Transforming HOLIS – A Journey to Self-Management and Financial Transparency

The RenDanHeYi model, developed by Haier Group CEO Zhang Ruimin in 2005, is revolutionary management philosophy aimed at transforming traditional hierarchical corporate structures into highly adaptive, customer-centric ecosystems. Rooted in the belief that employees (Ren) and their entrepreneurial capabilities should align with customer needs (Dan) to create value, the model emphasizes individual accountability and dynamic organizational roles (HeYi). By dismantling conventional silos, the RenDanHeYi model fosters a network of autonomous micro-enterprises within the larger corporate entity, transforming the organization into a nimble startup factory.

To develop and share the idea of Zero Distance and its broader management philosophy of RenDanHeYi, Haier hosts an annual forum to celebrate the world's most progressive organizations. This September marks the 8th edition of the forum, taking place in Haier’s hometown, Qingdao, on September 20. Working with the Business Ecosystem Alliance and the Management Lab, the Haier Model Institute will release the inaugural listing of the progressive companies which are putting Zero Distance and related ideas into practice.

These organizations are characterized by:

• Zero Distance to customer | Decision what to build is based on insights from the marketplace

• Autonomy | Small teams with full decision-making autonomy enable speed in execution

• Shared Rewards | Everyone in the micro-enterprise participates in its financial success

For the 2024 inaugural ZeroDX awards, Haier approached us to list 50 self-managed organizations that showcase the principles of RenDanHeYi in how they organise their work. HOLIS is one of the 50 organisations we listed this year.

Introducing HOLIS

HOLIS is a Japanese company with a diverse portfolio of 27 businesses, including golf equipment, costume rental, bridal services, and recycling shops, mainly located in Aichi Prefecture. The company employs over 500 people and generates more than 7 billion yen in total business value. Founded on traditional top-down management principles, HOLIS experienced stagnant sales growth despite initial successes. In response, CEO Takuya Katagiri led a radical transformation in November 2018, shifting the company towards a decentralized and autonomous organizational model inspired by the books "Reinventing Organizations" by Frederic Laloux and "Profit First" by Mike Michalowicz. This shift focused on aligning individual and organizational interests through transparent money flows, resulting in increased employee satisfaction and enhanced management performance.

HOLIS is an excellent example of RenDanHeYi management philosophy in Japan. With its decentralized organizational structure, no middle management and shared rewards to incentivize customer satisfaction and cost management, it has transformed itself into progressive organization where all stakeholders thrive.

Organizational Structure

HOLIS has adopted a decentralized organizational structure characterized by self-management and the elimination of traditional hierarchies. This structure encourages employees to take ownership of their work, fostering a culture of collaboration and innovation. The key features of HOLIS's organizational structure include:

• Role Allocation System: Employees define their roles based on their strengths and preferences, allowing them to visualize their contributions and areas for development. This approach encourages employees to take responsibility for their work and seek opportunities to exchange tasks or hire new talent to fill gaps.

• Advice Process: HOLIS replaced its top-down decision-making system with an advice process, encouraging employees to seek guidance and support from peers rather than relying on hierarchical decision-making. This fosters a culture of continuous learning and improvement.

• Elimination of Sales Meetings and Management Plans: The company abolished traditional sales meetings and management plans, empowering employees to focus on their core responsibilities and innovate without the constraints of rigid planning processes.

Zero Distance to Client: Aligning with RenDanHeYi Philosophy

The transformation at HOLIS aligns with the RenDanHeYi management philosophy, which emphasizes zero distance to the client by aligning employee interests with those of the organization and its customers. HOLIS achieves this through its innovative financial structure and transparent money flows, ensuring that employees are directly incentivised to enhance customer satisfaction and company performance.

Financial Structure and Transparency

HOLIS's financial structure is based on the principles outlined in "Profit First," which advocates managing money through five distinct accounts:

1. Profit Account: Secures profit first and distributes a percentage of the balance to employees who own shares in the company as quarterly bonuses.

2. Owner Account: Represents earnings for the owners, synonymous with directors' remuneration and expenses.

3. Tax Account: Covers various taxes associated with the company.

4. Expense Account: Includes all business-related expenses, with a percentage of the balance distributed to employees quarterly;

5. Repayment Account: Allocated for bank loan repayments.

Employee Incentives and Ownership

HOLIS aligns employee interests with organizational goals through a transparent incentive system:

• Quarterly Bonuses: Employees receive quarterly distributions from the balance of their expense account, encouraging them to reduce costs and increase sales to maximize their bonuses.

• Internal Deposits: Employees can participate in a system akin to capital participation by making internal deposits, which are loans from individuals to the company. This allows them to receive distributions from the profit account, further aligning their interests with the company's success.

• Long-Term Benefits: Employees receive distributions from the profit account for the same period they have been with the company, even after retirement, incentivising them to contribute to the company's long-term profitability.

Internal Culture

HOLIS fosters a culture of autonomy by encouraging employees to take ownership of their roles and responsibilities. The company values transparency, collaboration, and continuous improvement, allowing employees to thrive in an environment where they are trusted to make decisions and contribute to the organization's success.

The decentralized structure and financial transparency encourage innovation and effective cost management. Employees are motivated to reduce expenses and increase efficiency, directly impacting their financial rewards. This culture of innovation and cost-consciousness has led to significant improvements in company performance and employee satisfaction.

HOLIS's model promotes long-term thinking by incentivising employees to consider the long-term viability of the company. To this end, it is of utmost importance to be constantly aware of customer satisfaction and to gain long-term repeat customers. Because the interests of employees are aligned with those of customers, there are fewer complaints and more satisfied customers.The internal deposit system and long-term profit distributions encourage employees to prioritize strategic decisions that ensure the company's continued success and profitability.

Conclusion

The transformation of HOLIS into a decentralized, self-managed organization with transparent money flows represents a remarkable example of aligning individual and organizational interests. This transition embodies the fundamental principles behind RenDanHeYi. By embracing the principles of self-management and financial transparency, HOLIS has successfully enhanced employee satisfaction, increased profitability, and positioned itself for long-term success.