Haier and higher
The radical boss of Haier wants to transform the world’s biggest appliance-maker into a nimble internet-age firm
Oct 12th 2013 | QINGDAO | From the print edition

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“NO URINATION or defecation in the working area.” That admonition was among 13 rules that managers felt necessary to post on the walls of a shambolic fridge factory in Qingdao in the early 1980s. After several senior managers failed to turn it around, in 1984 the municipal government of the Chinese city appointed a young employee, Zhang Ruimin, as the firm’s boss. The gamble worked. Since then a lousy local firm has turned into the world’s biggest appliance-maker.
Most think of Chinese companies as peddlers of cheap, undifferentiated kit or mere copycats. In contrast, Haier is recognised globally for reliability and marketing know-how. Mr Zhang had spent time in quality-obsessed Germany, where he observed that even manhole covers were precisely made and numbered. It made a deep impression. Incensed that a fifth of the products his plant turned out were defective, in 1985 he handed out sledgehammers and joined employees in smashing 76 faulty fridges in public view. That won him national celebrity and was the start of the firm’s transformation.
In this section
Haier and higher
Pennies from heavenSilicon and pineCracking the screensTurning JapaneseThree legs good?Not open for businessReprintsNow comes Mr Zhang’s latest radical notion: eliminating the firm’s entire middle management. But surely it is barmy to tinker with a successful business model? A close inspection of the firm’s rise reveals that Mr Zhang has never adhered to conventional wisdom.
Haier became China’s biggest fridge-maker in 1999 in part by acquiring lots of lossmaking local rivals. Mr Zhang looked for firms with strong products and markets but inept leadership—“stunned fish”, he calls them—that could be turned around by superior management. His un-Chinese obsession with quality and branding helped, earning his products a premium even during periodic price wars. He also emphasised top-flight service, rare in China, promising that machines would be free if not delivered within 24 hours.
Mr Zhang also defied Chinese notions of how to expand overseas. Rather than go first to less competitive regions like South-East Asia