We live and work in an age when the need for corporate reinvention is treated almost as a given. CEOs often talk about reducing hierarchy and increasing agility, flexibility, and connectedness to the market, and virtually every large company is “transforming for digital.” Yet Qingdao, China-based Haier Group Corp., a major producer of consumer electronics and major appliances, has taken the idea further than most companies.
Under chairman and CEO Zhang Ruimin, Haier has transformed the administrative structure of
the company, eliminating 10,000 management jobs that once held it together. Ruimin is attempting to rebuild the enterprise as a network of entrepreneurial ventures, all focused on developing products
and services for the “smart home,” the internet of things (IoT)-based concept of a fully connected and networked household.
Haier calls its management model Rendanheyi, a term that refers to connecting employees with users, and sees it as a “win-win” model for reducing the distance between the organization and its end users to zero and moving as close as possible to a state of co-creation with the customer.
In an interview with MIT Sloan Management Review editor in chief Paul Michelman, Ruimin discussed Haier’s latest reinvention in person through a translator and subsequently via email. He spoke about a number of things, including platforms, incentive compensation, and how the changes have affected employees.
On the Enterprise as a Platform: “By eradicating our middle management layer — and laying off more than 10,000 middle-level managers — we have destroyed the original hierarchical structure. So we are merely a platform for entrepreneurs. All the businesses have to succeed as innovative