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leader_paper.docxHe Xiangjia — A Level 5 Leader
“Modest and willful, humble and fearless” (Collins, 2001, p. 22). What Level 5 leaders value most is the rise and fall of the company, rather than their own interest.
The author of Good to Great, Jim Collins divided the abilities of managers into 5 levels, in which level 5 is the highest level. Although levels 1 to 4 leaders could create considerable success for a company, not enough to lead the company to achieve lasting excellence. Level 5 leadership is a necessary condition for a company to improve from good to great — without Level 5 leader, this transition would always be an extravagant hope. Level 5 leaders would choose excellent successors, and wish the company toward a more brilliant future with the next generation. Nevertheless, Level 4 leaders often consider themselves as center; they were more concerned with the way they achieve self–realization and usually cannot help the company achieve long-lasting excellence (Collins, 2001).
Related Literature
The leaders play a key role in determining the success of a company. A good leader knows exactly what goes on in the company and determines the course of action. In essence, the performance of a company is affected by the quality of the leaders. For this point, a question came up with my mind: what kind of leader can make a great company? After I read Jim Collins’s book — Good to Great, I realized that a company needs a Level 5 leader in order to great.
According to Collins, there are seven important factors that affecting a company from good to great: “Level 5 Leadership, First Who…Then What, Confront the Brutal Facts, The Hedgehog Concept, A Culture of Discipline, Technology Accelerators, The Flywheel and the Doom Loop” (2001). Among these, level 5 leadership is the top priority.
The Qualities of the Level 5 Leaders
It is not difficult for us to perceive that every good-to-great company has this type of leaders — “an individual who blends extreme personal humility with intense professional will” (Collins, 2001, p. 21). None of them likes showing their face in public, on the other hand, they demonstrated their high entrepreneurial spirit as well. Instead of pursuing their own interests in their life, Level 5 leaders put their energy into a larger goal of build a company to be great. It is not that Level 5 leaders have no personal fulfillment. In fact, they are supper ambitious, but what they consider first is the interest of the company, not their own interest.
Personal humility. When a company has made great achievements, the Level 5 leader would never boast of his/her merits; he/she would like to talk more about others people’s credit rather than their own (Collins, 2001). Level 5 leaders tend to shun publicity and attention and they don’t want people to think that they are extremely important. From their point of view, it is not that only they have the abilities that can build the company to be great, the company can be great without their existence.
Level 5 leaders act with quiet and contemplate the problems calmly. When Level 5 leaders encounter problems, they can clearly recognize the existence of root causes and have the courage to face difficulties. Level 5 leaders would actively seek for the solution and make the company to be great.
When everything is going on smoothly, Level 5 leaders would give others all the credit rather than themselves, otherwise, they give it to good luck. (Collins, 2001). In the meantime, if thins go poorly, they would accept responsibility rather than blame the bad luck.
Personal will. Level 5 leaders have the common goal: The best interests of the company. They will do their best to ensure the company from good to great (Collins, 2001). Level 5 leaders have always led the company to high quality achievements. Level 5 leader is a clear catalyst in the transition the company from good to great. They are afraid of nothing, except building a not-great company. No matter how difficult the problem is, Level 5 leaders have the unwavering belief that do whatever must be done to produce the long-lasting excellence results. Also, they focus on building an enduring great company rather than a temporal great one. Everything they do is intended to build a great company.
Right People
To take a company from good to great, the first step is not set a new direction, a new mission and strategy for the company, is about how to get the right people on the right position. Level 5 leaders first got the right people on the bus, and wrong people off the bus (Collins, 2001). And then the next step is to determine where to drive to.
Level 5 leaders would never on developing a strategy until they got the right people in placen(Collins, 2001). So only the problem of getting the right people are solved, the development is meaningful. Level 5 leaders clearly realized that it is possible to find a way to make a company great if they consider the right people at first, and then gather them as a team to figure out how to do it.
When Level 5 leaders are not sure the people is right or not, they would not hire them and keep looking other possibilities (Collins, 2001). For the same respect, when they realized there are wrong people “on the bus”, they would act decisively. For the most important point, is that Level 5 leaders can put the right people on the right position. With a clear awareness of the right people, it would help the company to be great.
Setting Up Successors
Nepotism could make a company become mediocrity. Level 5 leaders know exactly that set up a right successor is the right approach for a company be even greater success (Collins, 2001). For a company’s best interest, Level 5 leaders would make the right decision when picking their successors. Level 5 leaders don’t concern about their own reputation for personal greatness, they even don’t mind that most people would not know that the success of the company track back to their efforts, what they really care is seeing the company even more successful in the next generation.
Biography
He Xianggjian is the co-founder of Midea Group, one of China’s largest appliance makers founded in the year 1992. He Xiangjian was born in Foshan, China in 1942. In May 1968, he raised 5000 yuan (US$ 781) with 23 residents, and then started a company which produced medicinal glass bottles and plastic lids. The company switched to produce gadgets afterwards for generators. He Xiangjian worked hard to find a market for these products everywhere and gradually fostered a sensitive sense for market trends. The company began to manufacture electrical fans in 1980 and turned into home appliances. Finally in 1992, he founded Midea Group and determinedly conducted shareholding reform.
Under his leadership, Midea Group became a public company and listed at Shenzhen Stock Exchange Center after a year. Then, in 1997, he greatly pushed Midea Group toward the multi-division structural reforms, which established a solid foundation for the group’s constant development. With his hard work, Midea Group is developing quickly and operating around the world.
Analysis
He Xiangjian, the co-founder of Midea Group, is exactly a “Level 5 leader.”
Modest and Humble
He is a man of few words, the opposite of a show and introverted to public, or a little shy. That is the impression of He Xiangjian on many people.
In China’s home appliance industry, where are full of high-profile and star-like CEO, He Xiangjian and his professional managers are always keep low key in Shunde (a city in Guangdong, China), who are so special and weird in this industry. However, it is this “low-profile and special Shunde man” who creates Midea Group’s development miracle that it hits 7.3 billion yuan (US$ 1.14 billion) from 5000 yuan (US$ 781) forty years ago.
Do What Must Be Done
There is no major strategic mistake in Midea Group’s history, don't even mention the crisis that would push the company to “the death door”. When the rivals are pushing through exciting reforms and putting in place the international acquisition, their business performance is like on the roller coaster going directly downward. However, Midea Group under He Xiangjian’s management keeps stable and continuous growth.
He Xiangjian firmly believes that only depending on the operation ability of the enterprise instead of resource policy or opportunism can the enterprise survive. Thus, he devotedly keeps the white household appliances as the main business, and refuses the temptation resolutely. For instance, he coldly turned down the proposal of cellphone production from the subordinate, because he thought Midea Group didn't have that “ability”. Here is another example that he gave up the investment on a big electricity project in Guangxi (a province in China), because the investment didn't comply with the diversification strategy of Midea Group.
“Every small step covers a long distance.” This is the commercial theory in Mr. He’s mind. He frequently says “compared with wrong steps, we prefer to develop slowly”, and “one or two thousand billion cannot afford the reputation the century-old shop, so never should we act recklessly.”
“Adversity is a good thing”. The year of 1997 is the year that is unforgettable to Mr. He in the whole life. In that year, the most serious crisis in Midea Group occurred.
At that time, the government intended to make Kelon Group (one of the largest manufacturers of household electrical appliances in China) merger Midea Group in order to establish Shunde Home Appliance Titan. In the meantime, Midea Group’s business performance suffered a sharp drop to about 2.0 billion yuan (US$ 31 million) after breaking 2.5 billion yuan (US$ 39 million) in 1996.
He Xiangjian firmly objected to merger, and he said “Midea Group should stick to its own way, and we can make breakthroughs and change by our independent efforts”. Bravely facing the cruel reality, Mr. He thought “adversity isn't the bad thing but a good thing for Midea Group”. By this crisis, he skillfully persuaded some founding members and established the professional manager team with divisional organization reform and decentralization. This series of actions quickly reverses the tide of operation crisis and ushered the enterprise into the “separation of the three powers” operation mode, namely shareholders, board of directors and manager team.
It is the same year when Mr. He largely pulled away from the management of daily operation affairs. He thought that “as long as the incentive mechanism, decentralization mechanism and accountability mechanism all founded well, brilliant talents will manage the enterprise for you”.
Hands-off boss. The relationship between the boss and professional managers has always been a big problem in management. The relationship between Mr. He and his team of professional managers is always clear, “boss is boss, and professional managers are the professional managers”. Once a certain professional manager violates the regulations, Mr. He will give alarm immediately. Mr. He is a “hands-off boss” without cellphone, because he thinks “there is nothing that requires cellphone or could be fixed by cellphone”.
The reasons why Mr. He could draw a clear line in the relationship with managers is derived from Midea Group decentralization principle set by himself, which is “centralization following rules, decentralization keeping the order, authorization under the regulations and operation within controlling”.
Similarly as queen bee doesn't need to make decisions but sending chemical substance to maintain the whole society of bees. He Xiangjian believes that enterprises should consider decentralizing step by step, when it concentrates the key power, so as to inspire the staff to create an open and energetic atmosphere. But these aspects, including the people to authorize, what kind of power and its operation scale, and the procedure, should have rules to follow. And the establishment of internal transparent information system and strict supervision system can prevent excessive concentration of power, and put an end to abuse of power and chaos after the decentralization.
Rolling up sleeves and looking for problems. After decentralization, He Xiangjian spends a large part of his time to study abroad and research domestic market every year. Even when he is back to the group headquarters, he always drives around among each business division to talk with management team in the spare time after the monthly work conference of daily application group and refrigeration group.
In Mr. He’s view, the CEO should not only drink champagne in business class, but should roll up his sleeves and look for problems. Due to the implementation of progressive development strategy in Midea Group, every time the strategy is set, Mr. He will attend the monthly and quarterly reports from every public institution to check the progress situation. Especially for unstable performance or growing business, Mr. He will give special attention and key care. He also has a habit that in a meeting some of the senior executive level managers will be required to attend the meeting and then they are called one by one to express their opinions, as long as Mr. He thinks they are right, he will directly admit his mistakes; or point out their wrong place.
Concentration on white goods. Low-key Midea Group conducted two major capital operations in 2008. At the beginning of that year, Midea Group purchased Little Swan (a brand) with 1.68 billion yuan (US$ 26 million), becoming the second largest roller washing machine production base next to Haier (a Chinese multinational consumer electronics and home appliances company). In July, Midea Group announced to cooperate with Carrier, the American air conditioning giant to expand overseas market together.
In the home appliance industry, acquisition is so common. Midea Group keeps its sound and stable management all the time and has an extremely high hit rate in acquisition and merger. Till now, Midea Group has made over ten major acquisition, the objects all were dominating the governors in the industry, including Toshiba, Macro, Hualing, Royalstar and Little Swan (brands). Surprisingly, these dying enterprises come back to life depending on Midea Group, which is a win-win situation.
Mr. He is very proud of these acquisitions. Acquisition of Hualing (a group) brings Midea Group into the refrigerator industry; acquisition of Royalstar (a group) expands the refrigerator production capacity of Midea Group and brings Midea Group into the washing machine industry. At the same time, the acquisition of Little Swan helps to establish Midea Group’s status in washing machine industry; acquisition of Chongqing Meitong (a group) lays Midea Group’s leading position in Chinese central air-conditioning industry with one action.
Midea Group’s all acquisitions are around the white goods business, so that it can enlarge the scale, expand the industry and arrange the regional distribution more reasonably. He Xiangjian is very dedicated, “the demand in Chinese white goods market is very large, so even just in white goods industry it is not easy to do a good job”.
Setting Up Successor for Success
When he retired, considering the company is facing the complex background of lots of new complexions and problems, it would need a leader that has the ability to do the right things. For the benefit of the company, he did not appoint his son He Jianfeng to his position. Instead, he appointed Fang Hongbo to his position as Chairman and President. He handed the company over to an appropriate professional manager from outside the family is what a Level 5 leader would do. He Xiangjian’ s decision turns out that he was doing the right choice. As of 2013, Midea Group became a large powerful company which has approximately 135,000 employees in China and overseas and had a net profit of 7.3 billion yuan (US$ 1.14 billion).
Conclusions
Above all, He Xiangjian has all the qualities of a Level 5 leader. He demonstrated a compelling modesty, and never boast about his efforts. He avoided public adulation and pay all attention to make Midea Group great, no matter how difficult it is. He has ensured effective financial management by forward-thinking. And when it comes to the acquisition of a company, he is bold and have the faith to make Midea Group even stronger by making the right decision. Everything he did is for the best benefit of Midea Group. In order to make Midea Group be even great success in the next generation, He Xiangjian has set up the right successor for Midea Group to be success.
