BY GROUP 2

SECTION 5

Problem Statement:

What changes to be made to the current performance management system

while implementing it globally?

PESTCL Analysis:

Factor
Political

1) China, being a
communist country
2) Stringent Labor Laws

Economic

1) Market share grew from

2.5% in 2001 to 4% in
year 2004
2) High growth in Chinas
GDP during year 20032007
1) Policy of displaying
employee ratings and its
hierarchical structure
2) Unique Chinese Culture

SocioCultural

Technologic
al

Legal

1) Technological Innovation
2) Technologically
advancement
New Labor Contract
Laws effective from
January 2008

Impact
1) Can influence the
operations of the
company
2) If the stringent labor
laws of China are
applied to other
countries, it can lead to
wage cuts, demotions
which will further spoil
the brand image of the
company
1) Good factor for global
expansion
2) Tendency for company
to gain profit increases
as the purchasing power
of consumers increases.
1) Not acceptable in other
countries
2) Difficult to replicate
Chinese unique culture
to other countries
1) Only a niche segment
was targeted by this
technological innovation
2) Diversified the product
portfolio
These laws gave more
rights to the workers
and the open contact
laws will bring difficulty
in firing workers without
cause.

SWOT Analysis:
Strengths:
1)
2)
3)
4)
5)
6)

Competition of employees on account of the Race track model

Job rotation increases the productivity of employees
80:20 Principle increases employee accountability
Selection of employees was done through talent pool
The ability of implementing turnaround strategy
Haiers competitive strategy(niche strategy)

Weakness:
1) Huge amount of work pressure on employees and in case the
performance is not upto the mark, the dismal of the employees can too
take place
2) Competition and race among the employees was seen to be adversely
affecting the atmosphere of the company.High internal competition
3) The trend of displaying the ranks of employees can sometimes lead to
insult and demotivation among the employees
4) Giving no permanent position can be a source of demotivation among
the employees.
Opportunities:
1) Successful implementation would help the company in improving its
performance and reduce the attrition rate
2) Continuous technological advancement and innovation will help during
global expansion
Threats:
1) High probability of high attrition rate if the demotivation and
dissatisfaction among the employees continued like this on account of
work pressure, not giving permanent position and trend of displaying of
ranks of employees.
2) On account of the cultural differences, the same system cannot be
applied across different regions.That is the sustainability of the present
PMS system needs to considered
3) Managers were not happy with the 80-20 Principle which can be a
threat to the company in the future.
4) The difference in labor laws can cause a delay in the companys
operations.
5) Role of unions in other countries

FACTORS
Haier practiced a very unique performance management system and the
following factors are important for the success or adoption of the system in
other countries

Emphasis on employee management and usage of motivation techniques, tools

like job rotation, colored footprints etc.

Innovative human resource practices (Integration of Japanese management philosophy,

American innovation, traditional Chinese culture, organizational learning),

Internal Competition
Performance evaluation and appraisal techniques, Incentives - Rewards &
punishments and management philosophy like OEC, Racetrack Model and
Emphasis on training and development of employees
cultural differences
Haiers competitive strategy(niche strategy) where emphasis is on quality over
price
Accountably at all levels particularly managerial accountability along
with assessment
Identification, training and retention of the right employees worldwide.
Sustainability of Haiers labour practices
Sustainability and adaptability of
the existing performance
Management System
Role of Union

CRITICAL FACTORS
Sustainability and Adaptability of the existing performance system
Employee management and motivation techniques
Identification, training and retention of the right employees worldwide

Performance evaluation and appraisal techniques

Influence of Chinese cultures on PMS

Role of unions

ANALYSIS OF CRITICAL FACTORS

Sustainability and Adaptability of the existing performance system

Haier has integrated the traditional Chinese values, aspects of Japanese

management philosophies, American innovation and Haiers own learning into
their work culture. In Haier, there was an exceptional level of
accountability at all levels of hierarchy at all times. The case talks
about OEC: Overall, Every, Control and Clearance. This was the
guiding principle of Haiers management system. However, it is a major
challenge to adapt the same work culture in other countries. Haier first needs to
understand the cultural differences and make sure that this system is accepted
and followed in other countries too. The performance management system was very
much inclined with the Chinese culture and their way of doing things. Stringent practices
regarding following rules and regulations within the organization and with no flexibility
might not be acceptable everywhere. For example, Chinese are very hardworking
compared to their USA counterparts, so the expansion into other countries such as USA
needs careful consideration of this fact. It is important for employees
in other countries to demonstrate the same level of accountability and
leadership for the Performance Management system to be
effective.So, the cultural, sociological factors and labour practices of
various countries are to be analyzed before the PM system is
implemented .Hence this factor would impact our problem statement .

Employee management and motivation techniques

In China, Haier used various management and motivation techniques and
tools such as keeping a deposit book, overall accountability (OEC), 80:20
principles etc. to motivate employees to perform better. But all these
techniques might not work in other countries, due to the differences in various
social and cultural values between them. The incentives needed to motivate
might vary among different countries. While monetary incentives may work
better in Western capitalist countries like USA, the work atmosphere and

better job recognition as well as respect might be important factors to be

considered in socialist countries. The company uses coloured footprint method
to assess and recognize the low performers. This might seem demotivating to
employees in other countries where unions are strong. They might not be
ready to accept this system

Identification,
worldwide

training

and

retention

of

the

right

employees

Haier currently has talented workforce at the moment which was acquired
through careful selection among several candidates. The talent pool was revised
every quarter and evaluations were conducted for each position. It was required that the employee
should constantly strive for continuous excellence. They were provided sufficient training
and were have been groomed to be highly efficient through constant
performance monitoring.so, one of the main requirements of the company is
that they get similarly talented employees in other countries. The new
recruits need to fit in with the work culture of Haier. Also Haier devoted significant
resources to training and development to increase the performance of the low performing
employees. But constant training will lead to increasing costs, when PMS is implemented in other
countries.

Performance evaluation and appraisal techniques

The system of deposit book, 80:20 principle or the racetrack model

might not be effective in other countries in a similar manner. The racetrack
model leads to high internal competition and might lead to friction among
employees. Also it does not allow team work to develop as all are
competing with each other. These impact the performance of employees
significantly. More collaboration rather than competition has to be
encouraged internally. Motivation techniques like the yellow footprint
method could be considered as demotivating by other cultures. Such
differences also have to be considered while implementing the current PM
system at other locations.
The three tier termination procedure which is followed at Haier. This in a
way provides a sense of job security which is different from the western
work cultures which deals harshly with non-performers .Also, we need to
consider the fact this company utilizes much of its resources for employee
training and counseling of under performers.so, terminations are usually
very costly to any organization. Haier has a well-established and effective
termination policy which it could use to attract large resource pool of
talented employees in foreign countries. Also in countries with strong
union, the termination policy might pose a problem.

Influence of Chinese cultures on PMS

Chinese culture varies drastically with that of other nations.as already
mentioned Chinese are considered to be hardworking and also there is
abundance of labor force available. Also their labour practices are
highly influenced by their values and beliefs.so we cannot implement
directly all the labour policy without considering the scenario at the
respective countries. there is no system currently to address the cultural differences
built into their performance management system regarding matter such as the appraisal
system, rating and also the training methodology .therefore, it is important to
analyses the cultural fit before implementing the existing performance
management system elsewhere.

Role of Union
Many of the western countries have strong presence of unions. These unions will impact
the major decision policies of the company. Now the unions in other countries might have
an entirely different perspective towards termination policy or the motivation tools used.
They might not accept the 3 phase process of employee termination or the mandatory
rotation of the jobs internally. The process of dealing with low performing managers at
Haier, by classifying them into different levels of sickness could be ineffective and
degrading. So the presence or absence of union affects the policies needed to form the
performance management system.

OPTIONS
1. Apply the current performance management system (that is
prevalent in China) in all the countries
The current performance management system functioning in all the
manufacturing plants of China has earned great success. This
performance management system has not only raised the performance
of the employees but also emphasizes on recognizing and rewarding the

employees creativity. Everyone tries to give their best efforts as their

pay is directly linked to their performance.

Advantages:
Easier planning and implementation of policies
A unique root is maintained
Low cost of implementation
Less time consuming
Standardized process will simplify the system

Disadvantages:
Might not be accepted by all the employees in all the countries
Underperformance of employees due to the fear of strict policies
Strict policies may lead to high attrition rate
Does not consider the cultural differences
Can create legal issues in other countries
2. Different performance management system for different
countries that suits their cultures and interests
The performance management system has to be designed considering
the organizational needs of different countries. This will help follow a
HR framework that tallies with the country specific cultural
requirements.
Advantages
Considers the work culture and respects the culture of every country
Performance management system is more acceptable to the
employees

Disadvantages
High cost of implementation
Very complex process to handle and coordinate
Very time consuming
Lack of uniformity of policies
Difficulty in aligning a particular countrys policy with the global
policy

3. Adopt a standardized performance management system

globally

In this case, a single standardized performance management system is

followed globally. However the core features of the current
performance management system followed in China will be retained.
Some additional features will be introduced that suits the global
interests. Any features that might harm or disrespect any employees
morale will be omitted.

Advantages:
Culture specific changes will be well considered
Since the core policies are retained this policy will earn success as it
has in China
Similar core practices and philosophies are followed in all the
manufacturing bases
Employees will be motivated to perform better
Greater productivity and good results
Uniform global identity

Disadvantages:
Complex to implement
Costly process
Implementation in China will be difficult compared to other countries

RECOMMENDATIONS
Considering all the advantages and disadvantages of the above options, we
recommend the third option - Adopt a standardized performance
management system globally.
The performance management system followed in China was considered
groundbreaking not only in China but also for any firm anywhere. We must
also remember that the countries where Haier is planning to expand have
different work culture and so the practices followed in China might not be
acceptable in other countries.
Hence all the core philosophies and positive aspects of this system will be
retained. Only a few changes are required so that all the cultural differences
are considered and thus there is no employee dissatisfaction and high level
of employee performance and productivity.

Again this has to be kept in mind that a sudden change in the Chinese
practices is not easy. The management needs to forecast the long term
implications of the change. The change has to be implemented in different
phases with proper review to ensure smooth progress.

ACTION PLAN
Step
s
1
2

3
4

Action

Timeframe

Research on the culture, policies and

motivational factors in different countries
Conduct meetings and discuss the
proposed changes with the top
management
Encourage employees to suggest any
improvisation
If possible consult any external source
who can advise on the legal implications
and labour practices in the target
countries
Devise performance measurement

In two weeks

techniques and refine the HR policies

In a month

In a month
In a month

After one month of all

the research

accordingly considering all the

recommendations
6

Communicate the revised policies to

every level of the organization

After devising the

policies

Train the supervisors and executives to

In the next two months

make them aware about the changes and

perform accordingly
8

9
10

Train the employees of the target

countries so that they get acquainted
with the existing framework
Implement the revised policies
Review and evaluate the changes and
their results on a regular basis

In the next two months

In the next three

months
Initially on a monthly
basis and then on a
quarterly basis