Managing Performance at Haier Harvard Case Solution & Analysis


In the year 2006, Haier was ranked as the 6th largest company in the large kitchen appliance market. In the global market, Haier had 4% market share and it was strongly positioned in the production of washing machine and refrigerators market. In 1985, Zhang became the CEO of the Haier that made the company successful in the market and its revenue increased from RMB 3.48 million to RMB 104 million. The new CEO of the company made it possible for Haier to transform into groups of companies along with 240 plants and companies in it, and the company employed more than 50,000 employees in the group.

Haier gained this top position and growth just in two years; whereas, its competitors had achieved the same growth as Haier did at an average of 95 years. Zhang adopted the policy that those products that are not producing at its standards were dropped as it was making the Haier to put its concentration on it, which wasted time as well as investment. Haier also evolved itself from producing one refrigerator to 86 different products line and these products were offered in more than 13,000 specifications. Haier was the one who innovated the niche market strategy for its products; this made the Haier successful in the market. In addition, it happened because of another reason that was emphasizing on quality and marketing of the quality product.


The problem faced by the Haier is the forced distribution approach in that it was ranking employees as top 10% ranked and bottom 10% ranked; this approach was damaging the moral of the employees. The key challenge for the company was to differentiate its 80% remaining employees from top 10% and bottom 10%.


The company was using the variant distribution systems as performance management system for evaluating the employees. In this, any employee that performed well was promoted to the top 10% and those who didn’t perform well were sent to the training and this training was provided by the company at its expenses and if these employees again came into bottom 10% then they were again sent to the training but this time these employees had to bear the expenses and if these employees again came in the bottom 10% then these employees were laid-off from the company.

Haier also used the performance appraisal tool that was used on a daily basis. Colored footprints that were printed on factory floor in different colors had different meaning such as yellow represented the poor performer of the day,  and he has to tell that how he could improve his performance on the next day. The red footprint was made for those who performed well and those employees who to stand on it share the ideas that how they performed well in the job.

The other tool that was used by the Haier for measuring the employee’s performance on a daily basis was to share their daily goals to be achieved by them and it was shared before the shift was started. The method was known as the management by objectives, and in this method all the employees and their respective supervisors were assessing the goals that how much these goals were achieved during the working day. Based on the daily goals assessments, employees received a color face that gives the employees an informal rating and they were given incentives based on these ratings.

¶        80:20 Rule:

Haier also maintained the hierarchical performance appraisal known as 80:20 principle in which 205 of the employees were managers and these managers were responsible to manage 80% of the Haier’s employees. If any employees under a manager didn’t perform well, then managers were responsible for the work and their appraisal was dependent on it.

All of company’s employees had their own account because of the reason that they were treated separately and their account showed the profit and loss statement accordingly. If employees achieved their goals then they were rewarded an increase in their savings into their accounts but if any employee failed to perform accordingly to achieve its daily goals, then that employee had increased debt in their accounts. This separate treatment of employees motivated them to perform well on their work. This made small performances of every employee contribute towards the Haier’s increased revenue.

¶        Talent Pool:

Furthermore, Haier introduces the talent hunt program for the new hires so that the company hires only those employees, who has the talent to perform best on job. Haier also introduces the job rotation program in that talent hunt program so that all the new employees are rotated on different jobs before assigning the final job to the new employee. This makes employees to know all the procedures of the company and it helps them to perform well as they already know what they have to perform ...............

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