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Haier Human Resources Management

Essay Topic:

HRM Effectiveness Evaluation Synergy makes it possible! HRM Effectiveness Evaluation Synergy makes it possible! To Sir Sohail Islam By Group # 3 Date 24-01-2008 Letter of Transmittal GIFT University Gujranwala, Pakistan January, 09, 2008 Mr. Sohail Islam GIFT University Gujranwala, Pakistan Dear Sir, The report is focused on evaluating the effectiveness of Human Resource Department of any multinational Company. We chose Haier for this purpose.

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We are very thankful to you that you gave us the opportunity to work on such topic, which really made us aware of a lot of hidden facts about the practical HR work done at companies. You helped us a lot in defining this topic. We are very grateful to you that you think us capable of this. Really, we have given our full in this report. We hope it will be above your expectations. Yours affectionately, Zain Hameed, Sarfraz Ahmed, Zohaib Khalid, Umair Ameen, Usman Khalid. Table of Contents Topics Detail |Page Number | |Executive Summary |1 | |Introduction |3 | |Introduction to Haier |6 | |Company Background |6 | |Company Facts |9 | |Corporate Overview |9 | |Global Presence |10 | |Board of Directors |10 | |Recognition |10 | |Leadership at Haier |12 | |Haier’s HR |14 | |Conception of HR 14 | |Challenge your content, manage…… |16 | |Values and Philosophy |18 | |Haier in Pakistan |32 | |Evaluation of HR Department |34 | |Conclusion |50 | |References | | Executive Summary This project is concerned with evaluating effectiveness of an HR Department in any multinational company. For the above-described activity, we chose well-known transnational electronic appliances manufacturing company named as “Haier”. Haier Pakistan holds its office at Raiwind Road. Haier Pakistan has split its HR Department in two parts. One part deals with marketing and distribution employees, while other deals with rest of the employees including administration, accounting, finance, security, and production departments.

As discussed above, our task was to evaluate the effectiveness of the HR department, and for this purpose we focused on one part of Haier’s HR Department that deals with administration, accounting, finance, security, and production departments. First of all we defined these functions and then evaluated effectiveness of each function in Haier’s HR Department. Haier was incorporated in 1984 only producing household refrigerators. In 2004, Haier’s global sales hit RMB100. 9 billion and Haier brand, valued at RMB61. 6 billion, topped all Chinese trademarks at a nationwide survey. Haier was ranked first in the row of China’s Top 10 Global Brands August 30, 2005 on the Financial Times. Haier CEO Zhang Ruimin was placed 26th of the World’s 50 Most Respected Business Leaders on 17th November, 2005 on Financial Times.

Haier’s international promotion framework encompasses global networks for design, procurement, production, distribution and after-sales services. Haier has established 15 manufacture complexes, 30 overseas production factories, 8 design centers and 58,800 sales agents worldwide. From Euro-monitor Statistics, Haier is currently ranked fourth among the global white goods makers by revenue and Haier’s goal is to play a leading role in the world white goods industry. Facing the challenges brought by E-commerce and China’s accession to the WTO, Haier began a management restructuring program in 1998 backed by the efficient Haier Market-chain System practice.

During first 5 years, Haier focused on the organization restructuring, management decentralizing with application of advanced information and network systems in order fulfillment, Market-chain performance, logistics, capital operation, after-sales service, product inventory and operational cost reduction. During second 5 year period from 2003, Haier carried out the SBU (strategic business unit) management to stimulate the enthusiasm of every employee and to enhance Haier’s competitiveness in global marketplace. Haier has 51,000 full time employees and hires 175,000 contract service personnel, providing a total of 230,000 job opportunities. Haier’s management has been worldwide recognized.

Haier has been recommended to the EU Case Studies by Lausanne Management College for Haier Market-chain Management. Haier’s goal is to become a global recognizable brand. (“Company Background”) The Haier Group is China’s largest home appliance brand and one of the world’s leading white goods home appliance manufacturers. By April 2006, the Haier Group has obtained 6,189 patented technology certificates and 589 software intellectual property rights. Haier products are sold in over 100 countries. Haier is the official Home Appliances Sponsor of the Beijing 2008 Olympic Games. As CEO, Mr. Zhang’s current goal is to further enhance Haier’s leadership in Chinese and global markets and strengthen the reputation of Haier’s brand worldwide.

The philosophy is the driving force behind the motivation and enthusiasm of Haier’s staff of over 50,000 employees worldwide. Haier is now widely recognized in the world. Haier’s production and management system restructuring has enabled Haier to diversify internal and external resources. Haier’s goal is to obtain worldwide recognition and to become one of Fortune Global 500. Haier Pakistan is the Pakistan Sales & Marketing division of the international Haier Group, a globally recognized manufacturer of world-class electrical home appliances. In the next portion evaluation of Haier’s HR department is done on the following basis. • HR Department • HR Planning Analysis and Design of Work • Training and Development • Performance Evaluation We have asked different questions, which are mentioned in the report, which leaded us to following conclusions. There should be a General Manager HR, who should be formally trained in HRM. At Haier, Administration Department is merged with Human Resource Department. HR Department should be separate from Administration Department. There are less than enough HR professionals in the Department. According to our information, Haier practices downsizing. Even if Downsizing is inevitable, then lay off employees should be adjusted to other sister organizations, like Haier has SV-RUBA.

While designing jobs, The HR department takes information through relevant HODs. The work flow is not documented at Haier. Haier HR Department takes JIT decisions. Haier’s first priority is internal sources for recruitment. The employees who come from internal sources are usually friends or relatives of existing employees. Nepotism is practiced, highly, at Haier. Nepotism reduces the efficiency of employees. Haier’s HR Department does not have any research regarding any issue. Company does not have any system to measure the change in performance and behavior after training. The minimum basic pay at Haier is 4,000. More than 1500 people are working at Haier.

Haier’s employees should be given proper and formal training to work on a particular kind of machine. There should be sessions, in which employees should be trained regarding safe work practices. Haier HR department is of the view that most accidents are due to carelessness of employees. Even if it is true, still it is fault of HR department that they did not provide proper training to employees regarding safe work practices. Introduction This project is concerned with evaluating effectiveness of an HR Department in any multinational company. The word, HRM Audit, is also used to describe this activity, but the word, audit, creates some problems in some cases.

Audit, usually, refers to financial audits, which is statutorily conducted, and has some negative meanings attached with it for some involved parties, so it would be very wise to call it the evaluation or effectiveness measure instead of Audit. For the above-described activity, we chose well-known transnational electronic appliances manufacturing company named as “Haier”. Haier is expanding very quickly, and has opened many subsidiaries in many countries including Pakistan. Haier Pakistan holds its office at Raiwind Road. This Office is a small portion of a giant size manufacturing plant at the same location. Haier Pakistan has split its HR Department in two parts. One part deals with marketing and distribution employees, while other deals with rest of the employees including administration, accounting, finance, security, and production departments.

As discussed above, our task was to evaluate the effectiveness of the HR department, and for this purpose we focused on one part of Haier’s HR Department that deals with administration, accounting, finance, security, and production departments. We split our evaluation work in components. These components were according to different HR Functions. First of all we defined these functions and then evaluated effectiveness of each function in Haier’s HR Department. For this purpose we decided to adopt interviewing approach, because it was most suitable, quick and reliable method as we planned to record each word of that interview. But before doing our desired work, we had to get some general information about Haier, because if you don’t know something, then you can never know a component of that particular thing.

Actually our focus is to check the effectiveness of a part of picture by taking whole picture in mind, so a brief introduction about Haier, its History, its leader ship, its achievements, its philosophy and values, its HR Conception, and, most importantly, information about its presence in Pakistan is given below before starting the Evaluation work. Introduction to Haier Company Background Haier was incorporated in 1984 only producing household refrigerators. Over the past 20 years, the company has witnessed significant prosperity and is now a transnational organization widely recognized in the world community. Haier currently manufactures a wide range of household electrical appliances, 15,100 varieties of items in 96 product lines, and exports products to more than 100 countries. In 2004, Haier’s global sales hit RMB100. 9 billion and Haier brand, valued at RMB61. 6 billion, topped all Chinese trademarks at a nationwide survey. Haier was ranked first in the row f China’s Top 10 Global Brands August 30, 2005 on the Financial Times. Haier CEO Zhang Ruimin was placed 26th of the World’s 50 Most Respected Business Leaders on 17th November, 2005 on Financial Times. Zhang Ruimin was ranked 6th of the Asia’s 25 Most Powerful People in Business on Fortune in August, 2004 and first of the 25 Most Powerful Business Leaders inside China on the Chinese Edition of Fortune in April 2005. Haier’s international promotion framework encompasses global networks for design, procurement, production, distribution and after-sales services. Haier has established 15 manufacture complexes, 30 overseas production factories, 8 design centers and 58,800 sales agents worldwide.

From Zhongyikang Statistics, Haier’s leadership position in Chinese home appliance industry has been solidified by obtaining the domestic market share of 21% for overall appliances, far ahead of all its competitors, 34% for white goods, exceeding globally recognized domination line, and 14% for small electric appliances, overtaking all previous competitive rivals. In the world market, Haier has gained first place in the United States for sales of compact refrigerators and wine coolers, in Iran for washing machines and Cyprus for air conditioners. From Euro-monitor Statistics, Haier is currently ranked fourth among the global white goods makers by revenue and Haier’s goal is to play a leading role in the world white goods industry.

On March 4, 2002, Haier unveiled its American headquarters in the landmark neo-classical building, the former offices of the Greenwich Savings Bank, on Broadway, Manhattan, New York, an indication that Haier had moved into a new phase for globalization of product design, manufacture and sales and had a strong determination for long-term development in the United States. On August 20, 2003, Haier erected an electric billboard in the shopping district of Ginza, Tokyo, symbolizing that Haier’s determination to reach Japanese marketplace. Facing the challenges brought by E-commerce and China’s accession to the WTO, Haier began a management restructuring program in 1998 backed by the efficient Haier Market-chain System practice.

During first 5 years, Haier focused on the organization restructuring, management decentralizing with application of advanced information and network systems in order fulfillment, Market-chain performance, logistics, capital operation, after-sales service, product inventory and operational cost reduction. During second 5 year period from 2003, Haier carried out the SBU (strategic business unit) management to stimulate the enthusiasm of every employee and to enhance Haier’s competitiveness in global marketplace. Over the past 20 years, Haier provided more than 100 million appliances to worldwide consumers and paid cumulatively a total tax of RMB13. 6 billion, of which RMB2 billion in 2004, RMB5. 5 million per day on average.

Haier has scheduled to finance 100 Project Hope primary schools, of which 47 are put into operation. Haier has 51,000 full time employees and hires 175,000 contract service personnel, providing a total of 230,000 job opportunities. Haier’s management has been worldwide recognized. Haier’s experience has been introduced in 16 case studies in business merger, financial management and corporate culture by 7 foreign educational institutes, including Harvard University, University of Southern California, Lausanne Management College, the European Business College and Kobe University. Haier has been recommended to the EU Case Studies by Lausanne Management College for Haier Market-chain Management.

Haier’s goal is to become a global recognizable brand. (“Company Background”) Company Facts Corporate Overview The Haier Group is China’s largest home appliance brand and one of the world’s leading white goods home appliance manufacturers. Haier was founded in 1984 in Qingdao, Shandong Province, China and manufactures home appliances in over 15,100 different specifications under 96 categories. By April 2006, the Haier Group has obtained 6,189 patented technology certificates and 589 software intellectual property rights. Haier products are sold in over 100 countries. Haier is the official Home Appliances Sponsor of the Beijing 2008 Olympic Games. Headquarters: |Qingdao, Shandong Province, China | |Employees |Over 50,000 worldwide | |Financial Information: |Haier’s global revenue in 2005 reached RMB 103. 4 billion | | |Average annual growth of 68% between 1984 and 2005 | |No. of Subsidiaries |Over 240 | |Listed Subsidiaries |Haier Electronics Group Co. , Ltd. listed on the Hong Kong Stock | | |Exchange | | |Qingdao Haier Co. , Ltd.

Listed on the Shanghai Stock Exchange | |Business Scope |Technology research | | |Product development and manufacturing | | |Trade | | |Financial services | |Key Product Lines |Refrigerators/Freezers, commercial air-conditioners, microwave | | |ovens, washing machines, dishwashers, televisions, mobile phones,| | |computers | |Global Presence | |Trading Companies: |64 | |Design Centers |8 | |Industrial Complexes |15 | |Sales Network |Over 58,000 | Board of Directors Chairman and CEO Mr. Zhang Ruimin President Ms. Yang Mianmian

Vice Chairman Mr. Wu Kesong Recognition • Ranked 86th among the world’s 500 Most Influential Brands by World Brand Lab in 2006. Only Chinese brand to be ranked in top 100 for three consecutive years • Ranked 1st among Chinese brands with the most potential by Glebor’s Global Financial Reports of Canada, 2006 • Ranked 1st among China’s Top 10 Global Brands by the Financial Times in 2005 • Ranked 1st among China’s Top 10 Global Brands by China State Bureau of Quality and Technical Supervision (CSBTS) for refrigerators and washing machines in 2005 • CEO Zhang Ruimin ranked 26th among World’s Most Respected Business Leaders by the Financial Times in 2005 CEO Zhang Ruimin ranked 6th among Asia’s 25 Most Powerful People in Business by Fortune magazine in 2004 • Received a World Climate Award from the United Nations Development Program and the US Environment Protection Administration in 2000 (“Company Facts”) Leadership at Haier “As far as transforming moments go in a CEO’s career, Zhang Ruimin has a story to match anyone’s. ” – Financial Times Zhang Ruimin is the Chairman of the Board of Directors and CEO of Haier Group, a position he assumed in 2000. He also holds the title of senior economist. As CEO, Mr. Zhang’s current goal is to further enhance Haier’s leadership in Chinese and global markets and strengthen the reputation of Haier’s brand worldwide.

In 1984, Zhang Ruimin was appointed director of the Qingdao Refrigerator Factory, a small, ailing collectively-owned factory in the Shandong province of China. Under his leadership and unique management philosophy, the company has since grown to become what is now the Haier Group, China’s leading home appliance brand, and one of the world’s largest home appliance makers, with a distribution presence in over 100 countries. Mr. Zhang began the turnaround of Haier with an order to destroy 76 defective refrigerators, laying into one himself with a sledgehammer – now preserved for its symbolism in Haier’s museum. That singular act of destruction impressed on employees that poor quality would not be acceptable. He reinforced the message with an aggressive Western-style quality control program. Mr.

Zhang’s management philosophy is a blend of international management principles and Chinese wisdom, with innovation and excellence as its cornerstones. The philosophy is the driving force behind the motivation and enthusiasm of Haier’s staff of over 50,000 employees worldwide. Mr. Zhang acts as a role model for modern Chinese entrepreneurs, and his leadership philosophy and business acumen are widely admired, both in China and within the international business community. Mr. Zhang holds an MBA degree from China Science and Technology University. He was born on January 5, 1949 in Laizhou, Shandong province, China. Zhang Ruimin[pic] Chairman and Chief Executive Officer (“Leadership”) Haier’s HR Conception of HR Globalized Enterprise and Globalized Staff

Zhang Ruimin, CEO of Haier Group, performs branding strategy, multi-directions strategy and global strategy under the direction of globalization and creation of famous branding. Currently, Haier acquires continuously quick increasing; the brand of Haier keeps its first position of China home electronics industry, and the brand wins more and more credits in the international market. In 1997, State Economic and Trade Commission decided to support Haier as one of six main Chinese enterprises to compete “World Top 500 Enterprises”. Globalized operation model in Haier drives it to “the Express Way”, so in the international market, Haier wins more and more respects in short period of time.

However, we can clearly recognize that Haier still has distance compared with world top enterprises. During the current situation, as long as the brand of Haier becomes a global branding, each of our staffs initially shall become a globalized talent. The objectives of HR development in Haier Group must match our enterprise’s strategic objective of globalization, to develop international and competitive talents. (“Conception of HR”) Promotion based upon excellence, not appearance Promotion is based upon excellence, not appearance —- Haier’s Rule of its HR Development During our HR development, we insist on innovation of notion, innovation of system.

We keep creating a kind of environment of fair, just and straightforward, and build up a set of mechanism to develop personnel potentialities. Therefore, while we purchase our enterprise’s objectives, we can offer each individual a developing space to realize his own value. “How much you can be involved, we will provide you a corresponding platform. ” 1. “Each individual is a talent, and promotion is based upon excellence, not appearance. ” —- Providing a fair, just and open competition environment in fact is the competition of talents. Staffs lead to the enterprise in success. If an enterprise has of most talented and high-qualified people, it will win in the competition.

Haier’s HR development initially based on “Each individual is a talent”, “firstly training people and then creating a brand” to change the function of most of traditional HR departments, and finally built up a HR mechanism and a policy with the function of, how to research and develop individual potentiality, which is different to traditional HR function, but concerning about who should be trained, and who should be promoted to the position of leadership. We provide our staffs 3 kinds of career designing: 1. For administrators; 2. For professionals; 3. For workers. Each of them has one direction towards his promotion. 2. “Who is incumbent who shall be inspected; promotion is based on competition; One’s position shall be changed after his expired term of office. ” —- We need to inspect and control the incumbent administrators.

There is such a rule in Haier’s HR management: the so called “if you give one person rights, you shall definitely trust him, and if you suspect him, you won’t give him any rights”, which is a definitely deny of market economy. In market economy, the essential relationship is driven by benefits. Trust or distrust your staff, or evaluate one staff only based on your private emotions or only based on his personnel capacity won’t be a proper method, and maybe will have negative effects in success of an enterprise. Therefore, Haier makes a rule like “Who is incumbent who shall be inspected; promotion is based on competition; position shall be changed after one’s expired term of office”. 3. “Usually more deeply dolphin dives, more highly it jumps. “—- Mechanism of promotion and demotion.

When we promote a cadre to a high-level position, we won’t him immediately inaugurate, however, we assign him to work in related department as an ordinary role; sometimes, even if he is already been playing a important role in the department, due to his lack of such experience, we will let him lower his position and work as a common staff. Sometimes, one person is very experienced, but only lack of integrated and coordinated skills; we will assign him to certain department to have so-called internship. However, it is tough for a cadre under such high pressure; on the other hand, he is finally trained and cultivated his integrated skills. 4. Elimination Quota—- That means in certain period of time and within certain division, we set a quota to lay off staffs in percent.

It can be cruel; however, it is good for an enterprise to purchase its long-term strategy. In Haier, there is no such saying “I cannot give any achievement to the enterprise; however my time and physical works shall be took into account. ” If you cannot offer your best efforts, you probably make a fault. Therefore, in such period of time, within certain division, we follow out our elimination quota in proportion. (“Conception of HR”) Challenge your content, manage yourself and challenge yourself Hang Rui Min, CEO of the Group, pointed out in the article My Point of View towards New Economy that, in the age of new economy, people is the key factor to ensure your innovation.

Each individual person can body of innovation, and we design our train of thought as a market chain to support outstanding. 1. “External market competition leads to the internal”—- Market Chain Effect. We convince that there are 2 markets involved in one enterprise, the internal and the external. The internal market is how to meet the requirements of the staffs to arouse their initiatives; on the other hand, the external market is to meet the requirements of the clients. Inside Haier Group, “the next processing is the client”, so it must have a main body to perform their responsibilities for their own market. “The next processing is the client”, each staff can represent a client, or he is the market.

Each staff can suppose to have no responsibility to his supervisor occasionally, but the most important thing is he must have the responsibility to the market all the time. Market chain mechanism, initialized as “SST” based on Chinese pin yin, that is to say: Firstly, we need to serve our client and acquire the related rewards; and if we cannot match the market’s requirements we must give corresponding reimbursement. Neither rewards, nor reimbursement, it could be a blank in the mechanism that means problem will occur. Therefore, the group is under the mechanism, and there are many people in their position under the sprit of “managing yourself” where people treat their own as a host in their division of Haier Group.

They manage their position as operating their own boutique so that they have extraordinary efforts in such as saving energy, decreasing consumption, improving quality etc. 2. Real time stimulation—- it is to stimulate and develop the initiatives of the staffs. To encourage new technical invention and innovation, Haier Group issues Staff Rewarding Regulation for Inventions, which establishes an award of “Haier”, “Hope of Haier” and “Rationalized Advice” etc. and based on the economic effectiveness and social effectiveness they achieved, and the enterprise, the administrators and the staffs have equal chances to win the awards respectively. Haier Group is as a sea to take domestic and overseas professional people in.

CEO of Haier, Zhang Rui Min, in the article of Haier is the sea wrote with full passions “as long as to gather all Haier people’s power together, it can generate the power as much as a sea, which need the sprit of ‘unselfish contribution and excellence chasing’ so that we can have the sense of team work. We make most of the incredible and the impossible become realizations and possibilities. Therefore, the great wave of Haier can exceed all barriers, and keep going ahead. (“Conception of HR”) Values & Philosophy Cultural Concept Corporate Culture Haier corporate culture has been widely recognized by Haier’s employees as innovative value created by Haier senior management. Innovation is the core of Haier corporate culture, Haier’s unique cultural system cultivated and developed over the past 20 years.

Haier corporate culture is guided and developed by advanced concept, innovative strategy, efficient organization, creative technology and market orientation, which have enabled Haier to grow swiftly with business expansion from China to outside world. Haier corporate culture features recognition and participation of all employees. Today, Haier is ambitious to gain worldwide recognition. To achieve this magnificent goal, Haier has had all its employees involved in realizing Haier’s ideal to be a global recognizable brand. (“Haier’s Corporate Culture”) Haier Spirit • Creating resources and worldwide prestige • Resource Creation is based on innovation . Even Haier has less resources than its rivals, it can benefit from the core competence originated from innovation. The higher objective of the Global Brand strategic stage is “worldwide prestige” which is accomplished in meeting the needs of customers from all over the world and which will in turn make Haier a globally recognized world-class brand. Haier Style Individual-goal combination, swift action and success “individual-goal combination” is our method and “swift action and success” is our target. The market of each SBU should be identified clearly and actions should be taken promptly. Haier HR Concept Promotion is based upon excellence, not appearance Haier provides its every employee opportunities to develop and demonstrate talents. It is not able people, but the mechanism to encourage able people development, should we be concerned about. The responsibility of a manager is to establish a “race track”, ie. personality development opportunity, for every employee to become a SBU.

The “Horse racing court” requires three principles, firstly, fair competition; secondly, ability-based appointment; thirdly, reasonable job rotation. Under the contract labor system policy, employees are regularly evaluated and classified by performances, and the managerial personnel do not work at the same position permanently but rotate regularly in a fixed period. The significance of Haier’s human resource management is to stimulate the enthusiasm of employees. In this system, every employee can feel the pressure from both inside and outside the company and convert the pressure into creative motility. This is the key to success. Authorization and supervision Performance with full power authorization must be supervised.

Haier regulates the rules on post control, promotion competition and job rotation “Post control” is so defined that firstly managerial personnel should self control and discipline; secondly, Haier has to establish a control system to guide the work objective and orientation and shun directional mistakes. In addition, it is aimed to control financial performance and to eliminate misconduct in business practice. “Promotion competition” indicates that a competitive system is to be operated to promote or demote employees according to their ability and performance. Every employee will be able to feel pressure while having opportunity to demonstrate and develop his potential capability. Job rotation” is destined to change positions of managerial personnel with fixed term, aiming to avoid inefficient performance in management due to thought rigidity and creativity shortage after a relatively long period on the same post. Job rotation system will create more opportunities to young managers for practical experience and expand more human resources for the company. Haier strategy Concept Activating shock fish Activating shock fish” Policy has been employed by Haier in acquisition of ailing companies for business expansion. International acquisition is characterized by three stages. In Stage 1, “Big fish eat small fish”, companies powerful in capital, not technology, merger with less powerful companies.

In Stage 2, “Fast fish eat slow fish”, these companies are powerful in technology, not capital instead. Microsoft, for example, started later than some other counterparts, however, it kept leading the industry with advanced technology and surpassed some old brands. In Stage 3, “Sharks eat sharks”, “Power Alliance” became popular in 1990s. Boeing merged with Mcdonnell in such circumstance. In China, “big fish” not allowed to eat “small fish”, nor “fast fish” and “sharks”, only “shock fish”. “Shock fish” represent those companies which are well equipped but not well operated and can be vitalized if effective management is introduced. Three directional changes In early 1999, Haier was about to decide the development guideline.

Zhang Ruimin, then President of Haier, brought forward a proposal that Haier’s 1999 development policy should be concentrated on globalization to approach Haier’s goal of global recognizable brand. To realize this goal, Haier prepared and launched an overall plan to restructure Haier’s management system for improvement of corporate competence. Zhang Ruimin proposed “Three directional changes” of restructuring the company management system. Reference: Previously, Haier focused upon maximization of profits, and Haier gives the priority to customer demands satisfaction. Directional change in management From linear organization structure to BPR of Market-chain Decentralization

Decentralization of traditional Pyramid management system on the basis of market principle application for interdepartmental management and customer needs satisfaction. Information Based upon interest of customers, production and management processes are operated under the principle of Market-chain Management with continuous and update information. Directional change in market orientation Emphasis shifted from domestic to overseas market Directional change in production scope Emphasis shifted from manufacture to service industry E-commerce system in operation for product sales Haier E-commerce System supported by advanced information technology for network management, marketing, service and procurement. Overseas Expansion based upon domestic success There are two principles.

Firstly, the best efforts are made to fully develop the current industry before entering new segment of relative products; secondly, the best efforts are made to gain the leading position in the new segment of the industry after a certain period in which the business has been well developed. Market development precedes production plants. The principle, “Market development precedes production plants” was once used for overseas business development in the initial period of Haier. It suggests that production plants should not be built unless sufficient purchase orders are received from the market developed by product sales at the very beginning of business.

In 1992, Haier set up its headquarter industrial complex in Qingdao and more then 10 industrial plants throughout the world, especially in the United States. Haier OEC Management: OEC Management. OEC is an abbreviation of Overall Every Control and Clear, indicating that overall control and supervision of every employee every day. “O” stands for Overall, “E” for Everyone, Everyday and Everything and “C” means Control and Clear. Purpose of the OEC Management is as follows: Day-based task accomplishment and improvement The task assigned for every day basis should be accomplished in the same day with an increase of 1% over that in previous day. The OEC Management is comprised of three systems: Objective > Daily Accomplishment > Incentive

The Objective must be established first; Daily accomplishment is basic to fulfillment of the objective; Result of Daily Accomplishment will be of significance when it is attached with incentive policy. Slope & ball theory An enterprise likened to be a ball on a slope requiring traction force to stop it from rolling downward and to keep it upward needs efficient management to prevent it from lagging behind and creative ideas to achieve more opportunities for development. What’s remarkable? What’s Difficult? What’s remarkable? It is remarkable for doing well simple things. What’s difficult It is difficult to accomplish the matters the public believe simple. Day-based task accomplishment and improvement The “Slope and Ball Theory” is used to describe indications of OEC Management in 3 aspects: Management is decisive to business success.

An enterprise cannot succeed and business will go down if it is not well operated. Consistent efforts should be made for management efficiency. It is a painstaking and profound process. Efficiency level of management does not always stay unchanged, even the supervising mechanism, but fluctuate continuously. Efficiency management requires untiring efforts. Management is dynamic, endlessly. Enterprise business develops while supervising mechanism needs improvement. Management is not rigid, but flexible and adjustable according to enterprise objectives and internal and external conditions. Haier’s policy is “Prepare for actual use, not for show Haier’s Market-Chain Market- chain

Market-chain management is based upon Haier’s corporate culture and computerized information system, concentrated upon order information flow and operated for logistics and capital performance to realize the Three-Zero objective business restructuring. The system incorporates the factors of sync flow efficiency, SST intensity and performance-based salary system to encourage employees to work hard to satisfy consumer requirements with application of innovative technology, valuable orders, improvement of corporate competence and creation of market demands Demolish the walls inside the outside enterprises. Chinese enterprises should demolish two side and outside walls.

Outside wall stands for the life-and-death competition between enterprises of the same trade, suggesting that competitors cooperate with each other for win-win relationship. Inside wall means administrative relation between different departments in the same enterprise, suggesting that competition mechanism be introduced to improve management efficiency. Accelerated pace for information technology application is the key to demolish the walls. Zero stock, distance and working capital. Order based performance indicates that production will not be arranged unless buyers have placed purchase orders. The entire production process is operated for ordered products. In such way, products are delivered at sight of payment and thus the goal of zero stock, distance and working capital is realized.

Zero stock The mission of logistics is to eliminate distance with time and stock volume with time efficiency. Haier’s goal is to eliminate all stock in warehouse. If warehouse is likened to a reservoir, Haier will change the reservoir into a flowing river by the JIT tool. JIT purchase: Purchase is precisely arranged according to the actual needs; needed parts and raw materials are procured through worldwide suppliers for order fulfillment. JIT supply chain: Haier’s warehouse is just a transit station in which all materials can only be stored for 7 days at most. In Haier automated high-bay warehouses, parts and components will be allowed for 3 days.

JIT delivery: Haier has established a nationwide logistics system for product delivery to every corner in the country. Zero distance Zero distance is another goal of the Market-chain Management. Under this system, Haier will, immediately after obtaining the purchase order, take every effort to satisfy the needs of customers. In the process, delivery efficiency plays a significant role to shorten the time with space efficiency. Buyers can place orders at the Internet and Haier will deliver the ordered goods to the buyers. Zero distance is important for a manufacturer to acquire orders. The enterprise strives to shorten or even eliminate the distance to buyers to obtain and satisfy individual orders.

If the distance is not eliminated, the manufacturer might not easily know what customers need and how to satisfy their demands. Zero working capital The third goal of the Market-chain Management is to realize zero working capital. It is believed to be the capability to change cash into material objects and then convert material objects into cash. Zero working capital means no fund is used as floating capital. Before making the payment to sub-suppliers, the manufacturer receives payment from buyers. This can be realized as production is scheduled at request of customers. This will result in healthy operation of the enterprise. Doing right things and doing things right way Haier’s operational restructuring based upon the Market-chain is carried out by three phases.

In phase 1, internal resources are integrated to structure the Market-chain system; in phase 2, valuable orders are obtained from the Market-chain system, giving emphasis upon customer demands satisfaction and establishment of global supply-chain to improve the corporate competence. Currently, Haier has entered phase 3 of the operational restructuring process by focusing upon integration of human resource to make every employee a SBU for more valuable orders. Haier is carrying the OEC Management with an aim to improve management efficiency and quality assurance. This is doing things in right way. On the other side, Haier launches the Market-chain program for competition in the world market place. This is doing right things. There is a distinct difference between doing right things and doing things in right way.

An example, a worker on production line is doing things in right way if operation and product quality comply with technical specifications. However, if the product cannot be marketed, what the worker has done is not right. From this point of view, doing right things is the basis of doing things in right way. Continuous improvement of management is to ensure that every employee is doing right. Speed, innovation and SBU Since 2002, Haier’s development theme has been Speed, Innovation and SBU. Speed helps create customer resource. In other words, Haier wants to be the early bird catching the worm. Innovation is to help customers create value provided customer resource is ensured.

If every employee becomes a SBU, loyalty of customers will be achieved. Speed Why speed? The fantastic efficiency of the Internet makes us believe that slow players will sure fail. Those who have no relation with the Internet will be washed out. Those using the Internet in business practice but having weak competitiveness will also be eliminated from the competition in the marketplace. Speed plays a significant role in order acquisition, fulfillment and follow-up service. Aim of fast speed Fast speed is aimed at realizing zero stock, zero distance and zero operating capital. Innovation Why innovation? In current depressed market, fast speed is gained by innovative thinking and spirit.

The obtained market shares cannot be continued if no innovation is pursued. During the innovation process, innovation should be combined with speed. The decentralized organizing structure is aimed to get the enterprise involved in the market practice. The entire process of management and production are concentrated upon satisfying the needs of both market and innovation. How to help customers create value by innovation In current network age, value of customers is realized by two methods, ie. customization and globalization. In the current market where supply exceeds demand, buyers have more options. Only those who satisfy their individual demands will be chosen by the buyers.

Aim of innovation: acquisition of valuable orders under the following conditions: Essence of innovation Approach of innovation: innovative simulation and introduction. SBU What’s SBU? SBU is an abbreviation of Strategic Business Unit If not only every division, but also every employee is a SBU, Haier’s business strategy will be carried out and shouldered by all employees. At the same time, the innovation of every employee will ensure that Haier’s strategy is successfully implemented. Why SBU? SBU is a carrier of efficient and innovative performance. Those who do not pursue fast speed and innovation are not SBUs. Managers have to fulfill business assignment.

If subordinates are not SBUs, the enterprise cannot satisfy individual customer needs. In other words, what SBU demonstrates is fast speed innovation. With this philosophy, Haier’s objective of fast speed innovative production is quantified for every employee. As a result, every employee will have to carry out technical innovation for production or management efficiency improvement for customer need satisfaction. Haier’s One-Stop service and B-to-E process is in operation to optimize customization production. How to become SBU? Four essential requirements are market objective, purchase order, sales achievements and market reward. These are goals of the company to achieve and break down for every employee.

Market objective: competitive power with fast speed creating customer resources Purchase order: acquiring valuable purchase orders with innovative technology to achieve market objective. Sales achievements: quantitative data on customer satisfaction gained by order fulfillment and displayed by the company information system Market reward: pay allocated from additional income created by marketing performance and used as incentive for employee enthusiasm in better performance Function of SBU What does SBU mean to the company, employees and customers? To employees, SBU means innovation, and employees will demonstrate their values by helping customers create values.

To the company, SBU means corporate competence, which cannot be copied by competitors if every employee becomes a SBU. To customers, SBU means a network age and loyalty to the manufacturer and its brand. If every employee carries out innovation, customer demands can always be satisfied. Features of SBU Feature 1: Only marketing target and position, not senior management or subordinate, considered in business practice. Feature 2: Only market changes, not time to start nor place to finish, focused upon for innovation. Feature 3: Only competitive end market could we are encouraged by to energetically and efficiently realize our ambitious goal. Go abroad; go localized, go up to a higher level – globalized Haier. First difficult, than easy

Build name brand in developed markets and then expand the business into developing markets with little resistance. Without domestic market, business is rootless, without international market, business is weak Without domestic market, business is rootless, without international market, business is weak. If a business is uncompetitive in the domestic market, it is impossible make its way into the international market. However, if a business is successful only in the domestic market, the superiority won’t last long. Haier has experienced a tough time when starting to go abroad. Some asked the question what is the point to seek for a bone abroad when there was easy meat in China.

The truth is when all are fighting over the same piece of meat, there will be nothing left but the bone in no time. A business like Haier should actively take part in the global competition. Three 1/3s 1/3 made and sold at home 1/3 made at home and sold abroad 1/3 made and sold abroad Three-in-one localization Three-in-one localization: Haier has its technical development centers, manufacture bases and trading companies set up overseas to enable localized operations with respect to design, manufacture and marketing, among which are Haier America, Haier Europe, Haier Middle East, Haier Southeast Asia, and more. Case study Acquisition of Italian refrigerator plant June 19, 2001.

The signing ceremony of Haier acquiring an Italian refrigerator plant was held in the central building of Qingdao Group. The acquisition marked the successful three-in-one localization (localized design, manufacture and marketing) in Europe after the United Sates. The Italian plant was located in a geographically convenient area together with many plants from famous manufacturers like Whirlpool, CANDY, Zanussi, etc. The project would bring Haier “three windows” and “two radiation effects”, i. e. windows of information, technology and purchase and marketing radiation from Italy to the rest of Europe and product radiation from refrigerator to the rest of product mix.

The transnational acquisition provided Haier a white goods production base in Europe as well as access to local manufacturer association and local information, paving the way for integrating of funds, intelligence and cultures and building a world-class brand. Haier believes that internationalization is supported by three-in-one localization of design, manufacture and marketing. The key to internationalization is making use of local funds and human resources. Integration and creation Integrate funds, intelligence and cultures to create a world-class brand. Three internationalization steps Internationalization of management system – to build up employee loyalty

Internationalization of service – to build up customer loyalty Internationalization of brand – to build up international competence Five globalization strategies Globalization of design In order to maintain the competitive edge in the international market, Haier has set up 18 design centers worldwide to consolidate resources from developed countries. Globalization of manufacture Haier has set up 10 industrial parks worldwide and 22 plants overseas, making Haier a global manufacturer and enabling prompt action to satisfy local user needs for quality Haier products which in turn greatly provides great support for Haier to achieve its goal of world-class brand. Globalization of marketing

Haier has 5,000 overseas retail outlets and over 10,000 service centers all over the world. The principle of interaction, development and innovation has been uphold in the course of globalization, e. g. , the best practice of Haier America is shared with Haier Europe, and the successful marketing of Haier Europe is introduced to Haier Middle East, opening up a vigorous prospect of global marketing. Globalization of purchase Public bidding and online purchase are carried out via Internet. A strategic partnership has been established with best global suppliers, who also participate in the front-end design of Haier products. Globalization of capital operation

By virtue of its experience in manufacture industry, Haier has made its way into finance industry Up to now; Haier has invested in Qingdao Commerce Bank and Chang Jiang Securities and is also running an insurance agency, a life insurance joint venture and a finance firm. By taking 50% shares of Haier Electronics Group, a company listed in Hong Kong, Haier has laid a solid foundation for its further movement to the international capital market. Co-optition Co-optition is the strategic trend of corporate globalization in the 21st century. It is based on competency complementation which is enabled through exchange of resources and aimed at win-win cooperation. On January 8, 2002, Haier announced the co-optition with Sanyo Japan.

Later on February 20, 2002, Haier announced the co-optition with Sampo Taiwan Go abroad; go localized, go up to Haier level Go abroad: go to mainstream markets in mainstream regions; Go localized: be admitted into mainstream channels selling mainstream products; Go up to a higher level: be a mainstream brand Haier in Pakistan Haier is now widely recognized in the world. From the latest statistics of Euro-monitor, Haier was placed fifth for the global white goods manufacturers with the largest world market share for refrigerators. In the list of the most respected companies in Asia and Pacific Region published by the Far Eastern Economic Review issue December 26, 2002, Haier was placed first.

Haier’s production and management system restructuring has enabled Haier to diversify internal and external resources. At pre0sent, Haier has put its worldwide logistics, distribution and manufacturing facilities into efficient operation for customer demand satisfaction. Haier’s goal is to obtain worldwide recognition and to become one of Fortune Global 500. |[pic] | |”Haier objective: Before selection of products you have many choices in the | | | |market but Haier is the name of trust confidence in the world”. | |Chief Executive | | | |Mr.

Shah Faisal | | | |[pic] | |“We would like to work fast”. Haier is not only competing strictly on price but by | | | |winning market shares through user friendly design, innovative features and top | | | |service for a wide range of appliances and consumer electronics. | |Country Manager | | | |Mr. Faraz Fiaz | | | Haier Pakistan is the Pakistan Sales & Marketing division of the international Haier Group, a globally recognized manufacturer of world-class electrical home appliances.

The joint venture between Ruba General Trading Company and Haier Group of China has brought Haier to Pakistan with an initial investment of about US$35 million and a commitment to provide world-class innovative products based on uncompromising quality to the Pakistani consumer. The plant spreads over a vast area of 63 acres with a covered area of 0. 6 million square feet including a workers’ colony on Raiwind Road, Lahore. The project is expected to produce 0. 9 million pieces of household appliances per year with plans to export to the Middle East and all over Asia. In the first year of its operations, Haier will generate employment opportunities to 600 individuals with potential to grow up to 1200 within the next 5 years. Furthermore, Haier will supplement income of 1000 to 1500 families providing indirect earning and employment possibilities.

The roster of products to be launched immediately in Pakistan includes Refrigerators, Air-Conditioners (Window & Split), Deep Freezers and Washing Machines, Microwave Ovens and Small Appliances with Dishwashers, Vacuum Cleaners, Television Sets and Mobile Phones to follow shortly. Haier Pakistan has entered the local market with a commitment to help its consumers reap the benefits of modern lifestyle and to provide them world-class innovative products, unmatched nationwide customer support, a vast dealer network and a steadfast after- sales-service throughout the country. (“About Haier”) Evaluation of HR Department As discussed in introductory portion of this project, we have divided evaluation task in different functions.

The division is as following • HR Department • HR Planning • Analysis and Design of Work • Recruitment and Selection • Training and Development • Performance Evaluation • Compensation and Benefits and Safety To get information about all above, we had to interview someone. For this, we got honor to meet Mr. Mohammad Asim Amjad, the HR administrator at Haier HR Department. We asked different questions about each of above functions from Mr. Asim. We recorded that interview, and also got important notes on spot. HR Department What is the structure of your HR Department? On the top of HR department is a General Manager Human Resource followed by a Senior HR manager.

Then after it, there is an HR Administrator. Below, the HR administrator, there are HR executives for Recruitment and selection, training and development, Performance appraisals, and compliance. There are also HR officers for Recruitment and selection, training and development, Performance appraisals, and compliance, which work under relevant HR executives. There is also an HR assistant, which only assists Manager Human Resource. On administration sides, after them, there are Labor Officers, and then there are two administration officers, which are followed by a whole team. One administration officer deals with construction, plant, etc, while other deals with Govt. agencies etc.

How many people are working in your organization, how many of them are permanent or otherwise, how many of them are on managerial positions and how many are otherwise? There are Approximately 1200-1700 staff in total. There are 100-1500 workers and 200 managerial staff. The amounts of workers vary according to season and currently it is not season, so we are having only 1000 workers. In the HR Department, there are approximately 10 people required, but they still do not have complete ten and are still recruiting for other. There are more than 100 people in administration staff. The HR Department is merged with Administration department at Haier. We are also planning to install a new production unit, and we need approximately 100 more workers for this.

What is your and other HR staff’s qualification? I have personally done MBA in Human Resource Management. Our Senior HR Manager is also as MBA in Human Resource Management. Some of our other HR officers are also MBA, while some of them are BBA, or Simple graduates. Our General HR Manager, who also looks after Finance matters, does not possess any formal degree in Human Resource Management. He is doing it by his experience. To Whom your HR Department Reports to? And how other people contact your HR Department? Our HR Department is headed by Finance Manager, and he only reports to CEO. So, Our HR Department Reports to CEO of the company. We have divided contact system according to function.

It means, if an employee has some problem regarding performance appraisal, he will contact the relevant HR professional. Now, it is not true that is a professional is not on seat, the work will not be done. Another HR officer will have to accommodate according to the situation and will have to do the desired work. Are your Policies properly recorder/written? And do you properly communicate these policies to other departments? If yes, then how? Yes we do have properly written and documented HR policies in our Department. We give proper code to every policy, and its effectiveness date is also mentioned. (Annex 2. 1). Also, we properly communicate these policies to other department. We also have a document regarding this communication.

In that document we have mentioned, that which personnel of a department is going to receive a copy of the policy. By this, we make sure that only relevant personnel are given the policy and it is properly communicated to all departments. (Annex 2. 2) Limitations and suggestions: • First of all, we have a problem with current HR structure. The General Manager of Human Resource Department is also looking after Finance Department. HR is a vast function and separate personnel should be there to look after its functions. Also General Manager HR does not possess any formal degree in HRM. So first of all, there should be separate heads for both HR and Finance Departments. Secondly, there should be a General Manager HR, who should be formally trained in HRM. At Haier, Administration Department is merged with Human Resource Department. They are doing it to reduce their costs. But HR functions are so wide that they should be separated from administration functions, and so is the case with administration functions. HR Department should be separate from Administration Department. • There are less than enough HR professionals in the Department. They still need some more professionals to divide work. As long as we know, the person we interviewed, has also resigned. So they should do something to keep their quality HR professionals intact and should try to hire new ones as required. HR Planning Do you believe in planning? Yes of course, Planning

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