Download - MIOC Analysis Haier Change Model
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The Radical Transformation of Haier
Exploring Haier in the Hard and Soft model of change. Were there any Problems ?
Presented by: Dharani Sridharan Heena Mehra Jane Cristel Sagar Chhadva Yashodhara Rajaraman
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Presentation Outline
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Haier Situational Analysis:
- Problem Analysis- TROPICS Test: Analysis of Change environment
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Problem Analysis: Haier (A) China & (B) US
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TROPICS Hard Soft
Time scales Medium to long timescale
Resources Clarity in identifying resources such as – Technology – (R & D, Product innovation), Manpower – (Better productivity, performance management system), Capital (Joint ventures foreign players, Market expansion (international technology alliance, market penetration)
Objectives Clear & Quantifiable Objectives – Quality, Cost & Output
Perceptions Consensus – in terms of problem and solution In Case of US Haier case differing views but not conflicting
Interest Limited and well define
Control Control within the management
Source Originates Internally
TROPICS: Analysis of Change Situation
Source: Paton and McCalman (2000)
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Locating Haier - Change Spectrum
Hard/mechanistic
Flexi/grey
Soft/complex
Low
Medium
High
Inte
rdep
ende
ncie
s
Complexity and variability of the change environment
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Soft Model Of Change
• Planned Change Effort• Total system• Behavioural Science intervenes with the Strategy and
Technological implementation• Critical Aspects : Change Agent and Action Research
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OD
Total Organization
System Approach
Support by Top
Management
Emphasis on Groups/ Teams
Use Behavioral
Science
Value System
Goals
Ongoing long term
Planned
Interdependence
Group processes
Climate for Change Change agents
Humanistic
Open relationships
Change Attitudes (Behavior)
Action research
Experimental learning techniques
Company Decision MakingProblem Solving
Basic Assumptions of OD Model Of Change
Underlying principles in the OD Change environment
Source :Fleming and Senior, 2010
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GOALS
BEHAVIOURAL SCIENCE
Participative Management Top Down Management
VALUE SYSTEM
TOTAL ORGANISATION SYSTEM APPROACH
EMPHASIS ON GROUPS/ TEAMS
SUPPORT BY TOP MANAGEMENT
LOWHIGH
• Quantifiable performance indicators set at all level of organisation• Decision Making & problem Solving – immediate & Direct
•Exploitative authoritative (fear & threat to control employees) & Power distance high• Lack of Action Research
• Quick fix & Crisis control• Change Short term perspective
• Change process team effort was absent • Singularly / Independently managed.
• Supported by Top Management
• Horse Racing System• Relationship is compartmentalized & Hierarchical
Mapping ‘Underlying principles in the OD Change environment’ in HAIER
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The OD Model for Change
(5) Assess andreinforce change
(3)Develop anaction plan
PRESENT STATE(1a) Diagnose
current situation
FUTURE STATE(1b) Develop a
vision for change
(2) Gain commitmentto the vision
(4)Implementthe change
CHANGE AGENT
Lot of time spent in diagnosing situation in consultation with
stakeholders to arrive at Vision & strategy
Once Change process completed no new change initiatives introduced nor
revisited
No continuous feedback nor revisit of stages
• Haier change model is linear - single loop (Argyris & Schon 1996) and adaptive. Neither iterative loop nor generative (Senge 1990)• Haier Case A (China) & B (US ) Change processes are goal oriented which indicates HSMC
HAIER DOES NOT FIT OD MODEL – DID NOT FOLLOW SSMC
Source :Fleming and Senior, 2010
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HSMC follows three linear stages of change process
Haier: Hard Model Of change?
Source :Fleming and Senior, 2010
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Description 1 Situation summary
TROPICS showed hard complexityMulti-cause diagram•Socialist enterprise with bureaucratic functioning•Substandard products•Bankruptcy
2 Identify objectives and constraints
Profit making venture• Improve quality • Increase profit•Constraints- external market, late entrants, no core technology
3 Identify performance measures
•Based on costs, sales targets, quality standards, performance targets and market growth.
Phase 1 : Description
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Stage 1: Situation Summary
Poor technology Inefficient bureaucratic control
No stringent quality control
Lack accountability
High inventory/production cost
Debt ridden
Substandard products
Lack customer orientation
No proper PMS
Diagnosing HAIER’s Situation- Multi Cause Diagram
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Stage 2: Identifying Objectives
HAIER’s Objectives Tree
Profit Making Venture
Improve quality
Decrease production cost
Market growth Improve accountability
Increase profit
Improve Technology
Customer needs
Quality control
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Objectives
Constraints
No core technology
External market
competition
Inertia among employees
Late entrants
Increase profit
Customer needs
Accountability
Market growth
Production cost
Improve quality
Technology
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Objectives Measures
Improve quality Quality control, quality standards, performance target per person
Improve profit Production cost per person, cost control, volume/sales target per person
Technology Quality standard
Customer needs Complaints, market survey
Quality control Control measures, performance targets per person
Decrease production cost Production cost per person
Market growth Sales target
Improve accountability Performance target, cost per person
Stage 3 :Performance measures
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Phase 2 : OptionsOptions 4 Generate options • International alliances, JVs, Product diversification, innovation, new
markets, PMS.
5 Edit options and detail selected options
•Performance management system•OEC•80:20 principle• Individual P/L•Deposit bank• appraisal system
6 Evaluate options against measures
•Quantifiable targets to be achieved in terms of performance targets, quality control measure, quality standards, P/L , cost control measures etc.
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Stage 4 -5: Generating Options
HAIER’s Objectives Tree
Profit Making Venture
Improve quality
Improve accountability
Options• 80:20 principle•Deposit book• 10:10
Increase profit
Decrease production cost
Options• OEC •Individual P/L
Market growth
Options• product diversification• New markets (niche market)
Improve Technology Options•International alliances• JVs • T&D
Customer needs
Options• Internal/external customer orientation• product innovation • Customer culture in the company
Quality control
Options
• OEC•3 Es
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Objectives/measure JVs Internal/external customer orientation
OEC PMS
Improve technology/quality standard
High quality standard
High standard High quality standard
High quality standard
Customer needs/complaints
Low complaints Low customer complaints
Low complaints Low complaints
Quality control/control measures
High quality control High quality control High quality control High quality control
Decrease cost of production/low cost
Low production cost Indirect effect Low production cost Low production cost
Market growth/sales target
High sales Indirect effect Medium effect High sales
Accountability/performance target
High accountability High accountability High accountability High accountability
Stage 6 : Evaluation matrixOptions
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Phase 3 : ImplementationImplementation 7 Develop
implementation strategies
• The above options were chosen and implementation strategies adopted.
8 Carry out the planned changes
• The above mentioned options were carried out.
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HAIER-Change Model
HSMC
Consensus on the problem
Quantitative criteria to test objectives and options for change
Simple system prevails
Unitarist ideology
Haier
No opposition to the problem in the ailing company. Facilitated by Chinese culture.
Use of quantifiable performance targets, quality standards, sales targets, quality and cost control measures.
It is a simple system- emphasis on quality and customer needs.
Largely unitarist in China- shared belief among the senior management.
HAIER CLEARLY ADOPTED HARD MODEL OF CHANGE
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ManagementStrategyGoalsStructureTechnologyOperations
HAIERCulturePolitics
LeadershipInternal Environment
Socio Cultural Influences
Political-LegalInfluences
Technological Influences
Economic Influences
External Environment
Focus OfHard
ModelsOf
Change
Focus OfSoft
ModelsOf
Change
Were there any Problems?
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Cultural
Country Power Distance
Individualism
Masculinity
Uncertainty
Avoidance
Long-term
Orientation
China High Low Moderate Moderate High
US Low High High Low Low
Haier High Low High High High
Source : Hofsede , 1993
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Leadership
Fine Tuning
Incremental Adjustment
Modular Transformation
Corporate Transformation
CollaborativeType 1
ParticipativeType 2
Charismatic TransformationConsultative
DirectiveType 3
Forced EvolutionType 4
Dictatorial TransformationCoercive
Source : Dunphy and Stace, 1993
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HIGH
HIGH
LOW
LOW
Potential ProblemsKEEP SATISFIED
Few ProblemsDO NOTHING
Definite ProblemsATTEMPT TO
COLLABORATE
Potential ProblemsKEEP INFORMED
Motivation to Block Change
Powerto Block Change
POLITICS
Source :Fleming and Senior, 2010
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Force Field Analysis
Change :To make it a
profitable organization
Financial Condition
Domestic Market Competition
Customer Dissatisfaction
CultureLeadership
Power and Politics
Were they strong enough to oppose the
driving forces?
Driving ForcesRestraining
Forces
Source : Lewin, 1951
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Despite…..
• HAIER is a Profit Making Organization with its Net Profit Growth staying at 47% as on 2001
• CEO Zhang Ruimin is an acknowledged Global Business Leader
• HSMC achieved Corporate Transformation!
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QUESTIONS???