Haier's performance management system used several tools to motivate employees and evaluate performance, including colored footprints to indicate performance levels, an "80/20" rule holding some accountable for most work, and a "race track" model with rotating management roles. However, issues included potential feelings of insecurity, loss of expertise from rotations, and loss of employee retention from individual profit/loss tracking. While Haier's system drove initial success, its approaches may not sustain growth or translate well across cultures during expansion.

1. THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT,
AHMEDABAD.
Assignment
ON
Haier PMS
SUBMITTED TO: -
Prof. Robin Thomas Sir
SUBMITTED BY: -
Pratik K.S Negi
PGP/SS/09-11/HR

2. Case study Analysis on Haier’s PMS
About the company
Haier is the world’s 4th largest white goods manufacturer and one of China’s Top 100 IT
Companies. Haier has 240 subsidiary companies and 30 design centers, plants and
trade companies and more than 50,000 employees throughout the world. Haier
specializes in technology research, manufacture industry, trading and financial services.
Haier 2006 global revenue was RMB107.5 billion.
Guided by the business philosophy of CEO Zhang Ruimin, Haier has experienced the
development stages, noted as Brand Building, Diversification and Globalization. At the
21st anniversary of the founding of Haier Group on December 26, 2005, Haier
announced its 4th strategic development stage of global brand building. In 1993, Haier
brand was officially recognized as a famous brand. In 2006, Haier brand was valued at
RMB74.9 billion. Since 2002, Haier has consecutively been ranked first in the row of
China’s most valuable brands for manufacture of 18 products, including refrigerators, air
conditioners, washing machines, televisions, water heaters, personal computers, mobile
phones and kitchen appliances. Haier was ranked first of China’s Top 10 Global Brands
by China State Bureau of Quality and Technical Supervision (CSBTS) for refrigerators
and washing machines
Q1- synopsis about the case
Ans- the case kick starts with the description of an incident that the new CEO was very
particular about the quality measures and the standards that were missing in the
company. and from that day the company has completely transformed itself from the
ailing socialist to thriving MNC.by 2002 it has made its mark as top 5 companies in
consumer electronics. Chinese enterprise could face like bureaucracy and inefficiency,
little concern for cost or quality control or for customer needs, were transformed to a
company with global perspective. This radical shift came in the company when zhang
was appointed the CEO of the company in 1985; he turned the loss making unit to a
100 plants and companies. By 2002 the company has become Chinese pride and was
rated as the most valuable brand in its own. It dominated & explored the overseas
market.
Create the market - dominate the market  (niche market)
It has also created specially designed refrigerators for the same. They has a very
differentiated list of KSF ( key success factors to bank on).they incubated various

3. management styles to 1 and performed an outclass outcomes. Haier used several
performance management and motivational tools like use of set of colored footprints
on the factory floor where red indicated excellent , green average and yellow for
below average , by help of racetrack model etc Hierarchy and interpersonal networks
were the Chinese problems with the worker that were removed by the philosophies used
by zhang. Many philosophies were introduced by zhang but still there were loopholes
due to the growing expansion and influence of local culture in other regions where these
management philosophies could pose a threat to the company.
Q 2) Issues in the case
Ans—following are the under listed issues with the case.
1. Key success factors worked for the company like diversification and product
innovation that were done may not work well with all the offshore markets.
2. Urgency was done in transforming the change as these changes were good but
backtracking and long term perspective has to be considered first.
3. No easy adoption of these policies could be digested as the system was in
place for lat 18 years.
4. Financially- the total output has increased but the gross margin and net margin
has declined.
5. More pressure was piled on the employees to do the days work in the KANBAN
manner.(OEC)
6. 80:20 rule was a clear cut indication of ( more pressure from managers to
employee and strictness and more vigilance)
7. Race track model—which could induce sense of insecurity in the organization.
8. The income claims and loss of income could hit the company with the iteration
coming into account. Plus the problem of (accumulated Deposit bank—where the
manager could also lose the income).
9. The footprint method could bring in issues as the person may feel insulted and
could end up by asking a layoff.

4. Rotational policy could only make the people work in an environment where he is
not having any expertise, but a jack of all trades. so unnecessary movement
could be avoided.
Q 3) Evaluate the performance management system of Haier?
Ans-- performance management system was more of a distributed systems in which
different type of systems were combined together to form a system which yielded
outputs for the company.
The OEC system—overall every and control and clearance
Each and every employee must complete the work on time that is scheduled for the
day. and thus making sure that the system was implemented on the floor very minutely.
The use of set of colored footprints on the factory floor where red indicated
excellent , green average and yellow for below average encouraged workers to
perform better. thus the standards of the work were increased every time and thus
evaluated on daily basis. and thus leaving the employees to select the own set of
challenges.
80:20 principle.
20% employees were held responsible for the 80% work that is being carried by the
workers. Emphasis on recognizing and rewarding creativity like if an employee
developed or improved a product, the innovation carried the employee name, and
notice of it was prominently displayed on notice board. Thus the employee or the
managers were imparted with the burden kind of stuff.
Race track model
The model was started in which the race was there to phase job-rotation policy for
management positions in which the average stay in a management position is three
years and the maximum is six months. This was started for new job openings and
PMS.and to stay on the top they had to fight. only 8 positions were made secure rest
were rotatinary. {Which could result in employee being hesitant for the position and
might induce rivalry kind off scenario) .
Chance of going up were high & chances of getting down were high
- Fear of job position

5. Tracking profit and loss of individual loss
Monthly measures for tracking performance according to the revenue and profit to the
managers, the employee were being charged for getting the inefficiency of the task
done under his governance. And thus this resulted in the either taking the incentives or
asking for compensation in the production and targets getting attained or not.
Incentives - related to the target achievement
Deposit bank kind of the system in which an employee adds to the bank as the each
part of the company was treated as MMC Miniature Company. And thus more revenue
earned and more added revenue gain in the account of the unit. Thus this philosophy
could add as an asset but the employee retention was not taken into consideration and
ethical issue could come into consideration when going into unit wise target reached.
Notice board and floor footing was used + training at company expense
to motivate the employee and thus an employee was knowing the track where he is
moving in the organization. Plus the employee was asked to leave the organization if he
falls in 10% rating and rest 10% were asked to leave the organization. Plus daily
reviewing was done & tracking employee was done regularly.
Job role’s based PMS for managers
Each manager was reviewed on the basis of the job description that he has been
assigned, plus the duties and responsibilities were clear cut defined. Managers
received a performance grade of A, B or C, meetings were done to track the same.
Publishing of the results were done and thus there was a complete transparency was
kept with the employee’s.
Haier has some limitations to its PMS in respect to its implementation in expansion and
local culture, but its PMS system planned was well executed and developed.
BY
Pratik Negi
PGP/SS/09-11/HR