Rendanheyi in Australia & New Zealand

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This is an excerpt from our book titled 'Start-up Factory'

Fisher & Paykel

After taking charge of Fisher & Paykel in early 2020, CEO Daniel Witten-Hannah sent an email to all employees. “You've got our backing to do things a bit differently, to follow your instinct, and to chase opportunities that will see us outperform our competition,” he wrote. Witten-Hannah knew that a successful implementation of Rendanheyi at Fisher & Paykel required the breakdown of bureaucratic systems. And to achieve further decentralisation, the top leadership team needed to know how to delegate. To kick-start the transformation, Witten-Hannah focused first on management, inspiring the mobilisation of employees' initiative as an entry point and using Rendanheyi to transform Fisher & Paykel.

This large company with a legacy stretching back many years, had a lot of work to do at the beginning. In the old days, employees would listen to instructions and work for their managers. Now, senior management delegated decision-making power to the microenterprises. They could skip the approval process. By simplifying things, they hoped that each microenterprise would become motivated to create value for users. And through the implementation and signing of bidding agreements, they hoped to stimulate microenterprises to set their goals and be responsible for the results.

They decided on a modest start: they would pilot the Rendanheyi model in the Australian division. Nearly 40 percent of Fisher & Paykel’s revenue at the time came from the neighbouring continent, so it was an important market. If it could be made to work there, there would be more confidence that the model could be replicated across the whole company.

The transformation began just as the outbreak of coronavirus forced businesses around the world into a sudden crisis. Traditional business models were in for a trying time. But Fisher & Paykel used Rendanheyi to avoid any lay-offs during the pandemic — and managed to increase profits. The first-year results were promising: annual revenue increased by 36 percent, while profit grew by 137 percent.

So, what exactly did they do? In short, the Australian Fisher & Paykel team adjusted. In terms of system and process, the business rhythm was revised. The planning cycle was changed from monthly to weekly in the early stages of the pandemic so demand and supply could be adjusted according to market changes. The company encouraged information-sharing. Visualisation and transparency helped employees to clarify their responsibilities and priorities for shared goals.

The top leadership team, meanwhile, started to hold daily half-hour meetings to discuss the priority of tasks and clarify the parallel collaboration of cross-functional teams. For the allocation of decision-making power, the New Zealand HQ decentralised and passed the process to the microenterprises.

That was the most obvious change. Zhao Huaqiang, the leader of the experience-oriented EMC in Australia, said: “In the past, employees were waiting, demanding, relying on HQ. Now we are aware of the changes in customer market demand.

“Fisher & Paykel headquarters and the Haier Group’s platforms took the initiative to provide us with support. All microenterprises now meet every week, or even every day, to discuss such things as planning, R&D, marketing and production. We meet to achieve a richer sharing of information in the various EMCs. It’s clear that a collaborative relationship has begun to take shape.”

Jason Healey, head of retail sales of Haier Brand Australia, said that Haier's rapid growth was the result of co-operation, “not just (of) the sales team, but all the departments involved”.

One of Fisher & Paykel’s winning strategies was to make everyone in the team move quickly, with clear goals, information-sharing, and decision-making. Jeremy Sargent said Q2 growth in the white goods sector — fridges, washing machines and kitchen appliances — along with the growth of both brands showed the importance of swift responses. Microenterprises were empowered to seize market opportunities.

When it comes to his personal feelings of Haier’s insistence on the Rendanheyi model, Sargent added: “Before I joined Fisher & Paykel, I did not understand the model, but I think it serves to connect the entrepreneur with the goal. The cross-departmental co-operation realised under this model, especially that of the autonomous employees in the microenterprises, is something I have never seen in my 35 years of working.”

There are still challenges to solve and the road of transformation is long. Fisher and Paykel still faces the challenge of formulating a new compensation mechanism, according to local conditions, to realise profit-sharing in microenterprises and EMCs.

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Haier is just one of the case studies contained in the extensive and immersive 6-week course from our Corporate Rebels Academy. Click here to learn more about what you will learn from the course and view answers to some frequently asked questions.

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