RenDanHeYi: The Organizational Model Defining The Future Of Work?
We just made our third visit in 10 months to Qingdao, China. Again, we visited Bucket List pioneer Haier. This time we were invited to speak at the 2nd International RenDanHeYi Model Forum. This is where developments in Haier’s unique organizational model—RenDanHeYi—are discussed. Here is what we learned.
Haier is the world’s number one home appliance manufacturer. It is a Chinese colossus with >70,000 employees. Since the 1980’s, Haier has reinvented itself several times.
The most recent was remarkable. It broke the company into >4,000 micro-enterprises. These self-organizing micro businesses act as separate entities (and in some cases, actually are). The core idea is that employees get ownership, decision-making rights and a customer-paid salary. They truly become entrepreneurs.
For a more detailed understanding of Haier, see our previous articles: Picking The Brain Of The World’s Most Radical CEO: Zhang Ruimin.
General Electric Appliances
In 2016, Haier took over General Electric Appliances (GEA) in the US. Ever since, we’ve watched this transformation. How does a Chinese company translate its pioneering thinking to the western world? What does such a transformation look like?
We had the opportunity to learn about their success so far. Initial results are promising. Sales this year are up 11%, despite a market decline of 1%.
We’re interested in other outcomes, too. What is the effect on employee motivation? How do they feel about the new environment? How did the transformation take place? What were the challenges, the obstacles, and the keys to success? Where did they start? And how?
Our interest was sparked when Kevin Nolan (CEO of GEA) said: “It’s actually not that hard. You just have to dare to let go—to give up control.”
We’d like to visit GEA—to learn more about how Haier’s model, and the micro-enterprise structure, translates to a western organization.
As CEO Zhang Ruimin says: “With the RenDanHeYi model we truly enter the network age. But the network aspect is not even the most important. What is more important is that we no longer try to delegate to, or ‘empower’, employees.
It’s now time for every employee to be his or her own boss. Even Peter Drucker told us that ‘everyone can be a CEO’. And if everyone acts as a CEO, we will grow collectively as an enterprise, and no longer be dependent on a few key people.
So, with the RenDanHeYi model we move away from being like an empire (with a traditional, closed pyramid) to be more like a rain forest (with an open networked platform). Every empire will eventually collapse. A rain forest, on the other hand, can be sustained.”
Literally, “Ren” refers to each employee, “Dan” refers to the needs of each user, and “HeYi” refers to the connection between each employee and the needs of each user.
A long list of experts
At the forum, well-known experts shared their perspectives on the RenDanHeYi model. Some have studied Haier for decades. The line-up included:
- Haier’s CEO, Zhang Ruimin
- CIO of Interbrand, Christopher Nurko
- Management expert, and Professor Gary Hamel
- Professor Rosabeth Moss Kanter
- Professor David Teece
- Author, Larry Downes
- Work Futures founder, Stowe Boyd
- Professor Danah Zohar
We shared our story of Corporate Rebels, and hosted the afternoon session. (And we got the chance to practice our Chinese in front of 1000 international guests!)
What were the experts’ most frequent comments on Haier’s model? That Haier is one of the few examples of an organization that actually puts their theories into practice. And that it is a pioneer in implementing progressive academic theories.
Thinkers50 Hall of Fame
Right after the forum, Stuart Crainer and Des Dearlove (co-founders of Thinkers50) opened the “Thinkers50 Qingdao Hall Of Fame”. (The Thinkers50 is well-known for promoting the best of management ideas.)
This week they added two thinkers posthumously to their impressive list: Peter Drucker and CK Prahalad. Drucker is known as “the founder of modern management”, with ideas like management by objectives, and self-control. Prahalad was added for his many contributions.
One of Prahalad's most powerful (in our view) is “Fortune at the bottom of the pyramid”. This concept focuses on business models that provide goods and services to the poor—while benefiting both companies and the poor.
Neither of these influential thinkers are alive—but their ideas are. For example, the Peter Drucker Forum will take place for the tenth time in November, in Vienna.
A continuous exploration
Our research into Haier continues. It’s a complex, continuously adapting model that even Haier is still developing. It’s an ongoing exploration to redefine, challenge, and improve their way of working.
The RenDanHeYi model is a complex, continuously changing model that is still growing and developing. Some parts are more advanced than others - it's a continuous exploration to redefine, challenge, and improve their way of working.
Along the way, as you know, we’ll continue to update you on the radical transformations, practices, and principles we come across in our quest to make work more fun.
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You should definitely check out a book called "The Haier Model" by Yangfeng Cao, here it is: https://www.amazon.com/Haier-Model-Reinventing-multinational-network-ebook/dp/B079C53BYQ
I was just doing up a paper on Zhang and found his RenDanHeYi philosophy very refreshing. I think a good standout example of this philosophy is Haier's subsidiary FirstBuild. Just when you think the micro-enterprises are responsive and nimble enough, FirstBuild furthers that by being an open community that is in the business of receiving feedback from stakeholders, even Haier's competitors. The company also openly showcase the ideas and projects it is working on, which further solicits ideas from stakeholders.
This year we launched the Corporate Rebels Academy and our first course on new ways of working. Four cohorts of students have studied the world's most progressive organizations. Today, we announce 2022 class dates and open enrollments. You can apply now!
My company, Happy, was not in happy shape! Sales had flatlined over 5 years. We were making a substantial loss. We had enough in the bank to last just 6 months. And we had parted company with the M.D. of our largest department.
There is a lot of comfort in knowing your way of running meetings is actually effective. Comforting because you know people aren’t annoyed by being in a pointless or unfocused meeting, and also because you know something is actually getting accomplished.