Haier Case Analysis

CASE ANALYSIS Managing Performance at Haier

-Group W2 Arun Debayan Harshita Satish Prathik

Problem Statement: How to develop and implement an effective performance management system in Haier at its international manufacturing bases inorder to match or surpass the success it achieved in China? PESTC Analysis Political and legal 

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Contract employees formed majority of the workforce in Chinese Haier Plants. The same cannot be followed in other countries as the laws are favourable towards majority of workforce being permanent employees. 2001-2005 was period of rapid economic development in most of the economies like India, US and Europe. Both US and India are favourable towards FDI. Per capita purchasing power of Indians increased immensely because of rapid urbanization and economic development.

Economic 

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Because of globalisation, companies have expanded their offices and employees across the globe. World has opened for the trade and commerce and opportunities are enhanced. Companies are exploiting resources available across the geographies. Dynamics in terms of volume of sales, selling speed, market share and business development has changed. Per capita purchasing power of Indians increased drastically due to rapid urbanization and economic development.

Technological 

There was tremendous development in home appliance technology especially in Germany. Also, Haier was already importing technology from Germany for production.

Socio-cultural  

The culture and values in Chinese society lays importance on politeness and demonstration of friendship. People are generally reserved, gentle and friendly. China has been making emphasis on relationships based on trust. The main features of Chinese culture are collectivism, power-distance and long-term orientation.

Internal Analysis- SWOT

SWOT analysis of Haier Strengths:        

High emphasis on quality High emphasis on human management as a means of competitive advantage Unique performance management system Source of national pride 86 different products with 1300 specifications High commitment on innovation, quality and creativity International technological alliances and joint ventures High performance work environment

Weakness:  

Highly individualistic work environment and difficulty in hiring managers as they may not be aligned or willing to accept the working scheme at Haier System being followed in China cannot be adapted globally and it will be difficult to remain in a country that encourages diverse workforce.

Opportunities:  

Increasing demand for kitchen appliances Niche target segment and advantage in global market

Threats:   

High competition Low quality Low price image

SWOT analysis of Performance management system at Haier-

Strengths

Continuous evaluation of employees.

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Accountability and transparency in the performance evaluation measures.

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Culture of grooming and nurturing employees.

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Emphasis on continuous learning and talent development.

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80:20 rules that keeps the managers on their toes and thus, ensure productivity.

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Culture of collaboration promoted among the employees.

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Employees were motivated to share best practices among the team and across the organization.

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Stimulation for the employees to continuously increase their performance.

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Every employee was considered integral to the business performance.

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Emphasis on each employee to deliver its best as they were monitored and evaluated among the peers.

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Employees with high performance and diligence were appreciated by benchmarking them against the other employees.

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System of rewarding and recognizing skilled employees and, employees who continuously exceeded the targets.

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Measures were instituted to ensure employees improve their mistakes and excel in future.

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System of Overall, Every, Control and Clearance which ensured employee efficiency and productivity.

Weakness

High performance work environment led to burnout among the employees.

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Daily targets that forced employees to excel everyday and hence increase stress.

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System of Deposit book which recorded employee productivity and, thus employee were required to pay if they accumulate negative balance.

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Employees were demoted if they don’t meet their targets and thus it may lead to pressure and stress.

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Culture of racetrack among employees which may lead to employee stress.

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Overlap of HPWS and Flexible labour management policies.

Opportunities-

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Efficient and effective Performance management (PM) system available to increase employee performance.

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Analysis the PM system of companies having high work culture

Threats

Increasing attrition of skilled employees due to increase in competition

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Problem of alignment with different work culture in different countries

FACTORSHaier practised a very unique performance management system and the following factors are affecting the performance management system1. Accountability at all levels (especially managerial) 2. Excessive internal competition 3. Regular performance appraisal 4. Monetary incentive to do better job 5. Use of colored footprints and boards to manage performance and motivate employees 6. Job rotation to increase performance Analysis of these factors using OB conceptsMaslow’s Need Hierarchy Theory states that the lower level needs should be satisfied before higher level needs are addressed to. In this case needs of belongingness and self esteem needs are not being addressed by the performance management system. The use of colored footprints to manage performance and monetary rewards will motivate employees. There will be transfer of knowledge sharing among employees and under performers will be influenced by good performers. However, low performers might feel

humiliated when asked to give the reasons in public. Thus, more emphasis on extrinsic motivation should be given by giving monetary reward and penalties as compared to intrinsic motivation. Herzberg’s Two Factor Theory states that presence of hygiene factors need not cause satisfaction but absence of these definitely results in dissatisfaction among the employees. In this case regular appraisal and lack of job security can lead to their migration to other jobs or companies.

Alternatives: I.

II.

Creating HR policies which are aligned to the culture of countries outside China while retaining the core principles and philosophy- The performance management systems currently practised in China should be changed according to the culture and values of other countries. For example, Haier plans to expand in US. In this case a proper study of American culture and people’s mindset has to be done. Since Americans are more individualistic and power centric they might not be willing to stand on “colored feet” and share their experiences there. Similarly direct pay cut based on performance might not go along well with Americans who have strong unions. So Haier needs to make certain changes in their policies accordingly. Continuation with the same performance management system - Haier will have to spend greater time in recruitment and selection of employees who are flexible and are aligned to the working system of Haier.

Recommendations: It is imperative for Haier to be flexible in its HR policies and performance management system to suit the needs and requirement of the given country they are looking to penetrate. If they can adapt and modify their policies according to the culture and values of the respective country then Haier can be a successful global brand. Company policies and management working style has to be also modified to suit a given country.