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Assignment Case Study: Classical Management in the Haier Group (Taken directly from pg 37 of Schermerhorn et al (2017). Management (6th Asia Pacific Editiion). Wiley:

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Assignment Case Study: Classical Management in the Haier Group

(Taken directly from pg 37 of Schermerhorn et al (2017). Management (6th Asia Pacific Editiion). Wiley:

Australia) The Haier Group is a Chinese electronics and household appliances company. With 10.2 per

cent market share of the world’s white goods market (*mor than any other manufacturer) and

a state-owned enterprise, it is a formidable competitor in the electronics market10. In the early

1980s, the group was merely a general refrigerator manufacturer in Qingdao, China. It was

close to bankruptcy when it appointed a young assistant city manager, Zhang Ruimin. A

customer brought back a faulty refrigerator and Zhang went through his entire inventory of 400

refrigerators looking for a replacement. Struck by a 20 per cent failure rate in its products,

Zhang issued sledge hammers to staff with instructions to destroy 76 faulty refrigerators in the

inventory rather than let them be sold.11 He introduced Western management theory to the

plant, with a focus on quality and reliability. By 1992, Haier was a certified ISO 9001

organisation - a remarkable demonstration of establishing quality management principles in a

very short time.

Sales improved and by 2002 Haier was opening plants in the United States, Pakistan, Africa

and India, as well as partnering with European firms and buying a factory in Italy. By 2008, it

had surpassed the giant American manufacturer Whirlpool. Zhang’s management approach

was summarised by the letters OEC – O (overall) E (Everyone, Everything, Everyday), C

(Control and Clear). Haier’s Human Resource Management Direct Wang Yingmin explained

the acronym:

OEC means that every employee has to accomplish the target work every day. The OEC

management control system aims at overall control of everything that every employee

finishes on his or her job every day, with a 1% increase over what was done the previous

day.12

Performance measurement is crucial and tasks are allocated to achieve greatest efficiency

across several departments with instructions so that tall employees understand their jobs and

how their jobs align with the corporate goals. Employees are shown how their wages are tied

to market performance. Short production lines were created to ensure a close match between

design and customer.

Daily control and clarity is the basis of fulfilling those objectives. Every Haier employee has

a ‘3E’ card, used to record each day that they have done everything required. This is

combined with a plan-do-check-act cycle to check everything. The 3E card has seven criteria:

job quantity, usage of parts, usage of materials, equipment, safety, work attitude and labour

discipline. Every staff member is required to constantly improve their work skills and ensure

that they can achieve the 1 per cent increases in productivity each day.

However not everything about the approach is positive: the emphasis on individual

performance and incentives has created a competitive internal culture where teamwork

suffers and synergy is problematic.13


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