The Radical Transformation

of Haier
Exploring Haier in the Hard and Soft model of
change. Were there any Problems ?

Presented by:
Dharani Sridharan
Heena Mehra
Jane Cristel
Sagar Chhadva
Yashodhara Rajaraman
Presentation Outline
Haier Situational Analysis:

- Problem Analysis
- TROPICS Test: Analysis of Change
environment
Problem Analysis: Haier (A) China & (B) US
 TROPICS: Analysis of Change Situation
TROPICS Hard Soft
Time scales Medium to long timescale

Resources Clarity in identifying resources such as –

Technology – (R & D, Product innovation),
Manpower – (Better productivity, performance
management system), Capital (Joint ventures
foreign players, Market expansion (international
technology alliance, market penetration)

Objectives Clear & Quantifiable Objectives – Quality, Cost &

Output
Perceptions Consensus – in terms of problem and solution In Case of US Haier case
differing views but not
conflicting

Interest Limited and well define

Control Control within the management

Source Originates Internally

Source: Paton and McCalman (2000)

 Locating Haier - Change Spectrum

Soft/com
High plex
Interdependencies

Flexi/grey
Medium
Hard/mechanistic
Low

Complexity and variability of the change environment

 Soft Model Of Change

• Planned Change Effort

• Total system
• Behavioural Science intervenes with the Strategy and
Technological implementation
• Critical Aspects : Change Agent and Action Research

 Basic Assumptions of OD Model Of Change

Ongoing
Total long term
Humanistic Organization
System
Value Approach Planned
Open relationships System

Climate for
Change

OD
Change Attitudes Use Support
Behavioral by Top
(Behavior) Science Management Change
agents
Action research
Experimental
learning techniques

Emphasis on
Company Goals
Groups/
Decision Making Teams Interdependence
Problem Solving
Group processes

Underlying principles in the OD Change environment

Source :Fleming and Senior, 2010
 Mapping ‘Underlying principles in the OD Change environment’ in HAIER

HIGH LOW

 Quantifiable performance indicators set at all level of organisation

 Decision Making & problem Solving – immediate & Direct
GOALS

Exploitative authoritative (fear & threat to control employees) & Power dist


BEHAVIOURAL SCIENCE Lack of Action Research



Change process team effort was absent

EMPHASIS ON GROUPS/ TEAMS Singularly / Independently managed.

SUPPORT BY TOP MANAGEMENT Supported by Top Management

 Horse Racing System

VALUE SYSTEM  Relationship is compartmentalized &
Hierarchical

TOTAL ORGANISATION SYSTEM APPROACH  Quick fix & Crisis control

 Change Short term perspective

Participative Management Top Down Management

 The OD Model for Change

Lot of time spent in diagnosing situation in consultation with stakeholders to arrive a

pleted no new change initiatives introduced nor revisited

PRESENT STATE
(1a) Diagnose FUTURE STATE
current situation (1b) Develop a
vision for change

(5) Assess and CHA No continuous feedback nor revisit of stages

reinforce change NGE
AGE
NT
(2) Gain
(4) commitment
Implement to the vision
the change
(3)
Develop an Source :Fleming and Senior, 2010
action plan

model is linear - single loop (Argyris & Schon 1996) and adaptive. Neither iterative loop nor generati
(China) & B (US ) Change processes are goal oriented which indicates HSMC

HAIER DOES NOT FIT OD MODEL – DID NOT FOLLOW SSMC

 Haier: Hard Model Of change?

HSMC follows three linear stages of change process



Source :Fleming and Senior, 2010

Phase 1 : Description
Description 1 Situation summary TROPICS showed hard complexity
Multi-cause diagram
Socialist enterprise with bureaucratic functioning

Substandard products

Bankruptcy

2 Identify objectives Profit making venture

and constraints Improve quality


 Increase profit
 Constraints- external
Based on costs, market,quality
sales targets, late entrants, no core
standards, technology
performance targets and
3 Identify 

performance measuresmarket growth.

 Stage 1: Situation Summary

Diagnosing HAIER’s Situation- Multi Cause Diagram

Substandard products Poor technology

Inefficient bureaucratic
control

No stringent quality control

No proper PMS

Lack customer orientation

Lack accountability
Debt ridden

High inventory/
production cost
 Stage 2: Identifying Objectives
 HAIER’s Objectives Tree
Profit Making Venture

Improve quality Increase profit

Improve Customer needs Qualit y control Decrease Market growth Improve

Technology production cost accountability
Objectives
Improve quality Increase profit

Technology Customer needs Production cost Market growth Accountability

Constraints

No core technology Inertia among employeesExternal market competition Late entrants

 Stage 3 :Performance measures
Objectives Measures
Improve quality Quality control, quality standards,
performance target per person
Improve profit Production cost per person, cost control,
volume/sales target per person

Technology Quality standard

Customer needs Complaints, market survey
Quality control Control measures, performance targets
per person
Decrease production cost Production cost per person

Market growth Sales target

Improve accountability Performance target, cost per person

 Phase 2 : Options
Options 4 Generate options International alliances, JVs, Product diversification, innovation, new


markets, PMS.
5 Edit options and  Performance management system
detail selected options  OEC
 80:20 principle
 Individual P/L
 Deposit bank
 appraisal system

6 Evaluate options Quantifiable targets to be achieved in terms of performance targets,



against measures quality control measure, quality standards, P/L , cost control measures
etc.
 Stage 4 -5: Generating Options
 HAIER’s Objectives Tree
Profit Making Venture

Improve quality Increase profit

Improve Customer needs Qualit y control Decrease Market growth Improve

Technology production cost accountability

Options Options Options Options Options Options

International Internal/external OEC product 80:20
alliances customer OEC Individual P/L diversification principle
 JVs orientation 3 Es Deposit book
New markets
product innovation 10:10
T&D (niche market)
Customer culture
in the company
 Stage 6 : Evaluation matrix
Options
Objectives/measure JVs Internal/external OEC PMS
customer orientation

Improve High quality standard High standard High quality standard High quality standard
technology/quality
standard

Customer Low complaints Low customer Low complaints Low complaints

needs/complaints complaints

Quality control/control High quality control High quality control High quality control High quality control
measures

Decrease cost of Low production cost Indirect effect Low production cost Low production cost
production/low cost

Market growth/sales High sales Indirect effect Medium effect High sales
target
Accountability/performHigh accountability High accountability High accountability High accountability
ance target
Phase 3 : Implementation
Implementation 7 Develop The above options were chosen and implementation strategies adopted.


implementation
strategies

8 Carry out the The above mentioned options were carried out.


planned changes
 HAIER-Change Model

HSMC Haier
Consensus on the problem No opposition to the problem in the ailing
company. Facilitated by Chinese culture.

Quantitative criteria to test objectives and Use of quantifiable performance targets,

options for change quality standards, sales targets, quality and
cost control measures.

Simple system prevails It is a simple system- emphasis on quality

and customer needs.

Unitarist ideology Largely unitarist in China- shared belief

among the senior management.

HAIER CLEARLY ADOPTED HARD MODEL OF CHANGE

 Were there any Problems?
Political-Legal
Socio Cultural Influences
Influences

Management
Focus Of Strategy Culture Focus Of
Hard Models Goals Soft Models
Of Change
Structure HAIER Politics Of Change

Technology Leadership
Operations
Internal Environment

Technological Influences External Environment Economic Influences

Cultural

Country Power Individualism Masculinity Uncertainty Long-term

Distance Avoidance Orientation

China High Low Moderate Moderate High

US Low High High Low Low

Haier High Low High High High

Source : Hofsede , 1993

Leadership
Fine Incremental Modular Corporate
Tuning Adjustment Transformation Transformation

Collaborative
Type 1 Type 2
Participative Charismatic Transformation
Consultative

Directive
Type 3 Type 4
Forced Evolution Dictatorial Transformation
Coercive

Source : Dunphy and Stace, 1993

 POLITICS
HIGH

Potential Problems Definite Problems

KEEP SATISFIED ATTEMPT TO
COLLABORATE
Power
to Block
Change

Few Problems Potential Problems

DO NOTHING KEEP INFORMED

LOW
LOW HIGH
Motivation to Block Change

Source :Fleming and Senior, 2010

 Force Field Analysis
Driving Forces Restraining Forces

Financial Condition

Change :
To make it a profitable organization Culture
omestic Market Competition
Leadership
Were they strong enough to oppose th
Power and Politics

Customer Dissatisfaction

Source : Lewin, 1951

Despite…..
• HAIER is a Profit Making Organization with its Net
Profit Growth staying at 47% as on 2001
• CEO Zhang Ruimin is an acknowledged Global
Business Leader
• HSMC achieved Corporate Transformation!

QUESTIONS???