Since the 2000s, the Industrial Revolution’s hierarchical “Scientific Management Approach,” built on command and control, has given way to agile approaches and entrepreneurial mindset, particularly among new generation companies and the software industry.
The global giants on the Fortune 500 list, once dominated marketplaces, fall into trouble day after day and leave their place to the next generation agile enterprises. The hierarchical organizational charts, role and responsibility matrixes, and central and bureaucratic decision-making procedures of these companies, all designed to “prevent employees from making mistakes,” make the situation worse.
Since its foundation, Chinese white goods giant HAIER has implemented several management styles based on the requirements of the day and its own situation. However short time ago, when it realized that the suit it was wearing didn’t allow it to move comfortably in the changing world, it sought a new management system and saw that no existing management approach could provide the flexible and sustainable growth it required in this volatile, uncertain brave new world. So, it developed its own management system under the name REN-DAN-HEYI with the help of its consultants.
REN-DAN-HEYI, as a new management philosophy, inspires and guides corporately rooted companies on the verge of collapsing, fearful of being clumsy in the turbulent markets of Europe, Asia, America, and even Africa, to transition into really agile organizations. It offers an infrastructure of being big without getting bulky and being a forest spreading everywhere from a garden rising between 4 walls.
The Thinkers 50-RENDANHEYI OPENTALK’21, showcasing the REDANHEYI approach and the experiences of global organizations that have progressed in their transformation path and made significant breakthroughs using this approach, took place on the 17th and 18th of September. Here, I’ll discuss the issues that were brought up over the two-day sessions and how they impressed me. All of the speeches are available on Thinkers50’s youtube channel, the group which pioneered the creation of the strategy and its dissemination.
Before beginning, if you’re wondering what this REDANHEYI stands for, name on it, and one word explains everything:
Institutionalization of REDANHEYI as a Management Approach:
The Rendanheyi approach, which was developed at the Haier company in China, has today spread to 325,000 companies in 74 countries, 15 sectors, from 10 global research centers that guide the transformation, and has proven itself in terms of global experience and “best practice” development.
The “Rendanheyi” maturity level certificate, which is given to companies that have reached to a certain point in their transformation process, evaluates companies in two dimensions which are; “self-organization capabilities” and “value expansion capabilities”. It also examines their ability to keep up with change and grow with change. Based on this assessment, it reveals areas of improvement of the company. Instead of hierarchical and limited growth under one roof, it enables enterprises to grow horizontally without hierarchies, spreads risk, and broadens the pool of options as an “ecosystem organization.”
The transformation, which began with a shift in mentality, unfolds under the four primary themes below. These themes might be considered a manifesto, in my opinion.
Mission: From shareholder primacy to the maximization of human value (employees/customers)
Company: From bureaucracy to self-organization
Employees: From managed people to autonomous people (entrepreneurs)
Management: From “scientific management” for efficiency to value based RDHY management.
The RDHY approach encourages the organization to evolve from a group of workers who complete their tasks correctly to entrepreneurs who understand the customers and closely follow their problems in order to develop innovative products, in brief; to an ECOSYSTEM, a network of coordinated and collaborative boutique ventures. When the ivy structure is developed in all directions, instead of being a single rooted, unidirectional, vertically rising tree, it is feasible to enter numerous regions, to attempt many areas of opportunity without endangering the whole company, and to exit unsuitable markets without affecting the whole. Indeed, one of the speakers, Dr. Jeffrey Kuhn, refered the BANYAN tree as the analogue of the system, which in China symbolizes immortality and grows new roots all the time.
What People from Companies on Their RDHY Transformation Journey Said:
Managers from FUJITSU, MAQE, JAIPUR RUGS, and GE A, who earned certificates indicating that they are on their road to becoming a “micro-businesses network of startups” (EMC = Ecosystem Micro Community), shared remarkable experiences during the two-day sessions. During the sessions, as the infrastructure of the transformation into a business network is self-organizing, learning, experimenting, and developing teams; we frequently encountered the features we have heard in many agile transformation stories. The most crucial aspect of this transformation was to create an environment conducive to innovation and collaboration. For this purpose, many topics such as Design Thinking, Organizational Safety, Diversity and Management with Values were touched upon. I will give you a quick rundown of the remarks that drew my attention:
- The effect of the “three winged birds” was mentioned: This term means growing by realizing a pain point of the customer and creating a new market with the new solution. By introducing Startup entrepreneurship mindset into the ecosystem, an opportunity for scalable growth is created. Companies even invited people from inside and outside, who have an innovative idea, to come and develop the idea safely within their ecosystem. Sustainable horizontal growth of the business as a whole is achieved in this way. During the endeavors for achieving the market fit the micro company is not only supported financially but also supported for the development of the management system.
- “Employee first” was one of the topics highlighted by each speaker; here in Jaipur Rugs in India, the workers from “the untouchables”, people even below the lowest strata of the Indian caste system, began to be valued by this transformation process. More over the designs made by the “untouchable” employees were awarded instead of famous designers’. This was the example that impressed me the most in terms of removing prejudices and the importance of valuing the employees.
- Again, in terms of being organized to improve quality together, rather than a hierarchical quality control process, assignment of “quality coaches” instead of “quality controls/quality supervisors” in Jaipur Rugs was one of the good practices that attracted my notice.
- Happy employees make their customers happy. In today’s world, where working hours are becoming more uncertain and employees are crushed under endless task lists due to the pandemic, the sharing of the CEO of VIISI, which received the “ZERO DISTANCE” award from Thinkers50, and has a score of 9.8 out of 10 in customer satisfaction surveys, was noteworthy. It was heartening to hear him telling, regardless of how busy they were, their personnel did not provide service on the weekends, leisure time to rejuvenate, and this ensured them make their clients happy.
- I think you have already heard the famous quotation of Peter Drucker; “Culture eats strategy for breakfast”. This statement was challenged by a very striking determination for cultural transformation: “Culture is a byproduct of the system we create, and the system we create must be in harmony with our strategy.”. The prevailing hierarchical and silo structure of organizations causes ego and conflict. People need to eliminate others from the race to advance in their careers, rather than working as a team. On the other hand, in a system that grows horizontally where every employee has the potential to become an entrepreneur, employees have to be creative and collaborative to create value in order to advance in their careers. In this regard, it is significant that GEA rose from 4–5th place to nearly the first place in the market with the same staff as the system evolved in the recent 4–5 years after Haier adopted it. During the transformation process the hierarchy was eliminated, approval and reporting mechanisms were streamlined, and employees were encouraged to act as entrepreneurs.
- Regardless from size and type of the company, the microenterprises ecosystem strategy, can be applied to all types of companies, such as service based small companies with 80 employees or commodity based giant companies with 80,000 employees; as seen, however, each organization’s transformation path is unique since Rendanheyi is a philosophy and perspective rather than a strictly followed method. In this sense, each organization discovers its own path to growth by experimenting in the context of its core values and philosophy. They improve the market fit of the new product by experimenting. The most significant tool for organizations is experience-based development.
- Salary and performance evaluation are among the most frequently asked questions in agile and team-oriented organizations: Employees in traditional organizations are continuously compelled to get along with decision makers using “carrots and sticks,” and even the most promising employees can be punished in case of being constituted a risk for their manager. Despite this, it is adopted because it is customary, whereas the tendency to evaluate individual performance is one of the most damaging factors for organizational safety. As a way to overcome all these odds, the bonus/reward system based on sharing the value created, in the organization where a base salary and a fixed increase rate is applied to everyone, was often stated during the speeches. The topic of performance and talent management was examined under a variety of headings, such as employees that elect their own managers, not being laid off in times of economic crisis, and how the roles and responsibilities descriptions limit the potential of employees and teams.
- At the conference, where an ISO official from the ISO 56000 Innovation Management Standard Department was also present, the oficial’s emphasis on ISO’s human and employee-oriented approach with the similar values to facilitate innovation was an important indicator of the change in the perspective of employees and people all over the world.
Not only profitability, but also cooperation culture, cooperation performance, and proper implementation of the RenDanHeyi philosophy were among the success criteria set forth by the company’s top management. The model of ecosystem might be seen similar to traditional holding or group of companies conglomerating subsidiaries of a single boss or same stakeholders, however, the crucial point here is that this ecosystem adds value to its employees, customers, and other ecosystem companies, as well as the transformation of employees into entrepreneurs. Rendanheyi does not impose a rigid management style; instead, each organization is free to implement the Rendanheyi philosophy at its own pace and in accordance with its own facts.
I hope that the era of competitiveness, fighting, and consuming is over, and that a new era has arrived in which everyone works in cooperation to create what is good and worthwhile.