Understanding Haier's inter-microenterprise contracting

DrRossWirth
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- 1 min read

A reading of Haier’s history reveals they struggled a bit with microenterprise (ME) linkages until they resolved the inter-ME contracting. This raises four interconnected questions:

#1 – I have read that Haier uses a contract template for connecting newly formed microenterprises. Does anyone know what this template addresses?

#2 – What is the transfer pricing mechanism between microenterprises? If each ME is to have an effective P&L, some internal transfer pricing is needed along the value chain including how staff MEs contribute value to the greater organization.

#3 – Does anyone know the mechanism for benefit sharing between MEs? While there is reportedly a clause for contract renegotiation, there is also a reported process for altering the transfer pricing when the benefit balance changes between MEs. For example, one ME may incur increased costs to enable another ME to increase their revenue (profit). Therefore, the net increase in value has to be shared across the ME to ME boundary.

#4 – What detail is available on Haier’s 3-tier goal setting process? I have seen bits and pieces of this process, which is reportedly connected to both compensation within the ME and how benefits are shared across ME-ME boundaries. However, the details are a bit sketchy when examined closely.

Lacking answers to these four questions, I am looking to collaborate with others to “reinvent the wheel” to better understand how a network of microenterprises can be used as an organization design.

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