How Haier Did What GE Couldn’t

For decades, General Electric was the go-to name in appliances, reigning supreme from the 1960s through the 1990s. But under the leadership of CEO Jack Welch, GE’s focus on financial performance often came at the expense of its workforce, earning Welch the nickname “Neutron Jack” for his reputation of cutting jobs while keeping the buildings intact. Market share plummeted, with employment dropping from a peak of 21,000 in 1971 to just 9,500 by 1995.

By 2008, a struggling GE attempted to sell its appliance division but found no buyers. The division became one of the worst-performing units within GE, leading to failed spin-off attempts and ongoing negotiations with labor unions. Finally, in 2016, a shocking turn—Haier, the world’s largest appliance manufacturer headquartered in China, acquired GE Appliances. What followed was nothing short of astonishing. Market share, which had languished around a mere two percent for the previous four years, skyrocketed to 20 percent. Haier had achieved what GE could not: a resounding success in the appliance market.

The source of Haier’s boom lies in an approach known as rendanheyi, a Chinese business philosophy – aligns the purpose of employees to the purpose of the business. The drivers of this approach include: 

Customer engagement.  Literally, rendanheyi translates to “employees and customers become one.” Everything starts with the customer. By reorganizing its operations into micro-enterprises—product-focused teams that encompass sales, marketing, design, manufacturing, and purchasing—Haier ensured that every employee was functionally connected to customer needs. The concept of “zero distance” to the customer became central, enabling front-line employees to access specific customer data and respond quickly to feedback.

Economic compensation.  Haier took a novel approach to compensation by linking it to the performance of these micro-enterprises. Leaders signed contracts based on agreed-upon performance metrics, so that every department—whether marketing, sales, design, or operations—worked toward the same goals, breaking down silos that previously hindered performance.  What’s more, the approach fostered a sense of psychological ownership among employees. They were no longer merely cogs in a machine, but stakeholders in the success of their company. This empowered workforce translated to higher morale and greater productivity, creating a symbiotic cycle of performance and engagement.

Transparency and understanding of the economics.  Each employee team developed strategic value metrics, allowing for real-time assessments of performance against market averages. Weekly forecasting became a collaborative effort, where insights from every level informed strategic decisions. This approach reinforces the notion that great strategy relies on great information, allowing Haier to stay ahead of market trends and adapt swiftly to changing consumer preferences.  By fostering a culture of open communication and shared goals, Haier encouraged employees to take initiative and contribute ideas.

Employee participation.  Haier relies on employee involvement in important improvement initiatives. For example, when the refridgerator micro-enterprise learned that customers struggled to keep fruits and vegetables fresh, they collaborated with a research institute to develop high-humidity storage technology. This solution went from concept to market in just 11 months—an impressive feat compared to the years it would have taken under GE.