Zhang Ruimin


Zhang Ruimin is a Chinese politician and chief executive officer of Haier Group. He is known for his work in turning a little-known, bankrupt refrigerator manufacturer into the world's fourth-largest white appliances company.

Career

Early life

Zhang Ruimin was born on January 5, 1949 to a working class family in Qingdao, Shandong; his parents were employed in a local garment factory. As a youth, Zhang was swept up in the Cultural Revolution and like many other students, he joined the Red Guards as the movement cascaded across the country. He visited Mao's birthplace and attended rallies in Beijing since all schools had been closed, and when the movement was finally disbanded, he was able to avoid being sent down to the countryside. Due to the widespread upheaval, Zhang was unable to attend university ; instead, he began his career in obscurity at a state-run construction company in Qingdao in 1968.
Despite his humble roots and abbreviated education, Zhang had a voracious appetite for learning, and between his shifts working at the factory, Zhang would bicycle back and forth to management courses; he also read extensively on his own. Slowly climbing up the hierarchy of the company, he was promoted to workshop supervisor and then deputy director of the company in 1980 after 12 years of hard work. In 1982, he was promoted to deputy manager of the "Household Appliance Division" of the Qingdao municipal government. In a twist of fate, Zhang was dragooned into taking over as general manager of the Qingdao Refrigerator Plant when the previous manager left. He was the fourth person to hold the position and by then the company was in deep financial trouble with more than $10 million in debts.

Qingdao Refrigerator Plant

Early in his tenure as general manager, Zhang traveled to Germany to visit the company's German partner, from whom they were purchasing technology and know-how. He quickly realized that the company had a serious problem in terms of reputation and quality; it also reflected poorly upon his country. To ingrain the concept of quality into his workers, Zhang decided to conduct a demonstration with some of the factory's product.
A customer had brought a faulty refrigerator back to the factory and showed it to Zhang. Zhang and the customer then went through his entire inventory of 400 refrigerators looking for a replacement. In the process he discovered that there was a 20 percent failure rate in his merchandise. To emphasize the importance of product quality, Zhang had the 76 dud refrigerators lined up on the factory floor. He then distributed sledgehammers to the employees and ordered them to destroy the refrigerators. The workers were hesitant; the cost of a refrigerator at the time was about 2 years worth of wages. When Zhang saw the distress his workers exhibited, some even to the point of tears, he exclaimed: "If we don't destroy these refrigerators today, what is to be shattered by the market in the future will be this enterprise!" The refrigerators were smashed to pieces; Zhang himself took part in the attack on poor product quality. One of the hammers remains on display at company headquarters as a reminder to posterity.
The benefits of Zhang's exercise soon became clear; not only did it reinforce the concept of product quality in his own workers, it also garnered the company some much needed publicity. The next year, its refrigerators sold well in major domestic markets such as Beijing and Tianjin. Zhang also instituted many reforms that were completely novel to the state-run Chinese economy at the time. To encourage productivity, Zhang tied employee pay scales to sales of the products which they produced. He also instituted a practice whereby a mistake by an employee would require that employee to stand before his co-workers to explain his error. Another new concept that Zhang introduced was customer feedback. After noticing that sales were poor in Sichuan province, he discovered the reason to be that villagers would use the machines to wash sweet potatoes, clogging the drains in the washers. In response, Zhang had his company redesign the product to wash produce in addition to clothing.
By 1986, Qingdao Refrigerator had returned to profitability and sales growth averaged 83 percent per year. With sales of just CNY ¥3.5 million in 1984, sales rocketed to CNY ¥40.5 billion by 2000. With the success of Qingdao's refrigerator company, the municipal government asked it to take over some of the city's other ailing appliance makers. In 1988, the company assumed control of Qingdao Electroplating Company and in 1991 took over Qingdao Air Conditioner Plant and Qingdao Freezer.

Haier Group

In 1991, Qingdao Refrigerator was renamed Qingdao Haier Group, borrowing and transliterating the last syllable of its German partner, Firmengruppe Liebherr. Zhang Ruimin stayed on as general manager, but he concurrently enrolled himself at the University of Science and Technology of China to study towards a master's degree in business administration; he graduated in 1994. He was named the chief executive officer of Haier Group in 1993.
Zhang began a concerted effort to expand Haier's presence abroad, beginning in Europe, where Haier already had connections thanks to its partnership with Liebherr. In 1993, the company also began shipping its products to the Middle East and Africa, and also entered South East Asia in 1996. To break into the American market dominated by the likes of GE and Whirlpool however, Zhang realized that Haier would need to elbow its way in through under-served niche markets such as wine coolers and mini-refrigerators, popular with hotels and college dormitories. To achieve this, Haier dissected its 80,000 workers into hundreds of internal micro companies, each with a profit and loss account. Haier also adopted a policy of "catfish management" whereby each division manager has a shadow manager who is ready to take charge of the division if, for whatever reason, the manager misses targets for three months. The strategy worked splendidly and by the turn of the century Haier claimed up to 60 percent of the electric wine cooler market. To further increase its visibility in the United States, Zhang also had Haier open a manufacturing plant in Camden, South Carolina that produced full-sized refrigerators. Factories were also opened in Indonesia, the Philippines, Pakistan, and Jordan. By 2005, revenues at Haier had surpassed $12 billion and the company employed over 30,000 people; the Financial Times recognized Zhang Ruimin as one of the "50 most respected business leaders in the world."

Politics

Zhang Ruimin joined the Communist Youth League in the 1970s, when the organization was resuscitated after being shut down during the Cultural Revolution. He went on to obtain membership in the Communist Party in 1975.
As a collective enterprise, Haier is technically owned by its workers under the supervision of the government. However, it is markedly different from Chinese state-owned enterprises and Zhang has asserted that he runs Haier like a private company. Nevertheless, after having successfully turned around Haier, Zhang occasionally comes under pressure from government officials to take over other struggling enterprises. Once, he agreed to take on a pharmaceutical manufacturer, despite a dearth of experience or distribution network; the merger was less than successful. In another instance, he was urged to take on a bicycle maker, however in this case Zhang was able to resist.
In 2002, Zhang became a member of the 16th Central Committee of the Communist Party of China. He has since then served as an alternate member on the 17th Central Committee and 18th Central Committee.

Personal

Zhang Ruimin is married and has one son. His wife keeps a low profile and previously worked as a party secretary at a textile factory in Qingdao. His son studied business at the Wharton School of the University of Pennsylvania. Zhang is known to abstain from drinking alcohol.

Honors