🛠️ How a broken fridge launched a global business empire

No bosses, no red tape—just 4,000 mini startups inside one company

May 23, 2025

In 1985, a young manager handed his workers sledgehammers to destroy 76 defective refrigerators—an act that would ignite one of the most radical corporate transformations in history.

“We took away all of our middle management. Now things are working much better. Zero signature, zero approval. Now we have only one supervisor, which is the customer.”

— Zhang Ruimin, CEO of Haier Group

Here’s what’s in store for today’s issue:

  • The dramatic moment when a factory floor turned into a demolition site, signaling a new era for Haier.

  • How eliminating middle management and empowering employees transformed Haier into a global powerhouse.

  • The revolutionary Rendanheyi model that redefined organizational structure and employee autonomy.

  • Insights into Haier's unique approach to customer-centric innovation and its impact on product development.

  • Lessons from Haier's journey that can inspire and guide your own business transformation.

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How to Fix a Failing Company With a Sledgehammer

In 1984, Haier wasn’t just a struggling fridge company—it was a national punchline.

Its products were defective. Morale was rock bottom. And foreign appliance brands were flooding into China with sleeker, more reliable alternatives. That’s when a young manager named Zhang Ruimin walked into the factory, inspected inventory, and found 76 broken refrigerators.

What he did next shocked everyone.

Instead of quietly fixing or hiding them, Zhang handed his workers sledgehammers and ordered them to smash the fridges in front of the entire factory.

That single act didn’t just destroy a few bad appliances—it became the symbolic reset button that launched one of the most radical business turnarounds in modern history.

Today’s issue breaks down how Haier went from bankrupt and broken to the #1 home appliance brand in the world—by reinventing not just its products, but its entire structure.

Build Better Products. Then Burn the Org Chart.

Zhang’s sledgehammer stunt wasn’t just theater—it was a declaration of war on bad quality.

In the 1980s, Haier (then Qingdao Refrigerator Co.) was in financial freefall, with a reputation for manufacturing junk. Zhang’s first move was to obsess over product quality. He trained workers to inspect every detail, implemented strict quality controls, and refused to ship anything that didn’t meet the new standard.

The result? Chinese consumers noticed. Haier’s reputation climbed, and so did its market share. By the early 90s, Haier was China’s top appliance brand.

But Zhang didn’t stop there. If product quality was phase one, phase two was something few CEOs dare to attempt: tearing down the management structure itself.

As Haier scaled, Zhang feared becoming a bloated, slow-moving giant. So he scrapped the traditional top-down hierarchy and replaced it with a radical idea called Rendanheyi.

In short: Haier split its 80,000+ employees into 4,000+ self-managed micro-enterprises.

Each team operated like a startup—with full autonomy, its own P&L, and direct accountability to customers. No middle managers. No red tape. If a team performed, they profited. If not, they were replaced.

The HR department went from 860 people to just 11.

Zhang didn’t want to captain the ship. He wanted to rearchitect it.

This shift turned Haier into a living, breathing ecosystem of micro-entrepreneurs. Teams could pivot quickly, launch products faster, and stay obsessed with solving real customer problems. Bureaucracy didn’t stand a chance.

And the rest of the world was about to take notice.

From Broken to Best in the World

With its culture rebuilt and structure reengineered, Haier made its final leap: global expansion.

But unlike many Chinese firms, Haier didn’t just chase scale. It acquired major players—GE Appliances in the U.S., Sanyo in Japan—but insisted on adapting its decentralized model wherever it went.

And it worked.

By 2021, Haier had:

  • 99,000 employees

  • $32 billion in annual appliance revenue

  • An 18% annual growth rate since 2015

  • The #1 spot in global market share for home appliances

More impressive than the numbers? Haier did it without becoming a Western-style corporate clone. It didn’t copy anyone. It invented its own playbook.

The “Haier model” is now taught in business schools. Its internal startups consistently ship new products. And Zhang’s philosophy—“the user is the boss”—remains the heartbeat of the company.

It’s not every day a broken local factory becomes a global business case study. But then again, not every CEO starts their turnaround with a sledgehammer.

🍫 Snackable Stats

12.6% YoY growth – Q1 2025 overseas revenue, supported by digital transformation and emerging market expansion

27,000 units sold – Q1 2025 sales of Casarte Star Pleasure wall-mounted units, ranking second in their premium price segment

20% YoY growth – Q1 2025 performance of Haier’s Casarte brand, driven by premium product optimization and AI integration

~USD 10.93 billion – Q1 2025 revenue, marking 10.1% year-over-year growth driven by premium appliances and AI integration

~USD39.5billion – Haier’s full-year 2024 revenue, solidifying its position as the world’s leading home appliance manufacturer

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