Polycentric Case Study: Haier
In the bustling port city of Qingdao, China, a small refrigerator factory teetered on the brink of collapse in 1984. Burdened by debt and plagued by defective products, its future looked bleak—until Zhang Ruimin stepped in. A young, determined leader, Zhang took a sledgehammer to 76 faulty refrigerators in a dramatic act that would become legendary, signaling an uncompromising commitment to quality. This was the spark that ignited Haier Group’s extraordinary journey from a struggling state-owned enterprise to a global titan in the appliance industry, redefining corporate leadership through its pioneering Rendanheyi model.
A Bold Beginning Amid Crisis
When Zhang assumed leadership, Haier was a microcosm of the challenges facing many Chinese enterprises in the 1980s: poor quality, low morale, and a rigid, top-down structure that stifled innovation. His first act—destroying those defective refrigerators—was more than symbolic; it was a call to action. Zhang instilled a culture of accountability, forging partnerships with German firms to improve manufacturing standards and setting Haier on a path to become China’s leading appliance maker by the early 2000s. Yet, as the digital age dawned, Zhang foresaw a looming threat: the traditional hierarchical model that had driven Haier’s early success was now a liability in a world demanding speed, agility, and customer intimacy.
The global market was shifting rapidly. Digital disruption, evolving consumer expectations, and fierce competition required more than incremental improvements. Innovation lagged within Haier’s bureaucratic structure, employees felt disconnected from decision-making, and scaling growth across diverse markets—from the U.S. to Japan—was proving daunting. Zhang knew that clinging to conventional management, even Western-inspired models, wouldn’t suffice. Haier needed a revolution.
Rendanheyi: A New Vision for Leadership
In response, Zhang introduced Rendanheyi, a philosophy that shattered traditional management paradigms. Translating roughly to “integrating people and goals,” Rendanheyi reimagined Haier as a network of over 4,000 autonomous micro-enterprises (MEs)—small, self-managing teams empowered to act like startups. Each ME operated with its own profit-and-loss responsibility, free to design, develop, and market products while answering directly to customers, not corporate overseers.
This polycentric leadership model turned Haier into a living ecosystem. Employees became entrepreneurs, leaders became enablers, and the company itself transformed into a platform for innovation. Take COSMOPlat, a micro-enterprise-born platform that revolutionized manufacturing by enabling personalized production for industries worldwide. By aligning teams with customer needs, Haier fostered rapid innovation and adaptability, integrating global acquisitions like GE Appliances (USA) and Fisher & Paykel (New Zealand) into its decentralized framework.
Zhang himself stepped back from traditional CEO duties, embracing the role of a “servant of the ecosystem.” As he famously said, “Every employee is their own CEO… The job of the leader is to help them unleash their potential.” This shift empowered workers to experiment, collaborate across boundaries, and drive value creation, positioning Haier to thrive in a volatile, digital world.
A Legacy of Resilience and Innovation
Haier’s transformation bore fruit. By 2023, it had secured its place as the world’s top major appliance brand by retail volume for over a decade, according to Euromonitor International. Its micro-enterprises fueled a surge of innovation, launching thousands of new products tailored to local markets. Employees, now co-owners of their success, reported higher engagement and accountability. The decentralized structure proved resilient, enabling Haier to navigate global supply chain disruptions and digital shifts with agility.
Haier’s story is a testament to the power of polycentric leadership—distributing authority, aligning with customers, and fostering an ecosystem where innovation thrives. It’s a blueprint for enterprises daring to rethink what leadership means in a networked age.
Practical Takeaways for Modern Enterprises
- Empower Autonomous Teams: Break down hierarchies by creating small, self-managing units with profit-and-loss responsibility to boost agility and innovation.
- Center on Customers: Tie team incentives directly to customer satisfaction, fostering rapid feedback loops and market-driven solutions.
- Build Collaborative Ecosystems: Transform your organization into an open platform, encouraging partnerships with internal teams, external stakeholders, and even competitors.
- Redefine Leadership: Move from command-and-control to enabling and coaching, creating space for leadership to emerge organically across the organization.
- Foster Experimentation: Cultivate a culture where employees are free to test new ideas, learning from both successes and setbacks to drive continuous improvement.
More Information
Photo credits:
All photos courtesy Haier: https://www.haier.com/global/press-events/materials/
References
- Zhang Ruimin and Gary Hamel, Rendanheyi: The Future of Management (Haier Group and Management Innovation eXchange, 2020).
- David Li, “How Zhang Ruimin Transformed Haier and Management Theory,” Harvard Business Review China, May 2016.
- Julian Birkinshaw, “Reinventing Management for a Networked World,” London Business School Review, Spring 2019.
- Gary Hamel and Michele Zanini, “Haier: A Case Study in Freedom-Based Management,”Harvard Business Review, September 2018.
- Zhang Ruimin, “Rendanheyi: Haier’s Way of Management,” World Economic Forum White Paper, 2019.
- Haier COSMOPlat, Official Website, https://www.cosmoplat.com.
- Gary Hamel, Humanocracy: Creating Organizations as Amazing as the People Inside Them(Harvard Business Review Press, 2020), 132–137.
- Haier Smart Home Co., Ltd., 2021 Annual Report.
- Fisher & Paykel, Carbon Impact Report 2022.
- Zhang Ruimin, keynote interview at the Drucker Forum, Vienna, 2018.
- Euromonitor International, “Global Appliance Market Rankings,” 2009–2023.
- Gary Hamel, “The End of Bureaucracy,” Harvard Business Review, November 2018.
