How China’s company management practices are transforming business leadership

Maverick management and leadership styles have emerged in China as a result of the country’s hypercompetitive market, rapid industrial and digital transition, enormous consumer base, massive labour force, advanced manufacturing infrastructure, and ability to adapt to practical and economic difficulties. 

China’s situation and strong desire to improve its business, economy, industry, and digital skills put it in a position where digitally enhanced directed autonomy (DEDA) could grow, resulting in some fascinating management structures.

As management changes, worker freedom becomes more of a focus. Some Western companies have given workers more freedom and less control, but this way of doing things often doesn’t take into account the role that technology and digital platforms can play and can lose sight of business goals and metrics. 

DEDA gives employees more freedom through digital platforms that let them organise themselves around business targets without direct help from managers. It gives front-line employees direct access to a company’s resources and capabilities, changes based on the situation, keeps an eye on how much freedom employees have, and has clear, measurable goals.

Haier’s Rendanheyi model

Haier, a Chinese refrigerator company, began in the 1920s as a Qingdao factory. It became a state-owned enterprise in 1949, but faced debts and poor management. Zhang Ruimin, an assistant city manager, took over in 1984 and focused on product quality. After partnering with Liebherr, Haier became profitable and globally known, with Zhang as chair and CEO.

Haier’s Rendanheyi, developed under Zhang, integrates producer and customer goals, promoting agility, entrepreneurship, creativity, and innovation. The company consists of self-managed micro-enterprises, each acting as a startup with access to company resources. Teams pursue defined business goals based on customer needs or market gaps. Single-threaded leadership is used in these micro-enterprises, reducing bureaucracy and administrative distraction. Such an approach has been used at Amazon for some time. 

Decentralized leadership in Haier emphasizes coaching over commanding, affecting compensation and hiring protocols. After Haier acquired GE Appliances in 2016, Chief Technology Officer Kevin Nolan was promoted to CEO, focusing on products rather than profits. Haier also changed its hiring process to attract entrepreneurial people. 

The company’s latest update is ecosystem micro-communities (EMs), which are groups of small business units that use contracts to determine rights and responsibilities. An example of this is two Haier refrigerator sales micro-enterprises in different cities forming an EM, offering zero-defect, zero-delay products. They agreed to jointly earn 140,000 RMB for meeting their goal plus a 20% profit boost, and 230,000 RMB for exceeding it by 30%. They ended up exceeding by 30% and got their larger incentive.

The digital middle

Companies in the West have traditionally had a middle management layer that connects top decision-makers and other departments, facilitating access to major corporate assets like archives, databases, warehouses, and logistics. 

However, in some companies in China, this middle layer has been replaced by digital platforms that provide more open access to corporate resources and tight monitoring of project progress for smaller teams. The structure consists of customer and partnership interfaces on the front end and assets like databases, warehouses, and manufacturing plants on the back end. 

Alibaba has honed its middle by focusing on its digital middle office, zhongtai, led by the group CTO. This platform is maintained and developed by cross-functional teams, catering to over two million merchants across hundreds of businesses. It is linked to other Alibaba tools such as Alipay, Alibaba Cloud, Cainiao, and project management service DingTalk, enhancing its flexibility and agility.

Ping An’s difficult transition  

Ping An, founded in 1988, was the most valuable insurance group globally in 2020. The company transformed from a financial services firm to a technology ecosystem, incubating 11 affiliates across five verticals with cloud-based IT systems. The market value of Ping An has increased by over 400% since 2013. 

The founder and chairman, Peter Ma, saw the rise of technology and tech companies like Alibaba and Tencent, and the increasing assessment of corporations on a wider range of assets, including data and intellectual property. 

In 2013, Ping An moved 80% of its proprietary IT systems to the cloud when few other corporations were doing so, with MIT graduate Jessica Tan managing the transition. The company implemented advanced data analytics across businesses through its own cloud. It took time and was painful but ultimately paid off in the long run. 

Ping An also took an ecosystem and incubator approach, focusing on efficiency and market trends. OneConnect, a fintech spin-off, served all of China’s major banks and more than half of China’s insurance companies, and was valued at $7 billion in 2019. Ping An incubated 11 affiliates like OneConnect by sharing talent and experts, incentivizing entrepreneurship, courting third-party investment, and enabling autonomy and entity-specific KPIs.

Applications by Western brands

Western companies have successfully implemented management approaches that emphasize teamwork, focused goals, and team incentives. Continental Airlines, for instance, offered employees a $60 monthly bonus if their scheduling performance ranked among the top five US airlines. Bayer, a German pharmaceutical company, implemented incentives in China that combined money and social rewards, with staff sending thank you messages on their digital platform. These programs can help increase team unity and focus, ultimately improving the company’s bottom line.

New corporate management paradigms emerging from China demonstrate the power of customer focus, an entrepreneurial approach, digitization, data-driven decision-making, open innovation, employee-centricity, and experimentation. 

Ashley Dudarenok is the author of Innovation Factory: China’s Digital Playbook For Global Brands.