Sustainable growth has long been a universal pursuit of all corporate executives. Haier, China's home appliances juggernaut, has developed a unique management model which utilizes employees' potential, entrepreneurial spirt and closer interaction with its customers.

On Sept. 20, the Second International Rendanheyi Model Forum, jointly hosted by the Haier Group and MLab, was held in China's eastern coastal city Qingdao, drawing an elite group of management thinkers to discuss and review the company's flagship management model "Rendanheyi."

Proposed by Haier's chairman and CEO Zhang Ruimin in 2005, the model allows the company to transform in step with the transformation that the internet brings to the traditional economy.

According to Zhang's description, the "Ren" in Rendanheyi Model refers to each employee; "Dan" refers to needs of each user; and "HeYi" refers to the connection between each employee and the needs of each user.

The model primarily makes these connections by providing greater autonomy and decision-making power to front-line employees to respond speedily to fast-changing user demands.

International experts, whom are closely following Haier's transformation model, recognize it as a cutting-edge and disruptive management paradigm which breaks away from the trap of bureaucracy and hierarchy and instills fresh momentum for sustained growth.

Gary Hamel, visiting professor of London Business School and director of MLab, said bureaucracy in organizations, in the form of inertia, slow and incremental growth as well as disengagement of employees, has become common maladies for many big companies.

Paying tribute to Haier's model, he urged that bureaucracy "must die" and moves toward "humanocracy" which calls for the reinventing of management models to build organizations that are fully human and are "as amazing as the people inside them."

David Teece, professor at the University of California, Berkeley and director of the Institute for Business Innovation, summarized Haier's model as a customer focused, highly agile and entrepreneurial which features strong team effort that is able to deliver desirable growth and financial performance.

"Haier and its management have developed very strong dynamic capabilities by designing a unique decentralized organizational structure which allows customer focused entrepreneurial action by empowering micro unit teams," he noted.

Through multiple transformations, Haier has transformed from a traditional executive culture to an entrepreneurial culture through the Rendanheyi model which is the enabler of the company's dynamic capabilities, he added.

Rosabeth Moss Kanter, professor of business administration at Harvard Business School, noted that "zero distance to users" is a key part of Haier's management reinventions.

She said that some businesses find it difficult to make changes in their organizational structures due to several barriers such as disengagement with the employees, the anxiety of uncertainty, rigidity and over-control. In response, she suggests for the management team to empower innovators and explorers, tear down internal walls inside the company, encourage employees to find a higher purpose and create strong human bonds, as well as embrace experiments and build momentum among the employees across all levels.

Under the management model, Haier has invented successful microbusinesses including the internet of clothing, an integrated smart clothing housekeeper services, the U-Blood platform to address blood-related issues, and its flagship industrial internet platform COSMOPlat.

The GE Appliances (GEA), which was acquired by Haier in 2016, has also transformed its business philosophy toward the Rendanheyi model and created several microenterprise subsidiaries dedicated to creating innovative products and services.

GE Appliances has grown its sales and profits in its first two years under Haier, said Kevin Nolan, president and CEO of the company.

Marshall Meyer, emeritus professor at Wharton School of the University of Pennsylvania, said the application of Rendanheyi management model has transformed the GE Appliances unitary organization to a community of microenterprises that serve as engines of innovation on its platform.

"We encourage employees to become entrepreneurs because people are not a means to an end, but an end in themselves; our goal is to let everyone become their own CEO… to help everyone fully realize their potential," said Haier's legendary head Zhang.

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