Haier group is one of the largest multinational companies across the globe that deals with home appliances, as well as consumer electronics. The company has a very distinct mode of management. This is because it employs unique aspects of management that are not practiced by other companies in China. Performance management refers to certain actions that are performed by organizations so as to make sure that the goals are constantly achieved efficiently, as well as effectually.
One of the most distinctive features of performance management that the giant corporate body Haier depicts is the guiding principle that is in place in its management system, which is OEC. This stands for overall, every control and clear. The term ‘overall’ implies that all performance dimensions have to be adhered to by the employees. ‘Every’ refers to everyone, every day, and everything. ‘Control and clear’ refers to Haier’s end-of-work procedure each day. Conversely, the element of accountability is not distributed equally. Haier uses a range of performance management and motivational tools. The conglomerate has an 80:20 principle whereby the supervisors are responsible for 80 percent of the outcomes, whether excellent or terrible, while the juniors stand-in for the remaining 20 percent.
Another significant feature of Haier’s HR system is a close connection between performance measurements and compensation. In addition, each manager’s production statistics, as well as performances, are evaluated on a weekly basis. The formula for reviewing employees involves both achieving quantifiable objectives and the degree of innovation and process improvement. The end of the month brings forth a grading criterion for the managers to analyze. This works out from the grade A-C. The outcomes are announced to the managers at a meeting for middle to upper-level managers. This is quite unique since most other companies do their work while shrouding in secrecy.
The strategy that is used by Haier is quite tricky to implement. This is because they have to look for ways to try and avoid conflicts among their employees. These conflicts may arise from the fact that the people strategy is well balanced for them to try to give everyone a chance to improve, and even if you excel, you must work hard to defend your title. The results are open to all staff, thus making everybody work harder as nobody wants to be at the bottom. With the ratings to prominently displayed in the cafeteria, all the employees know exactly who is on the top and who is dragging their feet. However, since their exclusive mode of people’s strategy seems to be working just fine for them, Haier may endeavor to elaborate on a few more issues that may hamper the progression of the moderately newer employees.
What is most impressive about the company is the way it empowers employees via an emphasis on recognizing and rewarding successes, as well as creativity. If an employee develops or improves a product, or comes up with a new procedure, the innovation carries the employee’s name, and a notice to this effect is outstandingly displayed. The company gives each employee a “P&L book,” which is updated every day and gives a detailed financial outcome of the employee’s efforts. In Haier’s language, employees do not receive salaries but their share of profits. This only makes everybody feel they own the company, thus working harder to make more profit.
However, one of the less moving points is the idea of exposing the manager’s performance to the juniors, as they might not respect a poor performer. Publishing the demotions also affects a concerned manager. The idea of having a “race” is also not too appealing since it may cause some bad blood between the employees and ultimately hamper the company’s trudge towards attaining its goals.
The organization succeeds because it uses the procedure for quite a long period. Haier’s 80:20 principle gives the leaders a chance to work even harder, making things easier for them do not depend on juniors who might mess. Everybody wants to grow so as they all have to perform well, knowing that there is no permanent promotion. In keeping with this philosophy, every employee in the Haier Group is subject to frequent and transparent performance appraisals. This is against the traditional Chinese culture in which “face” is extremely important.
All employees are offered a profit and loss book, which enables them to realize profits or losses on a daily basis. This motivates one to work hard, and also everybody feels like a shareholder since they do not receive salaries but their share of profits.
The aspect of performance appraisals should be emulated by companies overseas as Haier has a transparent and fair system. The promotions are given on merit, and if you perform poorly, the outcome is normally dismissal. The other thing is how the salaries are computed from the profit and losses that one makes daily, thus all employees feel like actual shareholders. Keeping that in mind, they will work hard for the enhancement of the company.
The criteria for exposing the performance rankings can be demotivating to the ones who performe miserably. The juniors, as well as the superiors, will not respect a poor performer. They need to be role models. The publishing of the demotions in the internal newspaper is also not so fair. The aspect of racing may also be misconstrued into something else in other countries. Evidently, there are different ways how to manage expatriates from the parent country (Evans, Pucik & Bjorkman, 2009). It may cause many problems among individuals.
Reference
Evans, P., Pucik, V., & Bjorkman, I. (2009). The global challenge: International human resource management. New York, NY: McGraw Hill.