Values & Philosophy
The story of destroying defective refrigerators
Case study:
76 defective refrigerators were destroyed.
In 1985, a customer reported poor quality of some Haier’s refrigerators. CEO Zhang Ruimin checked up the warehouse immediately and it turned out that 76 refrigerators were defective. What should we do? Some said these refrigerators might be sold to the employees at a lower price. While many remained undecided, Zhang Ruimin made an “unreasonable” decision that these refrigerators should be destroyed in public by the workers who made them.
On September 28, 1999, Zhang Ruimin in his address to Fortune Forum held in Shanghai concluded that the hammer has performed great merit for Haier’s success in the world market.
The move was so important to enterprise reform in China that it’s just like the first assembly line installed by Ford in 1913.
The toughest challenge in corporate management is to take decisive actions to adapt the way of thinking to the environment when exposed to a potential risk. When there was a great demand for even products of inferior quality, Haier insisted on its brand strategy based on quality. Haier believed that there is no way out for defective products other than elimination. That’s why at Haier a defective item is no but a reject. The total quality management system of Haier focuses on the idea that “quality products are made by qualified people” instead of mathematical statistics. Starting with a conversion of employees’ concept of quality, Haier has stayed on the right track of brand marketing.