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Qingdao Haier Refrigerator General Factory, a home appliance manufacturer in the northeastern Chinese city of Qingdao. Its CEO is Zhang Ruimin. Since 2002 Haier has been recognized annually as Chinas most valuable brand,based on its success in introducing market competition in the whole electric home appliance industry. In 2006 Haier was ranked as the worlds sixth largest maker of large kitchen appliances with a 4% global market share and a particularly strong position in washing machines (#2) and refrigerators (#3)

Key success Factors

Product diversification Product innovation to create niche markets Marketing initiatives that emphasized product quality and market research. Globalization Innovative human resource management practices.

Performance management system

Performance management describes the processes by which managers improve the performance of their employees by utilizing their power to reward, develop or discipline as appropriate. A performance management system documents these processes as company policy and may form a legally binding contract between the company and one or more employees.

Essential Components of a Performance Management System are:

A performance plan is negotiated between a manager and employee for a given period (usually one year). During the year the manager gives employees feedback Performance is appraised at year-end decisions are made to reward, discipline or develop employees. The cycle is completed with a new performance plan.

Haier groups management philosophies 1

Zhang remarked on the importance of effective human resource management policies: An enterprise is like a ball being pushed up a hill (F1). Under pressure of market competition and internal stress (F2), the ball needs a strong braking force (F) to prevent it from rolling back down. This braking force is the internal management infrastucture.


A Sense of Urgency: Haier was prepared for moving forward in time of danger. This sense of urgency was heightened by internal competition as well as external. OEC: Overall, Every, Control and Clearance A guiding principle of Haiers management system was OEC The term overall meant that all performance dimensions had to be considered. Every referred to everyone, every day and everything. Control and clearance referred to Haiers end-of-work procedure each day, which stated that each employee must finish all tasks planned for that day before leaving work. The concept of OEC laid the groundwork for a management system that had both breadth and depth: It applied to every aspect of work, every employee, every day.

80:20 Principle Under Haiers 80:20 Principle, the 20% of employees who were managers were held responsible for 80% of company results (good or bad). Race Track Model Every employee in the Haier Group (expect the top eight senior executives) underwent frequent and transparent performance appraisals going against the traditional Chinese culture in which face was extremely important.

Tracking Individual Profit and Loss

Monthly measures were used to track performance, according to the revenue and profit
the managers had earned for the company.

Each manager was accountable for only a small portion of overall profits. Each one could function

as a miniature company (MMC)

Managing Performance
HAIER used several performance and motivational tools. One involved a set of colored footprints on the factory floor. A board placed in the factory workshop that recorded workers performance on a daily basis. Under a system of selfmanagement,employees set clear goals for themselves in a brief meeting with their supervisor at the beginning of their shift. Haier had a formal policy for managing those employees who did not meet set expectations.

Appraising Managers

Each managers performance was reviewed weekly. The criteria for weekly evaluation involved both achieving quantifiable goals and the degree of Innovation and for improvement. The results of managers performance ranking were openely displayed at the entrance to the company cafeteria with a green or red arrow indicating whether their score had gone up or down that month.

Developing talent

When new position opened up,Haier ensured that a wide pool of candidates competed for the position rather than promiting only from existing employees. Job rotation was critical to promote employee development and avoid territorialism Monthly management evaluation meetings top performers were identified and those with the most were tranfered into the higher talent pool.

Dealing with low performance of managers

The low performing manager classified in 3 catogories: a) if minor improvement in management performance is necessary mangers were put on medication,which indicated that they needed to change and receive training on those specific issues. b)Most serious under performers were refer to as 4 users and demoted. c)Managers with serious performance issues werehospitalized, and would be removed from their position.

Haiers performer management philosophies were considered not only for chinese companies but also for any firm anywhere.