World Monitor Magazine June #3 - Page 123

additional content Key to all this growth was Haier’s behind- the-scenes customer-centric operations system. Rapid innovation based on consumer demand — as with the Tianzun air conditioners released in 2014 — has become routine, because all departments work in parallel. The company’s close collaboration among R&D, marketing, and sales also works well in the U.S. market. For example, U.S.-based R&D engineers are required to talk directly to consumers in the design of new products, and their salary is linked to the sales results of the products they design. Intimacy and Entrepreneurship In 2005, Zhang recognized that most of Haier’s competitors in China were achieving acceptable levels of service responsiveness and that the company would once again have to reinvent its value proposition. He believed that Haier suffered from unnecessary time delays and guesswork about new product manufacturing volumes, which proved costly when it guessed wrong, and that could be reduced, if not completely avoided, by becoming more intimately aware of customer needs and wants. Employees would now have to get to know the customer better than they knew themselves, or, as Zhang put it, to “create zero distance with the customer.” Intimacy is a lot more complicated than responsiveness, and this third reinvention required employees to feel closer to their customers. Haier thus inverted its organizational structure into one based on self-organizing work units called ZZJYTs (an abbreviation for zi zhu jing ying ti, which translates to independent operating unit). Their three most critical functions — marketing, design, and manufacturing — were now supposed to work directly for customers. Instead of directing the employees who did that work, the ZZJYT managers became service providers to them, giving them the resources and guidance they needed to provide for customers. This minimized the decisions made at higher levels in the hierarchy, making the company more responsive to nascent market needs. Zhang went so far as to announce that this shift in organizational model would proceed even if revenues and profits showed signs of flagging, and even if it were necessary to use some of the returns from successful legacy offerings to make it work. The new structure proved successful, and the ZZJYTs are still the basic organizational unit at Haier. Each comprises a team of 10 to 20 people — sometimes located in one place, other times virtual — who come from various functional roles and are brought together for a specific mission, and who are given profit and loss responsibility and accountability. They have their own independent accounting systems and complete autonomy in hiring and firing employees, setting internal rules about expenses and determining bonus distribution, and making almost any operational decision that typically would be made by an independent functional organization. Haier organizes its ZZJYTs in three tiers. First-tier ZZJYTs have the task of directly facing the market, understanding customer needs, and providing customers with the right products. Second-tier ZZJYTs are responsible for supporting the first-tier ones, providing them with the resources and the guidance they need. Third-tier ZZJYT managers are the business division managers or functional managers who set corporate strategies and direction for the whole group. A typical first-tier ZZJYT is composed of sales, R&D, marketing, and finance people. Everyone, whatever their function, is expected to talk to consumers regularly. To Zhang and others at Haier, this organization design represents an explicit effort to avoid being disrupted by technological change. They wanted to make sure that top management would heed early war [Yۘ[و\ܝ\[ۋ\XX[HH][YHH[\[Y[Y\]X[]Y\\YB[Z[\K\]ZY\H[YHق[ܛX][ۈ]Y[H\Y\H H[ܙ[][ۈ HJH\›Z[[Z^Y X]\H[X\][œ[Hܚ[H[YHU^BYY]\]Y[K\X[\H[]œX\HۜY\Y [\[HY\[HX]\Y\^B[\[X]HHܙ\\]BX[\\X[H[Y^H\H[Z[›ۛH\ۈܙX\ˈۘHHX˜\HXYH܈\Y[ ^H\HZ][[\Y[[ۛHY\\]Z[]]ˈ\^KZY\Y\š[[ܚY\X]\ܘYH˜[ܚ[\][ HU\H\X[[H\YۙYH\X[\X܈K[XY ^H\HܛYYY[\[\]][ێ\X\[]\\HܚۈڙX]\X[[K[\\H[ۈH\\وB]X[]HوZ\X܈\XHYX\H]X][\وZ\\[\›[[ [HX\X[]HوZ\B\][[ˈ[ZY\XYBH]YXXH][HYKB܈YY\]܋܈^[\K][]Y][\YY\\]H܈HBوXY[\[]X]]HHXZ][˜\[\[[\[\[[™^Z[[XHX[\XYY H\[x&\ KH[[ۂYKY܈YY\]܈\[\\›YHH[\و]\]][ۋ ^YX\[HX[ZKH\[XY \]H\[]]H[] X]\HB\ܚXYHX[[[XY[]]B^KۘH\[Y\][ۋ]\[[X[\ۈ[H[XBX[H[[X[YX\\[X\]\][ZY\XH[[\Xˈ^KHݙ\Y\]ZY\[H8'[][]Hو[\\ 8'H]\[HY]H\[K[\ܝYHUTАRŒLM