A conversation with Bill Fischer and Simone Cicero about Haier Group
This is a transcript of my interview with Bill Fischer, Professor of Innovation Management at IMD, and Simone Cicero, cofounder of Boundaryless and co-creator of the Platform Design Toolkit, for the Leadermorphosis podcast. We talk about what they have learned from years of studying and collaborating with the Chinese company Haier Group, whose Rendanheyi organisational model has been praised internationally as one of the most revolutionary management ideas of the 21st century. Our conversation explores the extraordinary leadership of CEO Zhang Ruimin, eliminating bureaucracy, designing an organisation to enable thousands of self-managed micro-enterprises, and what this model means for the future of work.
L Gill: Thank you, first of all, to both of you for being on the Leadermorphosis podcast — I’m really looking forward to talking to you and I’ve been following the example of Haier with quite a lot of fascination over the last few years. So it’s really fun to get the opportunity to talk to two people who have been immersed in the Haier world, at least for the last few years — but I know Bill that you’ve also known Haier and Zhang Ruimin for several decades now.
B Fischer: So I think it goes back to 1997 I think when we first met but I was living close-by when they started to smash the refrigerators in 1982. So I’ve followed the story since then. Yeah.
L Gill: Yeah, I love that story. Can you can you share that story about smashing the refrigerators briefly?
B Fischer: In 1982 I believe it was, a young fellow by the name of Zhang Ruimin had moved from the light industry bureau within the Qingdao government to take over the general management position at what was called Qingdao Refrigerators. And the reason he moved is because they couldn’t find anybody who wanted to run the organisation.
It was in such terrible shape. And Zhang Ruimin had these dreams. And it’s interesting because we often criticise bureaucrats for being unimaginative. But in this case, the bureaucrat had all the dreams and his dreams were that if the Chinese economic reforms were to continue the way they had started out, he felt that the Chinese customer would be much more sophisticated in a very short period of time, and would be looking for high quality products. And just about that point in time, a customer bought a refrigerator, it didn’t work, they brought it back, the customer was angry.
Zhang Ruimin, came in and he went to the finished goods inventory and discovered that 20% of the finished goods didn’t work. And Zhang Ruimin wanted to send a message to the workforce that this was unacceptable. So, I think he took 76 of these refrigerators that were damaged, put them in the street, brought 76 sledgehammers had 76 workers who had built these refrigerators and told them to destroy them.
And to be fair, most of the people in the story thought this was insane because even though the refrigerators didn’t work, they were perfectly sellable. People would buy them because they could get them fixed. So quality might not have been a great differentiator at that time in China. But there was a wonderful ‘fix it’ community that could change anything. And that was the beginning of Haier’s commitment to thinking further and bigger than the rest of the people in the industry, and very dramatic. Even today when I go back to China and talk to people my age who recall that event, I mean…everybody remembers it, it was “where were you when they smashed the refrigerator?” So, you know, it’s kind of a story about how to make a vision vivid.
L Gill: Yeah, thank you for sharing that. I think it’s such an iconic story, and it’s remarkable that here we are in 2020, and this RenDanHeYi model is sort of the talk of the town and everyone’s really enamoured with this new structure. So I’m curious what, to both of you, is the most interesting thing about Haier. Because there’s so much we could say — but what do you think are the really unique or interesting aspects?
S Cicero: Well, it’s hard to just talk about one thing. For me personally, I think Haier is a special organisation probably because of the leadership that it has. Not just when you compare it with other traditional Western organisations, but also in China. This mix of thinking that Zhang Ruimin has put together… really it’s like a puzzle of great ideas, and strong approaches to work and life and everything that makes this crazy, unique culture.
For example, it’s a great mix of some of the most interesting and important management thinkers from the West. Zhang Ruimin is such a big fan of Peter Drucker’s work, but really Zhang Ruimin is speaking not only from Western thinking, from the modern management theory, but also from the ancient Greeks. It’s not uncommon that you are there and he quotes Thales or Apollo’s oracle at Delphi... And on the other hand, it’s really, I think, one of the few companies in China that is really attached to a very strong Taoist approach to thinking about work and life and engaging with the world basically.
And I think that this is specific, you know, because normally Chinese companies are very much more focused on a more traditional — from what we understood — much more traditional Confucian thinking, and I’m very fascinated by, in general, Taoist thinking because it’s really postmodern to some extent. So there is a lot of parallels between postmodern thinking in Europe and in the West, and the Taoist perspective. The difference is maybe that postmodernity, as some people would recognise it in Europe or in the West, for example, relates to the world of philosophers such as Deleuze.
It ends up with a social dimension. Really it’s about how we created this social network. So the ‘society of control’, for example, for those that know a little bit about Deleuze’s work. So this idea is that it’s a society based on how we interact basically. Instead, the Taoist perspective is really individual — it’s focused on the individual. And it’s really about how we engage with such a complex world that goes beyond our capacity to understand it. And I think when you relate this powerful mix of individual capabilities and for example, the work of Peter Drucker and what he has been doing in focusing on the individual and his capability, with this kind of postmodern perspective that the Taoist thinking brings, you end up with this kind of crazy entrepreneurial culture. And this is really unique, I think — from my understanding this is not present in any other organisation that I that I’ve been able to engage with. You can engage with them and you will see that, for example, if there is a colleague that didn’t perform well on a project, there is always this reference to, “this person will find his way to a new place where they can show their capabilities fully and can express their human capabilities fully.” And I think it is very powerful.
L Gill: And what about you, Bill?
B Fischer: So, well, I’ve always been fascinated that when people talk about the exciting firms of China’s future, it’s always it’s always the same collection — it’s Alibaba, it’s Huawei, it’s Xiaomi perhaps Lenovo and Haier — and you know, the other four, they are high tech new economy companies, they’re very exciting. And Haier is an old economy, home-appliance manufacturer — you know, commodity industry, mature. And yet what’s going on there is extraordinary. So when we talk about innovation…we tend to pay lip service to product and service and business model innovation — and here’s Haier off on the side, doing really organisational innovation on a consistent basis — as a differentiator.
I teach at a business school [IMD] where most of the participants who come to our programs are managers from mature, relatively old economy industries. And they’re looking for an answer. And I think what the popular management market tries to give them is often you know, kids running around in Silicon Valley in flip flops. But that’s not the reality that they’re going to face when they go back.
But Haier is 70,000 real people making real things. And so for me, it’s a wonderful, wonderful opportunity to talk about how you change large, complex organisations in mature industries.
And the leadership. The leadership, of course is extraordinary. So those two things, I think are what differentiates.
L Gill: Thank you. Let’s, let’s talk a little bit about the leadership then because I mean, Zhang Ruimin has a legacy already at Haier — 35 years or so I think he’s been in the organisation — and this is now the sixth evolution or reinvention, I believe, of the organisation. So, it takes a very unique kind of leader I think, to navigate that and I’ve read and heard about him being this incredibly well-read person but he also strikes me from just the videos that I’ve seen as also quite a humble person. And he talks about having a faith in people who are closest to the market and relating to their potential.
So I’m curious on what your thoughts are about Zhang Ruimin how he as a CEO is able to hold the space for this organisation to evolve and to be the way it is, which is really quite radical in comparison to most large scale organisations we know today.
B Fischer: I think that he’s unique. I think that I have never met another CEO who compares to him — in both his intellectual curiosity, and his determination.
I think [Zhang Ruimin] has a simple vision — two elements that have driven all this change over all this time. One is the need to provide a better customer experience and the second is a faith that his employees know a lot. And if he could, if he could release that knowledge and their innate entrepreneurial energies, the organisation could really take off.
And, you know, we talked about six incarnations, at least, depending on how you count them. But I think it’s been one story, the same story. It’s just different chapters in how you fulfil those two meta-objectives. And I think that what’s so interesting about Zhang Ruimin is that he is consumed by this curiosity. So every time you go to see him, he’s just met everybody you’re reading now. Nothing is allowed to get in the way of Haier accessing fresh insights and then testing them, putting them to work right away.
S Cicero: Yeah, I think one thing that I can just add on top of this is that he’s really a humble leader. I met him a few times when I was there and now with this live interview…you can smell how much he is interested in knowing and engaging with new ideas. I think it’s clear that this is the most important thing for him. It’s really about knowing about the work of others, and engaging with ideas. He’s not there to make more money or to exercise more power. When you’re there it feels like you should be there reading books, instead of managing a company.
So, I think this kind of cultural approach, it’s been pulling down inside of the organisation. Because when I when I was there with the Drucker Forum we had this leader there — Mr Wu if I’m not wrong (the leader of the Internet of Food project) — and it’s a huge platform connecting thousands of enterprises which are creating these vibrant product solutions to get people with fridges that are connected with recipes, or organic producers, and so on. And when we went on stage, lots of people were there trying to showcase their projects, but at the end of the day this guy came up on the stage and the first question, the first thing he did was refer to the work of Peter Drucker.
And this shows me that you have these curious leaders —they’re really humble. And when you become an humble leader, you are empowered, there’s no other way because you understand that it’s not about you, it’s about all the other people that engage in the management and in the execution of the business vision. And so you tend to create this culture of having everybody at the same level, especially when everybody can engage with the knowledge.
And when the knowledge and the ideas and the compensation becomes the most important thing, then everybody is at the same level, everybody can be smart — everybody can engage with smart ideas, everybody can find his or her best way to embody this wise thinking in managing the business.
So it’s not about you. It’s much more about, you know, the ideas that we share, the books that we read… than your personal contribution. And I think you can recognise this because at the same time, you have these teams that are so engaged with their leaders. Most of most of all, of course, Zhang Ruimin — everybody respects him. But at the same time when you see an interview and you read people saying, “What happens when Zhang Ruimin will leave the company?” And then they will candidly say, “That’s no problem, somebody else will find their way to lead to this organisation.”
It’s not about Zhang Ruimin at the same time, it’s about this. And it’s crazy because it’s so important for this organisation. But at the same time, it’s really about this idea that we are all in the same space, we can engage with ideas, we can have the special power to discover this all together, and I think this is really remarkable.
L Gill: Yeah, I’m curious as well because there’s always a danger that we romanticise Zhang Ruimin and put him in the same camp of this slightly outdated heroic archetype of a leader. But he has this lovely phrase about creating a system where everyone can be a CEO of themselves. And I’m interested in what your experience is of leadership more generally at Haier and how leadership emerges. What does leadership look like elsewhere in the organisation? How is leadership encouraged? What does that look like? Do they have leadership training? Or do you design a system and leadership emerges?
S Cicero: Well, I think there is an interesting aspect, which is the constraint definition. And there’s a lot of leadership in Haier that goes through these architectural aspects. So for example, I think a lot of Zhang Ruimin’s actual leadership is an organisational design leadership. So he has been designing the constraints together with his board members over the years, so that his leadership can really flourish in the organisation.
So, for example, you need just three colleagues to create an enterprise. And then when you decide, your basic income is really basic — so you need to be entrepreneurial to really have a decent amount of money, but you can get more you know…because if you are really at the printer, you can make lots of money. So, you can be a kind of architect, a certain kind of attraction for the participants in your organisation — you kind of create the culture by designing these constraints.
And this is something that is quite recurring. I think, when you deal with really complex organisations, they’re mostly managed by constraints. And this is an expression of complexity in general. When you need to manage a complex system, you need to work by setting constraints so that you can flourish within certain directions that don’t, for example, create asymmetric risks. So I think this is really one clear and key aspect of, of the system.
B Fischer: And what I think is that everybody wants bottom-up type of innovation because we feel that there’s more energy and people are closer to the customer…and I agree with that. But what I’ve seen in so many organisations is that unless you have a very self-secure, self-confident, courageous, top management, you’re not going to get that because it’s only a visionary, self-confident top management that can unleash bottom-up suggestions and not take them as threats. And so, you know, I think in a sense, Zhang Ruimin really plays that role very well, because he is self-confident. And he certainly has a lot of power within the organisation.
I think he’s used that power to, as Simone says, build an organisational architecture and style, that really expects people to step into the entrepreneurial void at the frontline with the customer and fill it…I remember some years ago when there was a period when Haier was releasing control to people within the organisation — it was called de-hiring. And I remember that there were people celebrating being de-hired because they were, in fact, taking over their own destiny.
And I had dinner that very night with Zhang Ruimin and I asked him how did he feel about that? And, with a very human response, he said, “We worked hard together. We’re colleagues, we built this organisation. And you sort of hate to see these people go off and certainly celebrating that they’re going off,” he said, “but that’s what we set out to accomplish right from the start, we set out to free up the energies and knowledge within to fulfil the talent potential of the organisation. And if it means people taking control of their destiny and heading off on their own, so be it. That was the goal.”
And I was struck by both the sentimental quality in the way in which he was expressing himself, but also the commitment to this ideal — which is an ideal that I think we should all be associated with and that is freeing up the potential of people in large complex organisations and small, not so complex organisations as well.
L Gill: Yeah, my bias is that I come from a training background and so I’m always curious about the human, relational aspects and what is the kind of mindset that’s needed for this way of working to thrive, especially if you’re a manager. And often when there’s a transformation an organisation, like Zappos or organisations that transform into something more decentralised — it can be very difficult for former managers to make that shift, to unlearn that conditioning of being responsible, solving problems for other people, making decisions, not being transparent, and so on.
I’m curious what that journey has been like for managers because if the if the top management — even if Zhang Ruimin is the kind of progressive leader he is — if he has a COO or someone else in the top management team who is a command-and-control bureaucrat, then it’s not going to work, right?
How are people supported terms of those kinds of skills? Or is the system designed so that it’s self-correcting? You know, if you’re an autocratic boss-like character, no one will want to be in your micro enterprise — and maybe it becomes pretty clear pretty quickly. I don’t know — how does that work?
B Fischer: So I think that you can characterise the journey by being continuous because it’s not been episodic. It’s been quite a continuous period of change with a lot of experimentation. They don’t always get it right. And sometimes they embark on visions that people are wondering “how are we ever going to do this?”, and they figure it out as they go along.
I think that it has been a blend of the new and the old. So I think that there’s always been familiar pieces in the changes. At no time has Haier ever asked its employees to take a flying leap into the unknown. They’re still using the same performance management system they used 35 or 40 years ago. It’s been adapted and adjusted and digitalised and all that sort of stuff. But you know, it’s still the same system. So it’s not like you’re being surprised by outside and inside — the changes have always been contextually driven.
It’s always been outside in terms of its origins (even though the responses some of the early days were not) but it was always about what was going on around us rather than what we were doing ourselves.
S Cicero: What I can say for you know, being in touch with people that have been hired lately, I see that there is such a now such a strong culture, that it is impossible that you end up working for Haier with a hierarchy or control perspective. It’s mathematically impossible. You won’t be at Haier. You won’t be actually attractive because the employer branding that they have created is so strong.
The people that end up working there are entrepreneurial people. And I always say that one of the challenges of the organisation of the future is really about finding a way to attract the entrepreneurs, because entrepreneurs will be able to do enterprise outside of the organisation — everybody knows that. Now the potential of individuals and small teams is skyrocketing [compared to] to the past. And now the question is really about as an organisation and as a brand, how do we make the case for these kinds of people to work with us, to work for this organisation? And I think they have succeeded to some extent to create this attractive magnet for these kinds of people. This is going to be a challenge for most of organisations that I think we will have in in the future.
B Fischer: So I think that after about 35 years, the people who hate change are no longer there for the most part. So this is a huge advantage. Because I really do believe people come to work at Haier thinking, “What can I do today that would be a small innovation in the way in which we work?” Or, “How can I drive this venture forward?” They’re not all altruistic thinkers, but they’re thinking about, “What can I do that will help me, help advance what I’m doing, and collectively so that the organisation moves forward?”
And now, as Simone says, they have an employer brand that’s quite powerful. So, you know, that’s a huge advantage — to have that. And that’s only because they’ve consistently and persistently pursued the same dreams for a long time.
S Cicero: Yeah, I think the pressure that they put on the individual — it’s really huge. It resonates with Peter Drucker — you mentioned this idea of being the CEO of yourself. That’s not really Zhang Ruimin’s words but Peter Drucker’s words that Zhang Ruimin repeats all the time…it’s a company where individuals are on the forefront all the time.
So for example, if you create a micro-enterprise — at the moment of creation, you need to commit to goals, you need to commit to tangible results. Working at Haier, you never hide passively. You always respond to what they call. You create what they call a bid for an order. When there is an order, you bid for it. And when there is another, you bid for that. And when you bid for this order at every level of the organisation — as an employee that wants to join a micro-enterprise or a community, you always need to commit yourself to delivering above average results. And you always need to commit yourself to tangible outputs. So, at the end of the day, it’s a company where you need to be able to be consistent. You need to be able to put your skin into the game, and it’s always about zero bullshit. So everything is written down. I think this is really a characteristic that is unique to their own cultural code.
L Gill: Talking about cultural code, it’s interesting now that Haier is acquiring new businesses. And I believe you’re supporting in teaching the cultural code to some of the people who are in the European part of the Haier business now. I think back to, you know, when the Americans went over to study Toyota and what they were doing with Lean and kind of took it back and followed the recipe but it didn’t quite work because something was missing in terms of the kind of cultural nuance, I think, of really pushing authority down to the frontline.
So I’m curious what are there pieces of this cultural code, of this way of organising that might be challenging for people in Europe, for example, to really ‘get’? You know, I’m thinking about what you were saying earlier as well about Taoism and how that’s influenced this kind of mindset, if you like.
B Fischer: What I think Haier has done, as it’s moved towards hiring more entrepreneurial workers — and that that didn’t start at the beginning…at the beginning they basically needed to get people disciplined, but then at some point they began to need… the way in which they were going to interact with the marketplace, with this zero distance with the customers, required that there’s no point putting people at zero distance to the customers if you don’t trust them to make decisions. So they really needed to rethink what the talent, what the skills were that were needed.
And I think what they saw was that they needed people who are entrepreneurs, essentially — people who were willing to take chances and move fast and, and listen to what’s going on around them. And then once they did that, they needed to build an organisation or rebuild the organisation so that it didn’t get in the way. So you know, we’ve talked about how Zhang Ruimin is an architect — but really what he’s been doing is taking the barriers out rather than putting them in. It’s been, in a sense, reverse architecture, because it’s been enabling people to be able to become more successful.
And I think that’s really interesting, when we deal with managers of large companies — not necessarily Haier, but large companies in general — and we talk about the Haier experience, they often think about their own internal problems: why they can’t do this, or you know, whether it’s…work council restrictions, or whatever the reason is. But in fact, I think what happens at Haier is they’ve put their workforce in a position now where it thinks first about the customer, the outside stuff, and then begins to draw the changes to be able to more effectively meet the customer. Whereas in Europe and the United States, the traditional response has been, “Let’s think about all the internal reasons we can’t do it before we even begin thinking about the customer”.
So I think, you know, a lot of it is mindset, a lot of it is…changing the way in which people prioritise inside/outside, and then what gets adjusted to what. And then, in Qingdao, clearly, people start by thinking outside and then adjust the inside to fit. Whereas what I’ve seen in so many of the people that I work with is that they think first of all about inside and then try to figure out how they can adjust the outside — which is the wrong way to go.
S Cicero: Well if I can add just a couple of reflections more to the nuance of clashing of culture…so the West and the East… I think one interesting point of Haier when they take over existing companies… Zhang Rumin once said to me that they don’t really do helicopter management, or they don’t bring you the management from China, which is fairly common when Chinese companies are taking over European companies.
What they do is normally focus on three key aspects. They focus on, first of all, becoming market-driven. So, having this micro-enterprise architecture — becoming profit or loss driven. So you need to have your profit or loss, you need to be sustainable from an entrepreneurial perspective.
Then they focus on setting what I call the leading goals. So, being above average, basically.
And third, they focus on this idea that you need to really unlock the people’s potential. So you need to make it make it easy for them to show that leadership and so on.
So these are the three pillars. It’s a kind of simplification of Haier’s cultural code. It’s like a simplified version that you can apply. So: creating micro-enterprises (profit or loss); setting leading goals (being above average and being leaders in the market, becoming the number one); and unlocking people’s potential. This is the simplified version that you can, you can use.
And of course, you know, there will be challenges because China and the West today are different. They are different in many, many ways. And one, I think, of the most important ways we are different is, well, actually two ways. One is our work ethic. That is completely different. Of course, you know, we spoke about Taoism. If we think about, you know, the difference between the Taoist approach, which is mostly focused on this idea of doing by not doing and managing by not managing. And instead you look into the traditional work ethic as it is in the West which has created the western bureaucracy, which is very much a structure of control. There is a radical difference.
And another difference — I think it’s really important to spot — is the perception of modernity that we have in the West and the East. So, to some extent, I think in the West, most of our work ethic is already perceived the failure of capitalism to some extent, the failure of modernity. So we are leading postmodern, or post-postmodern, societies.
While in China, they still believe capitalism can make it. So they still believe that we can come up with a techno, let’s say, techno-political utopia that can manage society in a way that that is enduring. So, you know, you can have a very enthusiastic, you know, capitalistic society on the one hand in China. And you know, in the West you have this kind of confused, post-postmodern society. And it’s going to be hard for us to go to employees in western organisations and tell them, “You can become an entrepreneur’, you know…people don’t buy this anymore I think.
So I think, even if RenDanHeYi was born in China, I think, bringing it to Europe, it can really help us now to find a synthesis, and to bring these ways of organising beyond just creating the next user experience. And I think it’s really going to be an interplay of European culture and Chinese culture, if we can really achieve it, you know, this sweet spot of these two cultures, trying to think about the organisation and the purpose of the organisation of today in the modern world…then that is going to provide us as with a sweet spot for really understanding what the organisation of the future is about.
B Fischer: When I listen to Simone, I agree with what he says completely. I think it’s kind of interesting that traditionally we have this culture in the West of being independent, and the culture in China in particular as being collective. And yet the behaviour that we’re seeing in Haier is, in a sense, almost the reverse of what we see in the western analogues.
I think that when we look at what Haier has been trying to do with General Electric in the US, and I think even what we’ve seen with Haier in Europe as well, when you give people the prospects of really using what they know, and having more autonomy to do that, they become fascinated by it, it becomes energising, and then you begin to see very imaginative responses.
So I’m very hopeful that when Haier is transferring the RenDanHeYi model to its associates in the West, I think it’ll be a different interpretation. I don’t think it’ll look exactly the same. But I think it’ll be an interpretation that generates energy, enthusiasm, imagination… I think we’ll see revitalised organisations as a result of this.
L Gill: Yeah, I hope so. Because it’s, it’s funny that, you know, I think about Semco. And, and also like people like Jan Carlzon from Scandinavian Airlines back in the 80s and 90s, saying, “The people closest to the customer need the power to make decisions” and so on. And it never really took off. And so, perhaps, it will be an example like Haier — this kind of Chinese, incredible sort of giant and success story — that might, as you say, revitalise an interest in that. And then for people to think, “Oh, actually, maybe there’s something in this”. And I think also perhaps the technology aspect as well, because I know how Haier and organisations like Buurtzorg are using technology as a way of kind of decentralising, in a way of kind of being able to get rid of a lot of the management functions — because you can automate a lot of things and use technology to really empower people to do things that perhaps previously managers might have done. So yeah, hopefully it will inspire…
B Fischer: I’m interested in how Simone would react to this, but I think that Haier has not used technology to replace managers. I think that there was a large exit of managers in the early 2000s. But that was because they changed the organisational structure. And they gave middle managers the opportunity to figure out how they could contribute to the organisation…and my understanding is some decided that they would rather be middle managers somewhere else, than go through that trouble.
But I think that the other thing that has happened at Haier is that Haier has not only changed the organisational structure, and the power within the organisation, but they’ve also changed the distribution of wealth. So at Haier the way that value is distributed makes it economically worthwhile or rewarding economically for people who are inclined to take these chances.
And when I thought about your comment, it brought back a lot of memories, like Jan Carlzon and, and then also you had Habibi doing, you know, things like this and Oticon in Denmark. When I think back about those things, you know, they changed the organisation, they gave people autonomy, but they didn’t necessarily change the way in which rewards were distributed. And I think Haier has done that. What do you think Simone?
S Cicero: Well, I think technology at Haier is being used to destroy the organisation not to not really to destroy bureaucracy only.
I think Haier has been already accepting the idea that again, it’s a no bullshit culture — so they are really destroying the bureaucracy. They’re really on track to take bureaucracy out of the picture. To take out bullshit, pointless micromanagement.
So, when you speak with Zhang Ruimin, he will tell you maybe companies or organisations will disappear. So the question now starts to be really hard now to understand what is Haier and what is not, for example. When you think about it… they are investing in companies that are technically outside of it. So, of course, there are some elements that make the organisation…so for example, these platforms that internally give services and so on. But the same platforms are being transformed into being entrepreneurial units. So they’re kind of being unbounded by the organisation again. So it’s a continuous unbundling that is made possible by technology.
Now we design smart contracts, for example. This is something they have been doing in the last year. Ecosystem micro-community. Ecosystem micro-community is a new organisational artefact that is almost entirely possible just because there is a technology that makes it possible. So, smart contracts in this case. So, again, a technology is being used to introduce a new organisational artefact that is not even an artefact. It’s just a technological, powerful, technologically powered way to make contracts.
So… I find it really fascinating the way that they’re using technology to, again, get rid of anything that is not purposeful, is not useful for what we want to achieve. And so that’s the role of technology, I think, in this organisation.
It’s really about transcending the organisation and I think most of all, Haier is one of the few organisations in the world I know that is deliberately thinking about transcending the organisation as a concept.
B Fischer: So the opposite of centralisation is not necessarily decentralisation, right? Which is what they’re doing. But I sort of see the technology part as an enabler, that the technology makes it easier to do these things, but people are not abdicating their role in imagining the future and driving the organisation forward and in enthusing others to join with them.
L Gill: Yeah, that’s interesting. I’m sort of thinking about the future and, and imagining possibilities if you’ve if you follow the next logical evolution and, well a couple of things that kind of trouble me or questions that I have… one of them I know that you brought up, Simone, when you were interviewing Zhang Ruimin recently about sustainability and thinking about the planet.
And the other one is… you know, a few years ago, I went to visit a small organisation in the UK called Matt Black Systems, who have kind of a micro version of the Haier model, I suppose. But they are micro enterprises of one person, in the aerospace industry. And the owner there said to me that he was worried about the types of people that were able to work in these sorts of organisations, you know, the types of people that you’ve just been describing — people who are entrepreneurial, who are able to take initiative…
And as Haier grows, one question I have is: are we creating a class of people who won’t be useful in the world of work if many organisations start to go in this direction, not to mention the implications of AI and so on? Is there a risk of having a kind of un-diverse workforce in a sense — that only highly capable, entrepreneurial types will really thrive in this kind of environment?
S Cicero: That’s a good question. You know, to some extent, I mean, I feel like Haier is just becoming smarter and more efficient at capitalism than any other company in the world. And capitalism means also technology. So essentially, it’s probably the one organisation on earth at the moment where capitalism and technology are playing at their highest potential.
So the problem with technology, we know it very well. And so the question is, is there a risk that you just create an organisation this is a master of destroying the planet? But to some extent, I can also see that in Haier, there are some interesting seeds of transcending the organisation, as I said. So, it’s the same culture that is about no bullshit, you know, making new customer experiences all the time, there is also the seedbed for the independence and interdependence.
And so, for example, one person asked me, you know, would I be more excited about Haier if they were into doing a smarter home — more about something like sustainability. And so, I said, you know, maybe a smart home is a sustainable home to some extent.
There is another example where employees from Haier were working on water purifiers. And there is an anecdote on the website that mentioned that when they were working with communities, about the quality of water, they figured out that the quality of the water doesn’t just depend on the purifier. It depends on many other systemic aspects.
So, you know, that’s the point — there are some seeds in how, you know, Haier is making people self-organise, making entrepreneurs emerge, and letting go of the control from the centre…and this idea that you need to just create a self-fulfilling prophecy of a corporation that has the seeds to try and shake and transcend the industrial organisation.
We don’t know how yet, but I believe that this question of how we transcend, modernity, it’s an open question…not just for Haier, it’s an open question for our civilisation. And Haier is one place where I see a potential to start, you know, to see some sparks of how we really just transcend the industrial organisation and modernity into something that goes beyond.
You know, Taoism, it’s a really specific philosophy. And it’s all about being confused. It’s all about being confused about the future and being confused about what to do, and being happy with it. It’s about flowing. Like Zhang Ruimin says, “Our future is being like water. It’s being selfless”.
It’s really about kind of surfing with what’s going on. And Alicia Hennig in this beautiful paper called ‘Daoism in Management’, she speaks about this and she says this is not going to give us many answers in terms of how we create sustainable corporations. But the question is really that this kind of culture — it’s not about giving you an answer — it’s much more about flowing with what the transition is going to be and creating an organisation that can cope with this change and be resilient, and reconfigure themselves to adapt to an unpredictable world that we seem to be living in today.
B Fischer: My response would be that Haier is very simple relative to the total population of organisations around the planet, most of which are organised around traditional command-and-control types of structures with a goal of reducing variants — getting the surprises out of whatever happens in order to be more efficient.
What I find so interesting about Haier is that it’s creating an organisation where variance enlargement is very much at the core of what they’re doing. So they’re putting surprises back in. And if you think about what we’ve learned during the present COVID-19 virus, certainly one of the important things is we need fast moving, on-the-ground thinking that’s more imaginative. The COVID-19 virus crisis is a crisis of leadership imagination.
And what I think that the Haier model is doing is encouraging more leadership imagination throughout the organisation, not just relying on the top. But also, there’s a great deal of locality in it.
So as we see, I think one of the things we’re going to come out of this crisis with is rediscovering that buying local is a good idea. For a lot of reasons, not just economic reasons, but you know, because it’s a good idea to support the community.
And my sense is that the way in which Haier is structured and the ease with which three colleagues can come up with an idea and form a micro-enterprise to pursue is really wonderful. Because none of them are going to propose a micro-enterprise that says, “Let’s have a command-and-control structure and have 70,000 people listen to a guy on top” — they’re all product-oriented or market-oriented initiatives, but, but the way in which they work is fundamentally different.
So they are expressing themselves, both in terms of the output but also in the throughput. The throughput is different, and it’s no longer as linear and sequential as traditional value chains are. I think there’s a lot of promise for the future in the Haier model.
The problem is Haier is one of a handful of companies around the world that are experimenting with this. So how much impact will this experience have? I don’t know, not enough. And so, my hope is that if there’s a revolution within the workforce, it becomes one about seeking out more autonomy and more leadership.
But earlier, Lisa, you mentioned…the Toyota experience in North America. And I think the Toyota experience in North America was sincerely interested in pushing responsibility throughout the organisation. But the workforce was not prepared to accept that. And what I worry about is when the Haier model gets transferred, will there be acceptance of engagement, or will there be reticence and fear over being visible and therefore vulnerable?
L Gill: Yeah, well, that’s, that’s what I wonder as well. And I think about Miki Kashtan, who I had on the podcast, and she talked about that as well as structural shifts, there needs to be two shifts within. And one is in the people who have power — or have previously had power — in this case managers. And the other is in people who don’t have power — or historically haven’t had power — you know, employees.
So like you said in that in that example, if employees — which is an outdated word even in itself — but you can give permission and yet if people are so conditioned to being passive (which they are to a large degree in the world of work) and passing the buck or complaining upwards or whatever, I think it takes quite a lot to provide the conditions for them to really explore and learn this new way of working and being and relating to each other.
And it seems like in Haier, at least, that that has been facilitated by architecting the organisation in a very particular way, in all of the facets that we’ve just talked about, that help, you know, bend people towards that kind of way of behaving. And I imagine those people who have been in Haier in China have kind of evolved with the organisation. So it’ll be interesting to see those people who haven’t come up in that world, fresh from the source, so to speak, what challenges they’ll face in unlearning and learning this new way.
B Fischer: So, one of the things is for sure — the people who run the micro-enterprises, quite a number of those people have come from outside of Haier. In the course of one week, I interviewed 10 or 14 of these micro-enterprise owners, and there were no two career paths in common.
You know, it was all about who had a good idea and could gather support for it. And my sense is that those people were refreshed by the opportunity to run unencumbered with their own idea, at their own risk to some extent, I mean, it’s not a free ride — and see, and see if it would work or not. But I think the way in which the Haier culture works is that if you join the organisation, no matter whether you’re joining as a young, first time employee or mid-career transition…it comes as a bit of a jolt that all of a sudden you have a lot more freedom than would probably be ever experienced before in your professional life.
So, if you think about the broader ecosystem in which Haier exists — we don’t do a very good job in the education or training world, preparing people for this. We prepare them for the historical model, which is a lot more constrained. So my hope is that we recognise the tremendous potential that’s available within human ingenuity. And we go about creating mechanisms to free it up. And I think Haier is one way to do that. RenDanHeYi is one way to do that.
L Gill: Yeah, I guess I’m always coming back to… how do you help people to be successful? Because yeah, I can imagine when you’re entering into Haier, chances are you know you’ve had an experience of a traditional, top-down organisation. It also often the case with these kinds of organisations that the people who really thrive are people who are either young and don’t have much experience of a traditional kind of management bureaucracy, or they’ve come from some other context, which is so different that they’re not kind of porting over any of those learned habits. But for those who join Haier, who have had that kind of context, I just wonder if they get any support. What sort of training or are there particular skills or tools or things that help them, you know, with that jolt, so to speak?
B Fischer: So, so I think nobody winds up in Haier by chance. So I don’t think you have anybody who’s unsuspecting and thinks, “Oh, you know, how did I get here?” The employer brand is so strongly entrepreneurial that people know what they’re getting into. But Simone has a scheme that talks about architecting, empowering and enabling, which I think is really addresses your question very effectively.
S Cicero: Yeah, I mean, in general, I feel like Haier has eliminated a lot of the boundaries between inside and outside. So, you know, for example, if you make a comparison between Zappos and Haier, both of these companies are using micro-enterprise structures. Of course, Zappos is much more immature, let’s say, with respect to Haier. And both of them are all about self-management.
So for example, to be hired at Zappos, you go to three months training, and then if, at the end of the training, they feel like you do not culturally fit, you will be fired. And then if you fit, you get your stipend and you can create maybe part of your bonuses through the structure.
When it comes to Haier, you get, I think it’s easy to be hired to some extent, you know.In China, your stipend or basic income is set by the state. So then if you don’t find an opportunity, in three months you are out.
But when you enter the system — so maybe you can be hired by a micro-enterprise at first, but you’re not there just to work in a micro-enterprise. You are there because you can leverage the systems that Haier has created to lead to becoming an entrepreneur. So it’s kind of a system that offers you several things. It offers you what they call this Shared Service Platform. So legal, IT, HR and so on. But it also offers you what the industry platforms do. So, an investment process that makes it easier to enterprise inside the organisation if you’re passionate about the Internet of Things and technology, than outside.
So it’s really a system that’s very porous. It’s a very porous organisation that you can imagine as a kind of accelerator. You end up inside of this accelerator if you are attracted by the culture. You can be out in three months or…if there is this seat of leadership in yourself, and you have an overlap with the culture, you can easily be caught in this rapidly spinning machine and become a leader and create your micro-enterprise and get your enterprise to IPO in, you know, three years. Like, you know, when you think about these guys creating the Thunderobot micro-enterprise. This is a company making gaming PCs inside this giant organisation that is used to make washing machines.
I think it’s also depends on the policies that organisation operates within. It’s a completely different world. Of course, China does not have the same compliance rules that you may have when you run an organisation in the US or even in Europe. Even worse, I would say, in Europe when there are all these constraints on hiring and firing an employee, and so on.
L Gill: Yeah, that’s interesting. It’s very transparent criteria from the beginning that if you don’t generate more than your basic income, the system is kind of self-correcting, right?
S Cicero: I told you, you know, this is a company that is really based on this idea of zero bullshit.
L Gill: Yeah…You know, I have a drama background, so when I used to audition for plays, you would get one type of director that would try and challenge you in the audition straightaway and put you on edge and make you uncomfortable and get you to do something radical, and then you’d get a different kind of director that would be much more supportive and collaborative and asking you think, asking you to try something else and giving you feedback and so on — so I’m thinking about, and maybe it’s because I’m not the ideal employee for Haier (laughs), but again, I think about this diversity question that I mentioned earlier… In some ways, it feels kind of harsh, that that only a certain type of person will survive that. And I wonder if there are some people that need just a little bit more and then could really thrive, that that aren’t really catered for by that system? So it’s, it’s not a criticism, but it’s kind of a wondering that I have.
B Fischer: But I think that if you’re one of those people that needs a little bit more time, and you wind up in Haier, as long as you demonstrate energy and commitment and curiosity, you’ll get the extra time. I mean, the goal is not for everybody to run a micro-enterprise. I think that that would be an interesting goal. And I think many people come to Haier with that as their objective. But I also think that if you get hired into a micro-enterprise, the beauty of that is you’re — assuming the micro enterprise survives — your performance review is not on KPIs, and it’s not on an abstracted common score sheet, but it’s the impressions of the eight or nine or ten people you work with, as to how committed you are, how energised you were, how much of a colleague you are.
So in in a sense…you gave the spectrum of directors in drama. I mean, my sense is that Haier is a mix of both of those. There are absolutely clear-cut success and failure criteria. And at the same time, there is a lot of ambiguity in between on an individual basis.
So, so I think that Simone says no bullshit, I believe that’s absolutely true. But the way in which you define the subjectivity of bullshit can be debated endlessly, right. So, the we can tell pretty objectively when the micro-enterprise is succeeding or not, whether it survives or not — that’s clear cut. And fairly, you know, draconian in the way in which it operates.
But on the other hand, there’s the capacity, I think, a greater capacity to understand the capability and potential of an individual because you’re in a small group setting, you’re in a team setting, and your evaluations are based on a holistic impression… so my sense is that there’s it’s a little bit of both. You agree?
S Cicero: Yeah, I think one thing I can add is that if you are used to working in a small company… for example, I’m an entrepreneur, I have this small company, I run this company with others and, as an entrepreneur, you know that you need to pour in some massive contribution.
So it’s not going to be A plus B = C. No, it’s like, you do all the work and then you get all the rewards. You kind of put all of yourself into what you’re doing. And this is something that is easy to achieve on a small scale. I think this company is getting to the way of making it work on a large scale.
It is a context in which you can really put all of yourself into what you’re doing. And when you put all of yourself as a team, for example, and everybody is depending on each other, putting all of their selves into becoming number one, for example, then you generate this kind of dynamic where everybody looks after each other. But as soon as you become a bureaucrat, you’re out…that’s it, you know. You cannot become a bureaucrat in this organisation. There’s no way you can hide your debt, your commitment debt or your technological debt or your you know, organisational debt. It’s just too transparent, it is just too committed, it is just too entrepreneurial.
And to some extent, I think this really resonates with the way I as an entrepreneur, I see an organisation. I don’t want to hire a bureaucrat. I want to hire an entrepreneur. Of course, you cannot hire an entrepreneur if you don’t have skin in the same — if you’re not part of something that somehow makes the space for you to put this entrepreneurial asymmetric effort into putting all of yourself into making something happen. And I know that for those that are, for example, into collective management and collaborative decision-making, all the stories they have been telling us for decades, and some of them are true for sure, but some of them can be designed, for example. But I think we often fade our knowledge and make a space for people to really put one hundred per cent of themselves into making something happen.
That’s how it works with a start-up — you need to put yourself into something and create something new, and this is basically what Haier is trying to do on a large scale. And to do it on a large scale it’s a matter of designing the right pieces, and putting the right pieces together — the services, and the supports, and the culture — so that this can really happen on a large scale.
B Fischer: And, and so Lisa if you could go back to this person you mentioned in the aerospace industry who has a small firm with people and micro-enterprises of one or so, I think Simone and I have recently become fascinated by the idea of actually doing that. Better to have one or two people in a micro-enterprise than have one or two people in a small bureaucracy. So we’ve been in conversations with three or four different groups about starting from the beginning and saying, “Look I have an organisation, we have five people, we’re going to have two micro-enterprises”. Sounds a little weird, but I think that it works.
The other thing I have to say, as someone who is not as young as you two, is that when I go round and talk to entrepreneurs — not at Haier — but entrepreneurs, whether it’s in Silicon Valley or you know Shenzhen or wherever, there’s a uniformity there in the message that they send, the clothes that they wear, in the way in which they stand and the lingo that they use that I also find, you know, worrisome. So I think that homogeneity of any type is probably undesirable and as much as I envy their opportunities, and their energy and their commitment, after a while I feel like I am in yet another rendition of the same show. So I think that what you don’t want is too much homogeneity going into the future and my sense is that so far at Haier given the breadth of the platform orientations on which these micro-enterprises are embedded that there’s quite a bit of variety in terms not only of what they are doing, but the people who are doing it. So I’m optimistic about that.
L Gill: Yeah thank you for sharing that, that’s clarifying because I think I sometimes look at examples like Haier and it can feel, I don’t know if this is reductive to say, but it can feel quite masculine, I suppose, as a concept and my biases are always looking for the relational, human pieces. And I think they are there but it’s perhaps less written about.
It’s such a complex model. I’ve read about the RenDanHeYi model, I read one huge book about it and just breaking down the diagram of the model I was like, “Wow…too much for my brain to comprehend!” But the pieces that I often zoom in on are the bits where… I think it’s because I’m driven by, you know, more human workplaces. But what you share, that if you start from this idea of a micro-enterprise of one or two or three people, that people have the freedom completely to design their own organisation. It makes sense — of course, people aren’t going to design bureaucracies! So it is incredibly liberating in that sense.
B Fischer: But there is also some risk right, so…it’s an organisation that’s demanding as well in terms of results.
S Cicero: Yeah, I think to echo your point Lisa, for example if you look at the masculine and all these sorts of topics that you spoke about…sometimes you know, for example there is a lot of talk about Non-violent Communication and I think you touched on this topic also with Peter Koenig when you spoke about The Source, but to some extent sometimes I feel like I am one person that sometimes uses violent communication when I work with teams. And sometimes I feel like when I am forced to comply with a bureaucratic process or lots of pointless cycles of communication, I feel like a survivor you know so, I think having an organisation that removes all the foam makes it easy for you to become an entrepreneur.
It’s a way to be much less violent towards the employee. So when you speak about the masculine organisation and Haier, here is where Taoism can help. Because this is a different type of thinking — it’s didactic. Whereas you always put all the nuances together, there cannot be a masculine organisation if it’s not also feminine. And this is more or less what Haier is doing. You know, to some extent it’s masculine, telling you, you know, you need to be entrepreneurial. But on the other side it is also feminine in the way that it creates the space for you to be entrepreneurial. And in a way that makes everybody, for example, connected in achieving the same objective and depending on each other — like wood and water, like Zhang Ruimin mentioned in the interview. So it requires us to look beyond this idea that there is A and B, there is black and white, there is masculine and feminine — and asks us to really think about the didactic thinking where all this basis of one concept is rolled together into one.
And that’s why I say this organisation is at the same time potentially accelerating towards destruction and keeping the seeds for transcending this…so I think this is really the nature of this organisation.
L Gill: Yeah, that’s really interesting. I’m wondering as a way of kind of wrapping up this conversation…I imagine you get this asked a lot: what are some practical, actionable insights that we can take from the Haier model?
So people listening to this podcast tend to be people who are interested in self-management or more decentralised ways of working, or maybe they’re in a totally bureaucratic public sector organisation and wanting some kind of antidote or lifeline. So yeah, I realise it’s a difficult question to ask, but if you would share one or two pearls of wisdom with listeners, what would they be?
S Cicero: Well, I think that it’s never too late to become entrepreneurial. Knowledge, creativity is asymmetric. Again, you need to put all of yourself into something to create, something new and you cannot have a clear path, an algorithm to calculate how much of yourself you are putting into something because the outcomes are intangible — they are impossible to, you know, tabulate. So, you need to acknowledge this if you really want to create an organisation that creates this space.
And another thing I can say is…it’s time to get rid of bureaucracies, to get rid of all this bullshit work, as David Graeber, the British anthropologist wrote. And also it’s really about taking over bureaucracy in a serious way, not just about speaking about removing bureaucracy. But it’s also about acknowledging that bureaucracy needs to be eliminated in an age of an increase in technology, zero transaction costs. You know, it’s no more the industrial age — we are beyond that. And we need to acknowledge it in our organisations.
B Fischer: And to that I would add that: it’s not enough to want to create an organisation that’s different. It’s got to be a business model, if you will, that thrives on that. So somehow, you’ve got to make it important, as a commercial objective, or as a mission objective, that you have this autonomy and then you need to, I think, do a couple of other things. One is: make decisions that get the present organisation out of the way of those who are pursuing this commercial objective by having more autonomy. You’ve got to make it easier for them, not harder. The idea is not for this to be a sacrifice, but for this to be something that’s important enough to change the organisation. And that becomes complicated because every organisation has a present and a future and you’ve got to manage both simultaneously, and what we’re talking about…it lends itself more to a future. To where we want to enlarge variance rather than reduce it. We want to get away from that price-faced competition and create surprise in the marketplace.
So you’ve got to make it important in terms of the mission of the organisation, you’ve got to get the existing organisation out of the way especially if you’re talking about future-orientation, and the third thing is you’ve got to create equity in the distribution of rewards so that people are recognised, not only organisationally but also financially, for what they are doing and the contributions that they make.
And I think Simone’s right, you’re never too old to do this…but, I was thinking, where I work, we have a system very similar. We have no departments, we have no structure, everybody has the same base salary, I’ve had the same base salary for twenty years but income differences are big depending on how you run small micro-enterprises which turn out to be programme projects. And my sense is that that works great. We love it because we don’t have tenure, we’ve all given up lifetime commitments at other schools, and this is a very entrepreneurial way to work but it’s also a very rewarding way to work — both professionally and also financially as well. And I think that those sorts of things, that’s what I see in Haier. I see the same sorts of mechanisms working there.
The last thing I would add is, for me the biggest change in my life over the last two years is working with Simone, and watching how the canvases he creates, which I think if managers are really interested about this really brings them in and lets them understand the managerial choices they have to make and the consequences of those choices, which is really wonderful because it’s a guided conversation. And the other thing is the way he works, so he exemplifies what we’ve talked about just now.
S Cicero: Well thanks Bill. I think maybe Lisa it’s good to mention the work we have been doing with Bill in the last two and a half years has been open-source. So most of the people who will be listening to your show will find a way, and we can give you the links for your show notes, to find a way to download the canvases Bill is talking about with a glossary and a user-guide that we are creating and will be updating in the coming months for sure.
B Fischer: I am absolutely fascinated by this very analytical approach to thinking about subjective choices. It’s really changed the way I think about how to put these organisations together.
L Gill: Yeah and I think it’s also quite a unique thing that Haier is doing in terms of, you know, opening up to outsiders like you and asking outsiders to sort of teach this and make it open-source. I think that’s also quite a remarkable thing.
B Fischer: Yeah, take their philosophy and bring it into new colleagues. I agree. I think it’s extraordinary.
L Gill: Yeah, and on that note thank you to you both for sharing so generously your time and your ideas and what you’re learning and…I learnt a lot from this conversation so it’s been really enjoyable for me to have this case study brought to life by two people who have really been there and met people and been immersed in it so thank you for sharing.
- Link to sign up for Bill and Simone’s RenDanHeYi masterclass in October (link gives you a 25% discount with the code LEADERMORPHOSIS)
- The EEEO Toolkit Draft Download webpage (a set of tools to support the creation of an Entrepreneurial Organisation)
- The Boundaryless Haier webinar YouTube playlist
- Corporate Rebels’ post about Haier
- Bill’s chapter ‘Ecosystems as an engine for innovation and learning’ in the book ‘Ecosystems Inc’
- Bill’s IMD profile where you can find more of his publications
- Simone’s interview with Bill on the Boundaryless podcast
- Alicia Hennig’s paper on Daoism in Management
Leadermorphosis is a podcast exploring the emerging world of self-managing organisations and radical ways of working. Hosted by Lisa Gill, each episode features a guest thought leader or practitioner offering a unique perspective on new and innovative ways of working.