Case Analysis:Managing performance at Haier (A)

Submitted by, (Group D1, Section 1) Adesh P Nayak Arjitha Sindhuri Gourish Bellad Shilka Agarwal Tony Joseph F

Problem Statement:How can CEO Zhang Rhumin and Haier Group, develop and implement an effective Performance Management System keeping in mind the firms international expansion plans and the socio-cultural implications of the new system.

Core issues: Aggressive push towards international expansion Develop and implement an effective Performance Management System

Peripheral Issues: Influence of Chinese political atmosphere and ideologies in the working of the organization Aspects of cultural differences and multi-cultured work atmosphere when it comes to international expansion Fluctuating economic conditions in the industry and RMB exchange rates. Professionally undereducated SOE managersExternal Analysis:FactorsFactors as in the caseImpact

Political Influence of political atmosphere and governments in the working of the organization Influence of hierarchically structured Confucian/ traditional Chinese principles Highly paternalistic political setupPolitical atmosphere plays a huge role in the working and HR aspects of Haier in the Chinese as well as global context. The impact of democratic and communist ideologies need to be tackled as and when experienced during expansion.

Economic Monthly measures used to track individual performances Fluctuations in RMB exchange rates Bargaining power of suppliers and buyers Fluctuating economic conditions in the industry

Organizational as well as individual level economic performances are evaluated. Perform or pay method of evaluation for each manager. Staff right sizing was done as a result of the economic vulnerability and performance. RMB and economic vulnerability considerably impacts the overall performance of the firm.

Socio-Cultural Multi-cultured work environment Aspects of cultural differences when it comes to international expansion Hierarchy and interpersonal networks Frequent and transparent performance appraisals which were against traditional Chinese culture Professionally undereducated SOE managers Made use of an integrated Japanese management philosophy, American innovation and aspects of conventional Chinese culture

Expansion of Haier into the global market would mean adapting to various socio-cultural differences of employees and location. Cultural differences of employees in foreign countries are based on: Power differences Uncertainty avoidance Masculinity/ Femininity Individualism/ Collectivism

Technological Technological advancement in R&D Technology for global communication and expansion Use of technology to produce quality defect less productsState-of-the-art technology for research, and dedicated technically proficient staff made the difference in the industry. Usage of technology like Video Conferencing, web chat, email, etc. will allow better and faster coordination and communication between regional offices and global HQ.

Legal Labour, wage laws and policies in different countries Legal recourse and indemnity if the personnel system failsProper employee legal aspects should be covered in order to prevent unnecessary lawsuits. Legal laws vary considerably in different countries, hence caution is to be taken.

Environmental Environmental Testing Laboratory Strong pressure from external work environmentNeed to satisfy its customers in the design department by meeting deadlines and producing excellent data and useful test results. Pressure was there from external work environment to refine and improve products.

Internal AnalysisHaiers perspective SWOT:

STRENGTH Worlds 6th largest maker of large kitchen appliances Ground breaking and unique performance management philosophies Iconic brand name, hence brand visibility Dedicated to producing high quality products Formal training programs, employee engagement and job rotation Daily and regular team briefings Employees are motivated to excel OEC management practice Strong marketing initiatives Strong and innovative HRM practisesWEAKNESS Relentless pressure to perform and improve Rare passive job performances of employees Perform or pay system may not be that likeable by employees

OPPORTUNITIES Among the first Chinese manufacturers to have established manufacturing bases overseas International expansion opportunities Globalization Product innovation and diversification

THREAT Competition from other established firms Fluctuations in RMB exchange rates Bargaining power of suppliers and buyers Fluctuating economic conditions in the industry Guanxi and speed-absorbers

SOE Managers perspective SWOT:

STRENGTH Highly hierarchically structured Result focused Information conduits Individually strongWEAKNESS Not decision makers Risk and transparency averse Paternalistic and coalitional Inflexible

OPPORTUNITIES Huge opportunities for market growthTHREAT Professionally undereducated Constrained by unwieldy economic system

Factors: Globalization and International expansion Technological advancement in R&D Unique performance management system Product diversification Policy of firing under-performers with perform or pay approach Training and development with job rotation for employees Product innovation to create niche market Strong marketing initiatives Strong and innovative HRM practises

Key Factors: Unique performance management system- The unique system followed by Haier group assures that employees get necessary training and development. The effective OEC system makes sure that employees are focused on producing quality standard products. Globalization and international expansion- Being one among the first Chinese firms to setup overseas production bases, services and sales facilities and strategic alliances creates huge competitive advantage. Availability of Haier products in the global market assures brand visibility. Product diversification and innovation to create niche market- The plethora of diversified and innovative household products has helped the organization to carve a niche market. Household products like refrigerators, microwaves air conditioners, etc. are highly demanded in Asian countries. Had pursued a strategy of creating then dominating market niche. Strong marketing initiatives- The strive to produce defect free standard products leads to the need of innovative and in depth marketing initiatives. Haier is known to invest heavily in R&D and product marketing initiatives. Strong and innovative HRM practises- 80:20 principle, racetrack model, individual tracking of profit and loss are few of the HRM practises implemented in Haier. The firm gave due importance to job rotation and enrichment. Employee motivation was also a huge factor for the organization.

Theory based factors dealing with performance management: Herzbergs Motivation hygiene theory Expectancy theory Adams Equity theory

ConstraintsConstraint NoWhat is the constraint?How does it affect your options?

1Cost of implementationThe cost of developing and implementing a PMS is equally important keeping in mind the economic vulnerability and ideology of the management. There needs to be assured ROI if the new system is costly.

2Cultural and political diversity A robust Multinational performance management system can only be developed if the employee cultural and political-geographic aspects are taken into consideration.

3Professionally undereducated SOE managersLack of professionally skilled internal employees to send to foreign offices. Need for external recruitment

Options & Evaluation:Options 1Follow a standardized approach and apply the existing unique performance management system globally

ProsCons

Already effective in the Chinese context.Employees are pushed to excel in individual performance.Need to just implement the same in other countries, hence no implementation costs This system may not be effective in other socio-culturally and economically different regions.May not be compatible to employees globally.May lead to unwanted legal actions

Options 2Develop an unique performance management system for each geographic region

Pros:Compatible with that locations employee requirementsCan prevent unwanted legal actions against the companyCons:High cost of implementation Need for intensive market research

Options 3 Develop a Multinational performance management system taking into account the positives of the existing unique PMS and the cultural differences of prospective expansion sites.

Pros:Standardized MPMS systemTakes into account the cultural diversitiesIn the long run will provide a solid ROI

Cons:High cost of implementation Need for intensive market research

RecommendationSelected Option No: 3Reason 1

Haier stands to get a MPMS system which is globally acceptable and provides ROI in the long run.

Reason 2

By taking into consideration the positives of the present unique system and the cultural research studies results future unwanted legal and labor issues can be reduced.

Reason 3

A Multinational performance management system will definitely improve the employee talent pool as well as internal strive for product quality and manufacturing efficiency.

Outline Plan:The following outline can be followed:Organizations perspectiveActionResponsibilityTarget Duration/timePriority

Come up with a core team to develop and implement a Multinational performance management systemZhang Rhumin, Mianmian Yang and other top executivesAs soon as possibleHigh

Market research for finding out suitable geographic locations for international expansionNewly formed core project teamWithin 1-2 weeks High

Market research for finding out suitable geographic locations for international expansion and cultural diversitiesMarketing dept., strategic team and HR dept.Within 1-2 month High-moderate

Improve existing performance management system Zhang Rhumin and HR dept. OngoingHigh-moderate

Initiate 1st phase of gradual international expansion Zhang Rhumin, Mianmian Yang and other top executivesWithin 6-7 months High

Review action plan, management decisions and bench mark with the industry bestZhang Rhumin, Mianmian Yang and other top executives 1 yearModerate