By Elisabeth Goodman, 25th November, 2018
Small SMEs, large organisations, and a “microenterprise” model
One of the aspects I enjoy so much about working with smaller Life Science or Biotech organisations* is the level of energy, enthusiasm and connection that every employee seems to have with their company’s purpose. The people we encounter seem to demonstrate a level of autonomy and independent thinking that is sadly so often lacking in larger organisations.
[*Typically referred to as SMEs – Small or Medium Enterprises.]
When I’ve worked in and with larger organisations it’s been more common to encounter “us and them” mentalities, cynicism, a lack of connection with the company’s purpose and objectives, and a lot more bureaucracy.
So I always enjoy Gary Hamel’s articles in the Harvard Business Review when he describes organisations that have found other approaches to management that mitigate the disadvantages inherent to larger organisations.
In this latest article, co-authored with Michele Zanini, Hamel writes about a Chinese white goods company, Haier, that has achieved significant employee engagement for its 75,000 global workforce, by developing a “microenterprise” (ME) management model.
“Haier’s empowering, energizing management model is the product of a relentless quest to free human beings at work from the shackles of bureaucracy”. Gary Hamel and Michele Zanini. The End of Bureaucracy, Harvard Business Review, November-December 2018, pp. 50-59.
The microenterprise model: autonomy instead of bureaucracy
Haier’s model is an extreme version of an approach that GSK trialled, whilst I was working there, with its Centres of Excellence (CoEs). In that model, there were about half-a-dozen CoEs, each with about 350 people. They set their own goals, and managed their own budgets.
In Haier’s model, there are about 4,000 MEs, most of them with 10-15 people. There is a strong emphasis on autonomy, with the ME teams setting their own, very ambitious, goals, and managing their own budgets. The MEs also set their own pay rates and distribute bonuses, dividends and profits based on their performance against goals (or “lead targets”). Ultimately, employees behave and are treated more as owners and members of start-up organisations than as employees of a corporate organisation.
The MEs demonstrate a more autonomous approach in other ways:
- Groups such as HR, Finance, IT, legal affairs etc. are set up as “node” MEs instead of the centralised or shared service model common to larger organisations. These node MEs have to bid as suppliers to market-facing MEs who can choose between competing support services within or even outside the organisation. Contracts or agreements are then put in place to ensure that expected standards of service are maintained.
- MEs can change their leaders if they are under-performing, can recruit new leaders in an internal selection process, and can accept take-over bids from leaders elsewhere in the organisation.
Collaboration, open innovation and intrapreneurship in the microenterprise model
There are risks as well as benefits from Haier’s microenterprise model. The MEs form a sort of network which the authors compare to the internet, or the web. They have evolved this model to ensure that it works to their advantage as follows:
- Collaboration. Haier’s MEs were initially very competitive, and risked losing the benefits that could be gained from pooling their efforts and expertise. Haier formed “platform” MEs to address this. These platform MEs are somewhat akin to the “Communities of Practice” known to Knowledge Management practitioners. The platform MEs are of two types, one type addresses categories of product or technologies, the other addresses capability development or competencies that might cross several products.
- Open Innovation. Haier adopts all the practices available to tap into sources of innovation beyond the boundaries of its organisation. It invites potential users to provide input on needs, preferences and problems. It accesses a world-wide network of experts for creative problem solving and to support R&D and eventual sales and support.
- Intrapreneurship. As the HBR authors point out, one of the consequences of bureaucracy in large organisations is that the organisations can become very conservative. Haier encourages a start-up culture whereby employees effectively act as intrapreneurs to pitch for and launch new MEs. These new MEs are often initially externally funded, to prove their viability, before Haier pitches in with internal funds.
As Haier’s CEO, Zhang Ruimin told one of the authors on an earlier occasion: “We want to encourage employees to become entrepreneurs because people are not a means to an end but an end in themselves. Our goal is to let everyone become their own CEO – to help everyone realize their potential.”
Apparently, Haier’s resultant growth in gross profits, revenue, and increase in market value are unmatched by any of its domestic or global competitors.
Zhang believes they have achieved this through their practice of rendanheyi – a tight association of “the value created for customers with the value received by employees”.
As the HBR authors point out, most companies have focused on optimising their operations, and, more recently, on digitising their business models. Haier’s microenterprise approach would appear to be a unique route for achieving employee engagement in a large organisation.
There could be some interesting ideas here for managers and leaders to explore in growing Life Science SMEs:
Could finding ways to continue to work and think like a start-up mitigate against the otherwise inevitable increase in bureaucracy, and decrease in employee engagement inherent to large organisations?
About the author. Elisabeth Goodman is the Owner and Principal Consultant at RiverRhee Consulting., a consultancy that specialises in “creating exceptional managers and teams”, with a focus on the Life Sciences. (We support our clients through courses, workshops and personal one-to-one coaching.) Elisabeth founded RiverRhee Consulting in 2009, and prior to that had 25+ years’ experience in the Pharmaceutical Industry in line management and internal training and consultancy roles supporting Information Management and other business teams on a global basis. RiverRhee is a member-to-member training provider for One Nucleus and a CPD provider for CILIP (Chartered Institute for Library and Information Professionals).
Elisabeth is accredited in Change Management, in Lean Sigma, in Belbin Team Roles, MBTI (Myers Briggs Type Indicator) and is an NLP (NeuroLinguistic Programming) Practitioner. She is a member of CILIP and of APM (Association for Project Management) in which she was a founding member of the Enabling Change SIG.