In 1987, Ren Zhengfei founded Huawei Technologies at the age of 44 with 20,000 yuan. In three decades, Huawei has become China’s biggest telecom technology company.
There are many factors behind the phenomenal success of Huawei, but among these, Ren’s constant guard against big company disease is often considered as the key.
As an ex-military officer, Ren was well aware of the low efficiency of having too much and too stringent hierarchy in an organization. He is strongly convinced that a great company must eliminate middle managers.
In a recent event, Ren’s drive for lean management was well demonstrated.
A junior worker, Liang Shanguang, harshly criticized certain management decisions in Huawei’s intranet last week. His behavior was seen to be violating company rules, and Liang almost got himself fired.
At the last minute, Ren suddenly stepped in. He issued an internal email, praising Liang for his courage to tell the truth and promoted him by two grades.
“Telling the truth will improve our management, while telling lies will only make management more complicated and our operation more costly,” Ren said.
Ren’s move can also be interpreted as a warning to the middle managers that Huawei has very transparent internal communication channels. If they are not doing their job right, someone can always blow the whistle.
A believer in flat organization, Ren always makes sure the frontline staff get the most attention and resources, in particular in the sales and research divisions.
It’s not rare that an outstanding frontline employee gets paid double the salary of his or her boss, considering the strong incentives Huawei offers.
The tech giant even launched a mandatory retirement scheme last year. Under the plan, any employee who fails to join the group’s management team at 45 will have to retire.
Most companies would regard employees at such age as valuable assets as they’ve accumulated extensive experience but not Huawei.
In Huawei, employees at 45 or above are seen as lacking the creativity, energy and the right mindset to be a good frontline staff any more.
If they are not good enough to be promoted to the management team, then they have to go.
Meanwhile, American internet giants like Tesla, Google and Facebook have also embraced flat organization.
Tesla founder Elon Musk encourages all employees to email him directly.
British companies like HSBC and Cathay Pacific are also joining the move, and have cut out a number of middle managers.
Simply speaking, flat organization means a company would minimize the middle management jobs and put more resources in front-line positions. Also, the company would utilize advanced technologies to enable top management to make decisions and supervise efficiently.
A company with excessive number of mid-level managers can’t be nimble and flexible enough to react to a changing world. Therefore, many multinational companies are trying to adopt lean management.
In the old days, middle-level managers were essential for executing broad strategies outlined by the company board or CEO or CFO.
Since it would be impossible for a few top managers to directly communicate with tens of thousands of employees. As such, middle managers are responsible for informing, interacting with and inspiring the employees.
However, the technology advancement in management system, instant messaging and big data has increasingly eroded the value of middle managers.
This article appeared in the Hong Kong Economic Journal on Sep 11
Translation by Julie Zhu
[Chinese version 中文版]
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