Tag Archive for: talent
Zhang Ruimin – the would-be unknown leader
Zhang Ruimin took the helm of a struggling refrigerator manufacturer in 1984 when he was just 25. As a leader he won the confidence and goodwill of his workers and reversed the company’s dismal quality record. Since then, Zhang has turned the Haier Group into the world’s fastest growing appliance maker with the largest market share in white goods world wide. 1
Management without bosses
“A leader whose existence is unknown to his subordinates is really the most brilliant one.”
(Ruimin, Zhang)2
Prior to 2005, Haier’s 80,000 or so employees worked in traditional functions like manufacturing, sales and marketing. However with the advent of the internet, Zhang knew that the existing departmental/functional/silo organisation would be too slow to respond to customer needs into the future. So he began reorganising the way employees worked. 3
Zhang believed that if the company wanted to intimately understand and meet consumer needs, staff needed to be directly connected with the customer. Instead of complying with rules and following a manager, he decided that workers should have the freedom to make decisions led by the users of the things they make – the consumer. 2
ZZJYT’s
No, I’m not cursing in code.
Zhang split staff up into self-managed work units call ZZJYT’s (zi zhu jing ying ti – which roughly translates to independent operating unit) and by 2012 had almost done away with middle management completely. Today each ZZJYT comprises 7-10 people from various functional roles.
These microenterprises operate as independent ventures. Each is responsible for its own hiring, procurement, strategy, production and ultimately profit and loss.
The ZZJYT’s are not permanently assigned to a particular product or role. Instead they are formed through internal competition. If an employee identifies an opportunity for a new product or service, they are free to propose their idea. A vote involving employees, customers and suppliers determines whether the project goes ahead. The winner becomes the project leader.
Once a leader is appointed they can independently handpick a team and find their own manufacturers and distributors (either internally or externally) to produce and sell their product. 3
Beware the catfish
The project leader must work hard to stay ahead of the catfish. That is what the firm calls the person with a rival idea with the second highest number of votes. 3 Once a leader is in place, his or her team appraises the leader’s performance every quarter and votes whether they want to keep them in the position or replace them. 4
Zhang believes this structure creates competition in the organisation while also fuelling entrepreneurship. 3
Remuneration
Zhang believes that employees in traditional organisations tend to focus too much on what their bosses say or think because their pay is determined by them. This is why there is no position-related remuneration at Haier. 5 Instead employees are paid solely based on performance and the results their team achieves.
Ecosystem of talent
In the new generation Haier, talent is provided through an open labour market. Each ZZJYT is given the freedom to innovate by reaching out to customers, prospective employees, collaborators and even competitors.
Employees are free to leave or join ZZJYT’s, however a unit will dissolve after the project is over and talent goes back to the marketplace.
Whilst many businesses will find this concept foreign and unmanageable, for industries like Hollywood, bringing skilled workers together for the length of a project is nothing new. (See https://cognology.com.au/are-terms-like-hollywood-and-gig-spelling-the-end-for-the-traditional-employment-model)
The platform
Instead of offering jobs, Zhang says Haier offers everyone a continuing series of opportunities to find jobs via an entrepreneurial platform.4
By definition, platform companies form ecosystems by partnering with, and incorporating technology from multiple corporations to drive innovation and performance. Haier’s powerful internet platform enables limitless collaboration with suppliers, customers, universities, competitors, and other stakeholders.
According to Zhang, eventually there won’t be employees at all. There will only be a platform. 1 (I feel like Keanu Reeves might pop up any second now….)
A natural evolution in the internet age
Zhang Ruimin has been lauded for his accomplishments in management innovation, and yet by some he is still seen as a radical. Haier’s goal of becoming a facilitative platform without traditional employees seems consistent with broader global trends towards open collaboration, greater connectivity and on-demand workforces. I wrote about this last year in my blog https://cognology.com.au/what-skills-will-be-most-in-demand-in-2025
We are seeing the dawning of a new age of organisational agility and innovation. Employers and skilled workers alike have much to gain from embracing new ways of working. But it will take a willingness to change and adapt.
References
- Kleiner, Art. “China’s Philosopher-CEO Zhang Ruimin.” Strategy Business. 10 Nov. 2014. Web. 08 May 2017
- Ruimin, Zhang. “Raising Haier.” Harvard Business Review. 31 July 2014. Web. 08 May 2017.
- “Haier and Higher.” The Economist. The Economist Newspaper, 11 Oct. 2013. Web. 08 May 2017.
- Mahajan, Neelima. “How CEO Zhang Ruimin Reinvented Haier – Three Times Over.” CKGSB Knowledge. 28 Sept. 2015. Web. 08 May 2017.
- “Haier CEO Zhang Ruimin: Challenge Yourself, Overcome Yourself.” Founding Fuel. 18 Oct. 2015. Web. 08 May 2017.
- Fischer, Bill, Umberto Lago, and Fang Liu. “The Haier Road to Growth.” Strategy Business. 27 Apr. 2015. Web. 08 May 2017.
- “Zhang Ruimin: Driving Haier’s Innovation.” Zhang Ruimin: Driving Haier’s Innovation | CEIBS. Web. 08 May 2017.
Warren Buffett – Not your average billionaire
This blog will be the first in a series of posts profiling some of today’s most successful business leaders. Each leader is recognised as a trailblazer in their own right; entrepreneurs and visionaries who have dared to challenge the status quo and write their own rules.
This series will explore their different leadership styles and approaches and look at how this has shaped their success.
I decided to kick off with a name you might recognise as being one of the wealthiest and most business savvy people on the planet.
USA International Trade Administration Public domain, via Wikimedia Commons
Warren Buffett is the creator and CEO of Berkshire Hathaway, a holding company with interests in the likes of Apple, Costco and Coca Cola. [1]
Buffett has been a regular on the Forbes 400 Richest People in America list since 1982, and in 2008 was officially crowned the richest person in the world with a fortune of $62 billion.
Warren Buffett is the stuff of legends and has a cult-like following of investors that hang on his every word. But for me, it is not so much his financial prowess that I’m interested in, but rather how his distinctive leadership style has contributed to his celebrated status in the world of business.
Laissez Faire Management Style
Numerous books and articles written about Warren Buffett refer to his laissez-faire approach to management. A French term, laissez-faire loosely translates to “let them do” -basically let people do as they choose. This label seems fair given what I have come to learn about Buffett’s hands-off approach.
When Buffett buys a business, he leaves the managers alone to run the company the way they would have had he not bought them. Unlike other CEO’s, he doesn’t seek to exert control through traditional corporate plans or strategic meetings, and generally only communicates through his annual letter to the board. [2]
So how has Warren Buffett managed to successfully build an empire with assets worth $621 billion [3] whilst all the time remaining at arms length?
Adapting the Situation to Suit the Leader
Perhaps the secret lies in the corporate culture and operating environment he has carefully cultivated over the last four decades.
Engaging Top Talent
Warren Buffett has been quoted as telling his children “If you want to soar like an eagle in life, you can’t be flocking with the turkeys”. His personal philosophy is to surround yourself with good people whose behaviour is better than yours so that they inspire and challenge you. When hiring managers, Buffett looks for integrity, intelligence, and energy. [4]
Autonomy and Accountability
It stands to reason then that by choosing highly motivated and capable leadership, Buffett has been able to entrust his businesses to the stewardship of others. Handing over full autonomy is fundamental to the way Buffett operates. [2] (For more on the benefits and challenges of autonomy see A Sensible Discussion about Autonomy)
Meaningful Communication
Though Buffett’s communication with his people may be infrequent, his words have impact. He showers praise on the people who work for him in his annual letters but is also generous with advice. He breaks down complex financial concepts in a way that anybody can understand him.
Values-Driven Culture
In Part II of my blog Aligning People I discussed how a group united by values will achieve far more than one that’s driven by other agendas. Interestingly, Buffett only acquires well-led, profitable companies that share his values. He believes that a values-driven culture translates to strong business performance and credits a strong culture with the ability to attract and retain outstanding employees. [5]
If you want to soar like an eagle in life, you can’t be flocking with the turkeys
Authentic Leadership – Living the Values, Walking the Talk.
An ‘aha’ moment for me in my research into Warren Buffett was when I realised that the values he pursues in business he practises in all aspects of his life.
Thriftiness
Berkshire Hathaway only acquires firms with low debt and strict cost control. This reflects Buffett himself who is renowned for his frugal nature. He still lives in the same house he purchased in 1958 for $32,500 and drives himself to work everyday. [6]
Hard Work and Discipline
Lawrence A Cunningham in his book Berkshire Beyond Buffett wrote that,
“Buffett’s own success has been built through hard work, discipline, a no-nonsense acquisition strategy and unwavering adherence to core values”. [2]
Buffett demands the same level of discipline and commitment from his leaders. He asks only that they stay true to their core business and values. In other words, he expects them to keep doing what they know how to do and to do it well. No more, no less. [2]
Integrity and Humility
Cognology has found extensive evidence to suggest that integrity is a key attribute of exceptional leaders. Buffett is passionate about maintaining a reputation for doing the right thing and instructs his leaders to “zealously guard Berkshire’s reputation.” [7]
Buffett is admired for the humble manner in which he openly admits his failures and his willingness to share the lessons he has learnt. In turn he encourages his business leaders to “face up immediately to bad news” and not let problems fester. [7]
But Warren Buffett is not as warm and cuddly as he might seem. He has shown that he is also a man prepared to deal with any leader that has breached what he holds sacred. A Buffett biographer once noted that “when a leader violates corporate values or generates reputational damage, the axe falls swiftly.” [2]
Letting Go
At 87, Warren Buffett has no plans to retire. People will remember Buffett for his extraordinary ability to pick good investments. But in truth, a lot of his success has been due to his ability to identify talent and retain top performers for the long term.
His leadership style has been shaped by his own personality: his honesty, his integrity, his humility, and his other deeply ingrained values. He has succeeded in demonstrating that you don’t have to maintain tight control over your people to do well in business. Success can in fact come from letting go – so long as you have laid the right groundwork to begin with.
References
- CNBC, [Online]. Available: http://www.cnbc.com/berkshire-hathaway-portfolio/.
- L. A. Cunningham, Berkshire Beyond Buffett : The Enduring Value of Values, Columbia University Press, 2014.
- Market Watch, “marketwatch.com,” [Online]. Available: http://www.marketwatch.com/investing/stock/brk.a/financials. [Accessed 09 03 2017].
- Vintage Value Investing, [Online]. Available: http://vintagevalueinvesting.com/wp-content/uploads/2017/01/Warren-Buffett-University-of-Florida-Lecture-Vintage-Value-Investing.pdf.
- L. A. Cunningham, “The Philosophy of Warren E. Buffett,” The New York Times, 05 02 2015.
- A. Mohr, “www.investopedia.com,” 22 07 2016. [Online]. Available: http://www.investopedia.com/financial-edge/0412/the-everyday-lives-of-frugal-billionaires.aspx.
- W. Buffett, “berkshirehathaway.com,” 31 12 2014. [Online]. Available: http://www.berkshirehathaway.com/letters/2014ltr.pdf.
