchy and no bosses. They are inspired by Morning Star, a U.S. tomato-processing company that has been practicing these principles for years. I loved a quote from Mr. Ruimin during our chat, “It is important to keep twirling the pyramid all the time, because it is more important employees listen to the market and not the boss.”
–The power of tapping into the deeper thoughts and feelings of employees to build your culture. I have recently written a book, “Grow,” about how higher brand ideals drive growth by engaging and inspiring employees and customers differently. The ideas in my book resonated with Zhang Ruimin and his leadership (they translated my book into Chinese months before I launched the book in China). He shared a book with me that Haier employees had created, which brings the Haier culture to life through cartoons and quotes by a variety of employees. This book, simply called “Haier’s Pictures and Words,” was exclusively created by Chinese employees, but the concept is now spreading to other countries. Here are a few of my favorite quotes in it:
“Corporate culture is like a pot of strong tea, the more you taste it, the better it tastes, and the aftertaste lingers.” By Wang Yong
“The nature of innovation is to be creative in breaking something.” By Xiao Huang
“Brand is upheld by user’s heart.” By Huang Fei
“If you do not care about the users, the users do not care about you.” By Yang Honghui
–How storytelling can keep your heritage relevant and motivational. The Haier heritage center is about as good as it gets. As a new employee or visitor, you walk through the history of the company as a story, experiencing the remarkable history in a visceral and human way. At the end of the experience, there is a room for sitting and reflection, so employees can think about the implications of their heritage on them as leaders.