Lessons from China: Haier Group has achieved extreme success through unique performance-management systems.

Haier Group is one of China's fastest-growing companies and one of the world's top brands. Twenty-two years ago, the firm was a nearly bankrupt refrigerator factory in Qingdao, and now it's the world's fourth-largest white-goods manufacturer. On May 17, 2006, for the third consecutive year, Haier Group was named one of the world's 100 most recognizable brands in a global name-brand list edited by the World Brand Laboratory. The only Chinese brand on the list, the firm was ranked 86th after such household names as Google, Wal-Mart, and Microsoft, which were the top three.

How did Haier achieve its success? Haier Group fits a 1999 Gallup survey profile of what makes a successful company: Customer service, product quality, operating efficiency, and speed to market are among the top seven keys to success. Haier excels in all these areas. Here I'll provide a snapshot look at the company's history and then describe the firm's unique and effective performance-management systems.

THE COMPANY

According to the October 2003 issue of the Harvard Business Review, Haier Group is one of the five Chinese "National Brands to Watch." In 1984, when Haier's CEO Zhang Ruimin took over the company from a government official, it had total assets of $300,000, a net loss of $178,000, sales revenues of $421,000, and 600 workers. Haier was incorporated in 1984 and initially produced household refrigerators. Qingdao Haier Refrigerator Co., Ltd., was listed on the Shanghai Stock Exchange on November 19, 1993 (Stock no.: 600690; website: www.haier.com), and it changed its name to Qingdao Haier Co., Ltd., in 2001. In 2004, Haier Group's global sales hit $12.1 billion with a growth rate of 68% during the previous 20 years.

In 2002, the firm had total assets of $2 billion, 30,000 employees, more than $100 million in profit, and sales revenues of $8.7 billion with home-appliance products such as refrigerators, air conditioners, microwaves, and washing machines. During this year the firm also expanded to small appliances, televisions, and even computers and cell phones. In that same year, the firm captured 50% of the U.S. market for small refrigerators and 60% of the U.S. market for wine coolers.

The firm now manufactures a wide range of household electrical appliances in 96 categories with 15,100 specifications, exports products to more than 160 countries, and has established 58,800 sales outlets globally. In 2000, the firm opened a $35 million refrigerator factory in Camden, S.C. Haier products have made it to Wal-Mart and many other national and regional chains, and, in 2002, Haier opened its American headquarters in New York City. This move indicated the firm had entered into a new phase for globalization of product design, manufacturing, and sales and that it was determined to strive for long-term development in the United States. In the 2002 U.S. market, Haier had a 30% market share for 230-liter and undersized refrigerators and a 35% U.S. market share for refrigerators in the 230- to 280-liter range. Haier has also been successful in European markets, with a 10% market share in Europe's air conditioning market in 2002.