Haier’s organisational model, known as RenDanHeYi, represents one of the most radical and comprehensive reinventions of a large, multinational organisations in the modern era.
RenDanHeYi is not merely a new organisational charter but a fundamentally different management philosophy designed to thrive in the “ecosystem economy“.
Table of Contents
The Foundational Inversion: From Push to Pull
The dominant logic of industrial-era manufacturing, perfected by engineering powerhouses like Bosch, is built upon a “push-based” system.
This model relies on long-range market forecasts to drive production, achieving economies of scale through the mass manufacturing of standardised products. The entire organisational structure, with its functional silos and hierarchical command, is designed to execute these top-down plans with maximum internal efficiency.
Haier’s Rendanheyi model completely reverses this logic. The Rendanheyi organizing principle is not an internal forecast but an external, real-time user order, creating a “pull-based” system.
The guiding philosophy of “zero distance to the user” is not a marketing slogan but an architectural mandate that systematically dismantles the bureaucratic layers separating employees from their ultimate customer.
Every activity, from design to logistics, is a direct response to a specific user need or scenario. This shifts the primary organisational objective from optimising the firm’s internal world of production schedules to dynamically adapting to the external world of user demand.
1. What Is the RenDanHeYi Model?
The name RenDanHeYi itself encapsulates its core principle. RenDanHeYi is three interconnected principles based on three Chinese words: Ren (人), referring to employees; Dan (单), referring to user needs and the value created for them; and HeYi (合一), signifying the tight integration or connection between the two.
The central philosophy is that each employee’s value is directly reflected in the value they create for users. This creates a virtuous cycle in which the ultimate goal is the maximisation of user value, which, in turn, leads to the maximisation of human (employee) value.
Specifically, RDHY is a practical application of Drucker’s core principle that the “one correct and effective mission statement for enterprises [is]: to create and maintain customers”. Haier’s model is an attempt to achieve this principle, which Zhang Ruimin notes has become “impossible to achieve for traditional business models”.
The Meaning of RenDanHeYi
The term RenDanHeYi (RDHY) encapsulates the entire business model philosophy of Haier. The name itself is broken down into three parts:
- Ren (Ren): Stands for the employee.
- Dan (Dan): Represents the user.
- HeYi (HeYi): Signifies the connection or integration between the two.
In essence, the model is built on the “link between the value that employees create and the value that users experience”. It suggests that employees are entitled to share in the value they successfully generate for users, much like shareholders.
RenHandeyi Underlying Philosophy and Origins
The core philosophy of RenDanHeYi is a human-centric, self-organizing approach that stands in direct opposition to traditional, rigid corporate hierarchies.
The foundation of Rendandeyi is not entirely new; it rests significantly on the managerial principles promoted by American management scholar Peter Drucker. Haier’s founder, Zhang Ruimin, has frequently acknowledged the profound impact Drucker’s ideas had on his thinking and the evolution of Haier.
Specifically, RDHY is a practical application of Drucker’s core principle that the “one correct and effective mission statement for enterprises [is]: to create and maintain customers”. Haier’s model is an attempt to achieve this principle, which Zhang Ruimin notes has become “impossible to achieve for traditional business models”.
Philosophy: “Liberating Humanity” and Creating Negentropy In its most profound sense, Haier’s philosophy is to “liberate humanity”. Zhang Ruimin describes the purpose of RDHY as launching a
“Renaissance or Enlightenment movement in management, so that everyone can maximize their own value and win their own dignity”.
The goal is to create an “open self-organized ecosystem that recognizes no borders”. This ecosystem is designed to create negentropy—a concept from physics meaning a decrease in entropy or disorder.
- Negentropy (Order): In Haier’s model, negentropy is achieved when its Ecosystems of Micro-Communities (EMCs) “continuously engag[e] with users and enhanc[e] their experiences,” creating an exchange of energy that promotes order and ensures the company’s vitality.
- Entropy (Disorder): This is contrasted with traditional, closed systems that fail to interact with users. Zhang Ruimin argues that the “inability of traditional management models… can be explained by the law of entropy increase” , which leads to chaos, stagnation, and eventual failure.
Culture, Purpose and Strategy at Haier
In essence, the model is built on the “link between the value that employees create and the value that users experience”. It suggests that employees are entitled to share in the value they successfully generate for users, much like shareholders.
Underlying Philosophy and Origins
The core philosophy of RenDanHeYi is a human-centric, self-organizing approach that stands in direct opposition to traditional, rigid corporate hierarchies.
Origins in Drucker’s Principles The foundation of RDHY is not entirely new; it rests significantly on the managerial principles promoted by American management scholar Peter Drucker. Haier’s founder, Zhang Ruimin, has frequently acknowledged the profound impact Drucker’s ideas had on his thinking and the evolution of Haier.
Specifically, RDHY is a practical application of Drucker’s core principle that the “one correct and effective mission statement for enterprises [is]: to create and maintain customers”. Haier’s model is an attempt to achieve this principle, which Zhang Ruimin notes has become “impossible to achieve for traditional business models”.
Philosophy: “Liberating Humanity” and Creating Negentropy
In its most profound sense, Haier’s philosophy is to “liberate humanity”. Zhang Ruimin describes the purpose of RDHY as launching a “Renaissance or Enlightenment movement in management, so that everyone can maximize their own value and win their own dignity”.
The goal is to create an “open self-organized ecosystem that recognizes no borders”. This ecosystem is designed to create negentropy—a concept from physics meaning a decrease in entropy or disorder.
- Negentropy (Order): In Haier’s model, negentropy is achieved when its Ecosystems of Micro-Communities (EMCs) “continuously engag[e] with users and enhanc[e] their experiences,” creating an exchange of energy that promotes order and ensures the company’s vitality.
- Entropy (Disorder): This is contrasted with traditional, closed systems that fail to interact with users. Zhang Ruimin argues that the “inability of traditional management models… can be explained by the law of entropy increase” , which leads to chaos, stagnation, and eventual failure.
Culture of RenHanDeyi
The corporate culture of RenDanHeYi (RDHY) is built on the belief that employees are self-motivated and creative, and its goal is to “liberate humanity” by allowing every person to “maximise their own value”.
Operationally, this means traditional job descriptions are replaced by “entrepreneurial” roles . Instead of a fixed salary, employees receive a “user-paid salary” through profit-sharing, directly linking their pay to the customer value they create.
This is part of a “comprehensive and granular control system” that functions as a “real-time performance feedback loop,” allowing employees to “self-regulate” and see exactly how they are performing against their goals.
For instance, the “OEC system” (Overall, Every, Clear) acts as a daily ritual, mandating that “each task… must be completed daily”. This culture is then locked in place by powerful “myths”—like the famous smashing of 76 refrigerators—and “rituals,” such as “formal award presentations,” which publicly celebrate success and reinforce the company’s core values.
| From: The Traditional Hierarchy | To: The RDHY Ecosystem |
| The Goal: The company’s main objective is maximizing profit. | The Goal: The company is driven by a core purpose (like serving users); profit is the natural result of achieving that purpose. |
| The Structure: A rigid pyramid where bosses command subordinates. | The Structure: A flexible network of small, independent teams (MEs) that form alliances (EMCs) to serve users. |
| Leadership Style: Managers command and control employees from the top down. | Leadership Style: Leaders act as coaches and supporters, removing obstacles so their teams can succeed. |
| How People Work: A culture of strict rules and bureaucracy to control behavior. | How People Work: A culture of freedom and trust, where people are guided by a strong sense of personal responsibility. |
| Decision-Making: Important decisions are made by a few senior executives at the top. | Decision-Making: Decisions are made by the people closest to the customer and the problem. |
| Company Focus: The company is focused internally on its own processes and efficiency. | Company Focus: The company is focused externally on the customer, aiming for “Zero Distance” to anticipate their needs. |
| View of Employees: Employees are seen as “cogs in a machine” who must be monitored, managed, and controlled. | View of Employees: Employees are seen as “the whole man”—creative, self-motivated people who want to contribute. |
| Employee Roles: People have fixed roles defined by a job description and execute assigned tasks. | Employee Roles: People are empowered entrepreneursresponsible for creating value and maximizing their own potential. |
| Information: Information is kept secret by management and used as a source of power. | Information: Information and results are shared openly with everyone to build trust and enable better decisions. |
| Strategy: Strategy is a fixed, long-term plan that everyone must follow. | Strategy: Strategy is a process of continuous experimentationand adaptation to a changing world. |
The Haier Model Of Strategy and Purpose
The strategic purpose of RenDanHeyi is built on two fundamental pillars: achieving “zero distance” to users and empowering employees to act as entrepreneurs.
Zero Distance to the User The model was “originally developed with the intention of achieving zero distance with the customer”. This is Haier’s core approach to customer-centricity, which involves “closely engaging with customers and even proactively anticipating their needs”. Haier aims not just to satisfy a customer but to create the customer.
Employee Empowerment (The Entrepreneur) The second pillar is “empowering people and placing employees at the core of the business model”. RenDanHeyi dismantles traditional bureaucracy and emphasizes that “everyone within the organization is a CEO”.
What Is “Zero Distance” To The Customer?
Zero Distance is Haier’s core philosophy and operational model. It is a “steady commitment to not only addressing, but often foreseeing, customer needs, while also delivering prompt responses”. The goal is to eliminate the gap between the company and the user, enabling the organization to address needs “promptly and efficiently in real time”
How It Is Operationalized
Haier operationalizes “Zero Distance” by fundamentally restructuring the entire organization, turning it from a traditional hierarchy into a customer-centric network.
- Inverted Hierarchy: The company introduced its inverted pyramid organizational structure, placing users at the top. This makes the customer the “ultimate decision-maker”.
- Employee Empowerment: Employees who interacted directly with users are empowered to take the lead in addressing user needs. This means employees prioritize responsiveness to the customer rather than hierarchical superiors.
- Organisational Structure (MEs and EMCs): The company was deconstructed into autonomous units (Micro-Enterprises or MEs). Contracts interconnect these MEs and serve to “interconnect customers with Haier’s internal resources. When complex needs arise, MEs and external partners form “Ecosystems of Micro-Communities (EMCs)” to deliver a complete experience.
- Reporting and Compensation: Operationally, everyone should report to the users. Employee compensation is strictly tied to the tangible value they contribute to customers. The customer’s evaluation becomes the key force propelling the internal market.
Traditional models aim merely to satisfy needs with products. Haier’s “Zero Distance” approach moves beyond this; it centres on the “redefinition and combination of needs to form comprehensive experiences”.
The most significant operational difference is that the user is not a passive recipient. In Haier’s model, users are “elevated to the status of co-creators”. They are actively involved in shaping their own experiences and designing business solutions tailored to their specific needs.
Based on the provided text, here is a concise explanation of Haier’s “Zero Distance to Customer” model.
Comparison to Other Methods
Traditional models aim for “merely satisfying needs with products”. Haier’s “Zero Distance” approach moves “beyond” this; it centers on the “redefinition and combination of needs to form comprehensive experiences”.
The most significant operational difference is that the user is not a passive recipient. In Haier’s model, users are “elevated to the status of co-creators”. They are actively involved “in shaping their own experiences” and “designing business solutions tailored to their specific needs”.
Fitting Services to Customers
1. Service-Oriented Organization
This describes Haier’s fundamental strategic shift, driven by its founder Zhang Ruimin. Instead of identifying primarily as a manufacturer that makes and sells physical products, Haier redefined itself as a service provider that solves user problems. This means the company’s main goal is no longer just selling an appliance but delivering “substantial value to users, transcending the mere production of goods”.
2. Manufacturing as a Service
This concept is the logical outcome of becoming a service-oriented organization. In this model, the factory and the production line are no longer the center of the business. Instead, manufacturing is treated as just one component in a larger chain of value. It becomes an internal “means to providing services to customers,” rather than the end-goal itself.
3. Holistic Solutions
This is the output of the service-oriented model. Instead of just selling a product, Haier focuses on the entire “customer experience”. This “holistic approach” includes every part of the user’s journey, such as the “distribution of products and after-sales service”. The goal is to move “beyond merely satisfying needs with products” and instead focus on the “redefinition and combination of needs to form comprehensive experiences”. Note: think of how it focuses on strategic arenas not just markets.
4. Ecosystems for Experience
This is the operational structure Haier uses to deliver holistic solutions. Haier recognized that a single company cannot satisfy a complex user experience alone .
- Structure: The company creates Ecosystems of Micro-Communities (EMCs), which are “temporary alliances” of internal teams (MEs) and external partners.
- Function: These EMCs are categorized into “Experience EMCs,” which “perceive… evolving experience-related needs,” and “Solution EMCs,” which “assume responsibility for implementation” .
- Example: The “Internet of Food” case study illustrates this. To deliver an “effortless” Peking duck experience at home, Haier (the appliance maker) had to build an ecosystem with a “renowned chef” and “14 partners,” including duck farms, packaging specialists, and frozen logistics companies .
- Goal: The ultimate operational goal of this ecosystem approach is to move beyond a single transaction and “cultivate a lasting bond that transforms them into lifelong users”.
The Evolution of the RenDanHeyi Model
The RenDanHeYi philosophy required a complete departure from the prevailing economic models of the 20th century. Haier’s leadership identified a necessary evolution from the “product economy,” focused on the firm, to the “platform economy,” concentrated on aggregating transactions, and finally to the “ecosystem economy”.
Both the product and platform models are ultimately self-centered, designed to create value for the organization or platform owner rather than for the end-user. The ecosystem economy, by contrast, is founded on using a network of collaborators to create and continuously iterate personalized experiences that meet the specific needs of individual users.
To achieve this, Haier undertook a dramatic and painful process of “creative destruction” against its own structure.
The company systematically dismantled its traditional corporate hierarchy, eliminating the entire intermediate layer of more than 12,000 middle managers.
This act was not simply a cost-cutting measure; it was a strategic necessity to transform the organisation from a rigid pyramid into a decentralised, distributed network where every employee could face the market directly.
This transition reframes RenDanHeYi not as a mere management innovation, but as a comprehensive corporate survival strategy meticulously designed for a new economic paradigm defined by volatility, uncertainty, complexity, and ambiguity.
RenDanHeyi, though, was not created overnight; it has evolved in stages over two decades.
- RenDanHeyi 1.0 (2005): ZZJYT and the Inverted Pyramid Haier launched the first version of RDHY in 2005 by deconstructing itself into ZZJYT (Zi Zhu Jing Ying Ti), or “independent operation units”. This was visualized as an “inverted pyramid” organization, which placed the “users at the top”. However, this model was still limited, as the ZZJYTs “lacked the autonomy to introduce new products… without hierarchical authorization”.
- RenDanHeyi 2.0 (2012): Micro-Enterprises (MEs) In 2012, Haier evolved the ZZJYTs into 4,000 Micro-enterprises (MEs). These MEs operate as “miniature autonomous companies” with “full decision-making autonomy” and responsibility for their own profit and loss (P&L) statements. These MEs are supported by Platforms (former corporate functions like HR, Finance, and Legal) that act as resource providers.
- RenDanHeyi 3.0: Ecosystems of Micro-Communities (EMCs) The latest evolution, RDHY 3.0, emerged because Haier recognised that “individual MEs were insufficient to satisfy an increasingly sophisticated user demand”. This led to the creation of Ecosystems of Micro-Communities (EMCs). An EMC is a “unique structure made of different Micro-enterprise (ME) units” that form “temporary alliances” to collaborate on a specific user need.
EMCs are “transient entities” ; they are “established in response to distinct user requirements and can be disassembled once those objectives have been fulfilled”. They are bound by an “EMC Contract” that aims to “reduce internal competition among MEs” and stimulate cooperation.
The Firm as a Networked Ecosystem
10 Questions On Haier’s Renhandeyi Model
1. How does the Renhandeyi Haier Model keep everyone aligned if teams act independently?
Every team works toward a shared purpose defined by user value rather than management targets. Alignment comes through market-style contracts that link autonomy to measurable results for the customer.
• EMCs manage coordination around shared user needs.
• Contracts define contributions, outcomes, and rewards.
• Success depends on transparency and mutual accountability.
“Without a shared goal of creating value for users, autonomy leads to fragmentation. Rendanheyi unites independence through common purpose.” — Zhang Ruimin
2. Who makes decision in the Haier Model if there is no traditional hierarchy?
Decision power follows accountability rather than rank. Those who face the user decide, while platform leaders guide, resource, and protect brand coherence.
• Teams that face customers make operational and design choices.
• Platforms act as investors, supporting with data, tools, and brand governance.
• EMCs resolve cross-team issues through agreed rules, not management orders.
“Power must be transferred to those closest to the users because only they can sense changes in demand.” — Zhang Ruimin
3. How do teams in Haier earn rewards based on real customer value?
Income is determined by the market, not by seniority. Teams share in profits according to the measurable value they create for users.
• Each team shares directly in the profits it generates.
• Income becomes an outcome of user satisfaction, not internal approval.
• Transparent metrics link reward and contribution
“Everyone becomes their own CEO, and their income comes from the users they serve.” – Zhang Ruimin
4. What happens when a Haier team underperforms?
If a micro-enterprise fails to meet its goals, it loses internal market support, but people are not discarded. They can move into new teams, receive training, or start again with a different idea.
• Performance failure triggers review and potential restructuring.
• Talent is redeployed through an internal matching process.
• The system values learning and recovery more than blame
“Failure is not an endpoint but a signal that the user has not been satisfied. We must learn and start again.” – Zhang Ruimin
5. How do shared functions stay useful when teams run themselves?
Shared functions have evolved into internal service platforms that compete to deliver value to the teams they serve. They must prove their worth through quality, speed, and fair pricing.
• Teams can choose internal or external service providers.
• Service levels and prices are published openly.
• Continuous improvement and responsiveness keep functions relevant.
“No department has a guaranteed existence. Only those who create value for others deserve to continue.” — Zhang Ruimin
6. How is Haier’s long-term innovation protected in a system driven by short-term results?
Haier protects long-term innovation through shared investment platforms that fund strategic projects. These platforms allow multiple teams to collaborate on ideas that may take years to mature.
• Innovation funding comes from collective internal investment pools.
• EMCs assemble teams from across the company for complex challenges.
• Progress is measured through learning, prototypes, and market potential.
“We build an ecosystem where innovation comes from everyone, not from a single R&D centre.” — Zhang Ruimin
7. What kind of leadership does Haier use?
Leaders focus on creating conditions for entrepreneurship instead of directing people. They remove barriers, encourage learning, and help teams connect their goals to user value.
• Leadership success depends on how many others succeed.
• Managers coach rather than command.
• Trust, clarity, and opportunity replace control.
Quote: “Leaders must become gardeners of entrepreneurs, not commanders of employees.” — Zhang Ruimin
8. Can the RenDanHeyi Haier model work across different cultures and countries?
The principles of RenDanHeyi and user-centred entrepreneurship are universal, but the ways they are applied vary across cultures. Haier’s experience shows success depends on local adaptation, not replication.
• Begin with pilot teams that are culturally open to autonomy.
• Adjust incentive systems to local norms and labour laws.
• Build understanding through small wins and transparent results.
“Rendanheyi is a philosophy, not a formula. Each culture must interpret it through its own values.” — Haier Europe Leadership Statement
9. How is performance tracked in the RenHanDeyi Haier Model when there is no bureaucracy?
Performance is measured through clear, real-time metrics rather than layers of reporting. Each team uses a simple “strategic income statement” linking user outcomes, costs, and returns.
• Dashboards show progress against user-defined goals
• EMCs review performance collaboratively, not hierarchically
• Transparency replaces administrative oversight
“Numbers tell the truth only when they reflect user value, not internal activity.” — Zhang Ruimin
10. What is the safest way to move from a hierarchy to a RenDanHeYi system?
Start small, prove results, and scale through success rather than mandate. Focus first on building the right incentives, decision rights, and mindset before changing structure.
• Launch pilots with motivated leaders and clear accountability.
• Redesign pay and contract systems to reflect user value.
• Keep headquarters as a strategic investor and capability hub.
“Transformation cannot be imposed; it must grow from the success of those who embrace it first.” — Zhang Ruimin
References
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Hamel, G. and Zanini, M. (2020) Humanocracy: Creating organizations as amazing as the people inside them. Boston: Harvard Business Review Press. https://store.hbr.org/product/humanocracy-creating-organizations-as-amazing-as-the-people-inside-them/10403
Hamel, G. and Zanini, M. (2018) ‘The End of Bureaucracy’, Harvard Business Review, November–December
Jacobides, M.G. (2022) From products to experience ecosystems: Haier’s internet of food. London: London Business School Case Study. https://www.thecasecentre.org/products/view?id=187235
Laker, B., Soga, L. and Bolade-Ogunfodun, Y. (2023) Closing the service gap: How to connect customers, employees and organisations. London: Pearson.
Monteiro, F. (2023) Haier Europe: Bringing RenDanHeYi for all. Fontainebleau: INSEAD Case Study.
Steiber, A. (2022) Leadership for a digital world: The transformation of GE Appliances. Cham: Springer.
Zohar, D. (2022) Zero distance: Management in the quantum age. Singapore: Palgrave Macmillan. https://link.springer.com/book/10.1007/978-981-16-7849-3
