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Haier Group CEO Wins Best Practices Award
07-30 2015

Zhang Ruimin’s renowned leadership skills sparked global expansion and record growth

 

Zhang Ruimin, CEO of the Haier Group, the world’s number one Major Appliances brand for six consecutive years*, has been named the first 2015 recipient of the Best Practices CEO Award, presented by Best Practice Institute.

BPI, one of the world’s leading talent management associations, presents the award each year to the world’s top CEOs who have demonstrated a commitment to developing talent in innovative ways. Mr. Ruimin was selected for the Best Practices CEO Award from more than 500 nominees. Previous recipients include Phil Martens, CEO of Novelis, and Steve Reinemund, CEO of PepsiCo.

“Zhang Ruimin is exactly the kind of chief executive BPI’s CEO Award aims to recognise,” said Louis Carter, Founder and CEO of Best Practice Institute. “What Mr.  Ruimin did 30 years ago to rescue and revitalise his company was heroic. More importantly, Zhang Ruimin continues that pioneering spirit today, by leading the transformation of talent management in the Internet era.”

From dilapidated factory to global powerhouse

Haier Group, a global electronics manufacturer specialising in refrigerators, air conditioners, microwave-ovens, computers, televisions and mobile phones has about 70,000 employees worldwide with annual revenue of $32.6 billion and profit of $2.4 billion in 2014.

Zhang Ruimin became director of Haier’s predecessor company, Qingdao Refrigerator Factory, in 1984, when he was 35. The dilapidated factory was deeply in debt and on the verge of bankruptcy. With no money to pay employees, Ruimin had to turn to private lenders just to make payroll during his first months at the helm.

By simultaneously supporting but challenging employees and by continually adapting the company’s business model to keep up with changing times, Ruimin has led Haier to become the largest home appliance brand in the world. Sales revenue has increased by more than fourfold since 2000.

Zhang’s covenant with employees

In his first years as CEO, Zhang Ruimin made it a top priority to improve workers’ conditions: increasing salaries, providing transportation to and from work and enforcing standards that resulted in a better workplace, getting in return an improvement in work quality. Ruimin first attracted attention beyond Qingdao in 1985, when he had 76 substandard refrigerators hauled to the factory yard.  He handed the workers who had made them sledgehammers and told them to destroy the shoddy products. The dramatic episode drove home the message that Haier was now a company where quality mattered.

Management in the Internet era

Thirty years later, Zhang Ruimin has drawn attention from around the world, not only for his remarkable success at Haier but for his innovative management concepts.  In a speech last year, he briefly reviewed 200 years of modern management principles, concluding, “With the arrival of the Internet era, I think all these theories have been overturned.”

At Haier, Zhang Ruimin has introduced the “Individual-Goal Combination Win-Win Model” which aligns employee goals with consumer needs. When each individual worker is driven by the experiences of end users, that combination is a win-win. Each employee is expected to know who the end users are and to seek their input in everything they do.

The traditional business process, Zhang Ruimin says, consists of a series of steps, from planning to distribution, most of which are insulated from end users. To give his employees more direct contact with their customers, Haier team members work in small, self-contained groups, as independent ventures. Each team conducts its own strategising, hiring, procurement and production. Each team  is  also  responsible  for  its  own  profit  and  loss  and  is paid accordingly.  Forbes described it as “small, self-managed, contract-based teams, with no hierarchy and no bosses.”

BPI’s Carter observed, “The best talent management leaders put their faith in the creativity of their team members and then turn them loose. Nobody has done that so fearlessly and on such a broad scale as Zhang Ruimin.”

 

*with a 10.2% retail volume share (source: Euromonitor International Limited, based on 2014 data)

 

 

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