Managing

Performance at
Haier
Case Analysis
By Group Q2, Section 3

Problem Statement:
How can Haier augment and apply an efficacious performance management system at its
plants in other regions of the world so as to duplicate its success in China?.
SWOT Analysis: (Internal Analysis)
Performance Management System
Strengths:

There is high emphasis on selfimprovement

High degree of ownership is ensured by
the 80-20 principle
The quality threshold is very high.
The investment in training and
development is very high
Consists of a blend of Chinese, Japanese
and American management philosophies
High performers are constantly motivated
Job rotation ensured by wide domain
knowledge
Multiple chances are given to the
underperforming employees

Opportunities:

In order to address team

performance issues the system
could be extended.
The system could also be
customized for different countries
In order to meet the cultural
sensitivities of different countries
the colored footprint system could
be modified.

Group Q2 |Section 3

Weakness:

Job rotation system led to less number of

specialist employees.
System
was
addressed
towards
individuals and not the teams.
May not be feasible at a global scale
The management system is time
consuming to implement globally.
Yellow footprint is de-motivating to low
performers

Threats:

Can lead to a hostile work

environment in some cultures.
Might not be accepted in different
countries.
Might leads to higher attrition rate.
The system could be opposed in
countries having strong trade
unions.

PESTEL Analysis: (External Analysis)

Political:
1. The company policies in the operating country might vary since China is a communist
country and other countries that Haier operates in have a democratic government.
2. A few processes might need to be altered to meet the labour laws of the host country.
3. As per the single party set-up Haier interacts only with a limited group of people. Also
since the national policy changes are more firm and lasting. This may not be the case
in countries with a democratic set-up.
4. The threat of Chinese government taking over the business is much higher than any
other country. So spreading risk by expanding is a major need for Haier currently.
Economical:
1. Haiers global share increased to 4% from 2.5 % can be viewed as a positive sign for
the company.
2. Exports of the company have increased to $1.6 billion which is a positive sign and
depicts the acceptance of the product in the international market.
Group Q2 |Section 3

3. With 12 out of 15 top retailers distributing Haier products in European market and all
of 10 major retailers distributing Haier products in North American market, the
situation demands an expansion at other geographical locations.
Social and Cultural:
1. Haier believed in complete transparency at work, appraisals and promotions. This
might not be in line with the culture of different countries. For instance job security is
very important for Irish and Finnish people whereas the British people prefer
hierarchical system. Also there is a minimum wage rate expectation in the European
and American countries, this can be introduced in the African countries where in the
industries have no set rules( which might lead to the productivity to get hampered).
2. A dominant social structure exists in China where Emperor is over general, Father is
over son and so forth. It would be challenging for Haier to appoint people at mid-level
and top level management positions from other companies with this set up
3. Guanxi a quid pro quo had plagued the management in the past. The company needs
to ensure that such system does not affect the company again.
4. Haier propagates a sense of self management. This could be difficult in countries with
a high power distance. For instance in India employees follow a bureaucratic system
where people are inclined to follow orders of their superiors.

Technological:
1. The company transitioned from producing a one model refrigerator to over 86
products in 2007.
2. A tie-up with a German firm to get access to better technology.
Critical Factors and Analysis:

Carrot and Stick policy: This policy boosts employee performance and keep the
underperformers in check. The policy of incentives and compensation is prevalent all
across the world. The Haier PMS gave performance based incentives and rewards
and also penalized employees for under performance.

Group Q2 |Section 3

Culture Specific: The performance management system at Haier is culture specific to

China and needs to adapt as per the global work culture. Chinese work culture
expected employees to work in multiple silos beyond their comfort zone. To ensure
that the system is adaptable globally the PMS must be re-modeled as per the local

culture of the country.

Rotational Policy: The rotational policy is one of the key defining characteristics of
the Haier PMS. It required the Chinese people to go beyond their comfort zone and
forced them to be multifaceted in other tasks as well. This policy should be
implemented in all performance management systems, irrespective of the culture

because this tests the overall competence of an employee.

Goal Alignment: Goals are aligned with employee competency and company
objectives. If goal alignment is not present then the performance management will be

inadequate.
S.M.A.R.T Goals: These are the goals that are set for a company to influence the
employee's performance in a major way and subsequently the PMS.
Goals should be:
Specific
Measurable
Attainable
Relevant
Timely

Constraints:

Transitioning into a global player is the main constraint faced by Haier.

The process of performance management is a time consuming process involving
complex analysis.

Options Available:
1) The Group does its business in different countries in a local way. However, focus is
more on a clear vision of where it wants the business to be. They hire people with
values aligned with its business strategy. The foundation of Haier's people strategy is

Group Q2 |Section 3

rigorous performance management where employees are ranked daily as per their
results, monthly as per their performance and quarterly on their potential.
Pros:
a) It can take advantage of the cultural differences in each country.
b) The policy will enhance performance since each country has its own method of
working.
c) It would make monitoring better.
d) Different carrot and stick policy design depending on what excites or deters
employees for that specific country.
Cons:
a) It is very time consuming as the PMS policies have to locate the intrinsic factors of
performance present in each country and inculcate it.
2) Force fit the companys management style on a sample of units in other countries.
Pros:
a) The company will be able to measure the impact of its management style on the
units in different countries.
b) This will ensure that company doesn't disturb all its existing set up.
c) The company might be able to achieve its desired results from this management
style in the long run.
d) After the model is tried and tested, the learning curve thus achieved will prove
valuable for the company.
e) The high level of standardization in its operation globally will enhance the scope of
inter-changeability of employees across different plants in the long run.
Cons:
a) This style doesn't take into account the socio-cultural differences. Force fitting will
lead to culture shock which might affect some of the efficient workforce.
b) If the fit doesn't get through, this method can prove very costly and the low levels
of productivity may result in loss of market share in that region.

c) This can cause long term damage as employee confidence in the company may
reduce.
d) This method presumes that a culture is transportable and not actually created.
Recommendation
Our recommendation is to implement Option 1.

Group Q2 |Section 3

Action Plan
Haier can implement the Performance Management system by also taking into
account the macroeconomic environment and the specific culture of a particular
country while implementing the system globally. The following steps can be taken
before implementing:
1) New policies that account for the cultural aspects of that country should be created.
2) Eliminate those existing policies in China which are not in tune with the country on
which it will be implemented.
3) The policies and standards to measure performance should be increased or reduced
depending on the culture and economy of the country.

Group Q2 |Section 3