The archive · Work & Ways of Doing · Strategic decision · 2005–2018
Haier's Rendanheyi turns staff into self-managed microenterprises — 10,000 managers cut
Zhang Ruimin's Rendanheyi made employees self-managed microenterprises tied to users — with their own P&L, hiring and pay, and 10,000 middle managers cut.
Haier Group
What it had to solve
By 2005 Haier had grown into a giant appliance maker suffering what Zhang called 'big enterprise disease' — silos, slow decisions, managers disconnected from users. He wanted internet-era speed and user responsiveness.
How it works
In September 2005, Zhang Ruimin, chairman and CEO of Haier Group, introduced Rendanheyi (人单合一): employees (ren) and user demand (dan) unified (heyi). His diagnosis was 'big enterprise disease' — as Haier scaled, departments turned into silos, decisions slowed, and managers lost touch with users.
Rendanheyi inverted the traditional pyramid. Instead of managers on top and customers at the bottom, customers sit at the center and teams organize around them. Self-managed teams called microenterprises handle their own strategy, hiring, procurement, production and profit-and-loss; each employee is expected to know their users, and a user-pay platform rewards teams directly from the value they create.
The model meant removing the layers that didn't create user value: in the transition Haier let go of more than 10,000 middle-level managers. Zhang admitted the first years were hard — stock prices barely moved and shareholders questioned the model — so the company started with small pilots and replicated them only after they showed success.
Performance picked up in 2016, when Haier's stock price doubled, and doubled again in 2017. By 2014 Haier had already become the world's No.1 major-appliance maker by retail volume (Euromonitor), with US$32.6 billion in revenue. The model turned a Chinese manufacturer into a reference case for post-bureaucratic management.
Why it lands
- Pay comes from user value, not from a manager: teams that don't create value for users don't get paid, aligning every unit with demand.
- Microenterprises hold real powers — business decisions, hiring, resource allocation, compensation — so the flat structure isn't just a reporting chart.
- A decade-long transition with pilots first: the big change was de-risked by starting small and replicating proven units.
- Removing 10,000 middle managers sent a public signal that hierarchy existed to serve users, not the other way around.
What it did
After a slow first decade, performance picked up: Haier's stock price doubled in 2016 and again in 2017; in 2014 revenue reached US$32.6 billion and Euromonitor ranked Haier the world's No.1 major-appliance maker for a sixth straight year.
What you can take
Dismantle hierarchy by changing who pays: when a team's income depends on user value, managers become optional — but expect a long mindset transition and pilot-then-replicate scaling.
Since then
Rendanheyi became a widely taught management case at Wharton, Harvard Business School and INSEAD, and Zhang kept extending it into the IoT era, connecting appliances and suppliers into ecosystems. Other companies study it as an example of Chinese management innovation, though Zhang himself notes the model is hard to replicate because it took over a decade of mindset change.
Sources
- Zhang Ruimin Receives Best Practices CEO Award
- For Haier's Zhang Ruimin, Success Means Creating the Future
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