New Outthinker Research Findings Show Open, Decentralized Organizational Structures Improve Companies’ Financial Performance and Ability to Attract and Retain Top Talent

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Outthinker new research findings that show statistical evidence that open, decentralized organizational models, such as Haier’s RenDanHeYi model, significantly improve a company’s overall financial performance and its ability to attract and retain top talent.

On December 14th, 2022 Outthinker released new research findings that show, for the first time, statistical evidence that open, decentralized organizational models, such as Haier’s RenDanHeYi model, significantly improve a company’s overall financial performance and its ability to attract and retain top talent.

The Haier organization has been developing and refining its RenDanHeYi model since 2005. The model is characterized primarily by small, self-managed teams called microenterprises, open organizational structures, and enhanced employee-to-customer responsiveness. The success of Haier’s 2016 acquisition of GE Appliances, which grew revenue from $15B immediately following the acquisition to $32B within five years, is attributed to the application of the RenDanHeyi model.

Over the past year, Outthinker, a think tank specializing in growth strategy and corporate innovation, conducted a survey of 500 mid-level managers with decision-making capabilities to test eight attributes of such open, decentralized models. Four of those attributes showed a strong statistical significance between the characteristic and the organization’s overall financial performance and its ability to attract and retain talent.

The complete summary of the study and findings can be found in this white paper.

The key results show that organizations who apply four characteristics of Haier’s RenDanHeyi model are likely to improve their ability to attract and retain top talent and to improve their overall financial performance. The four characteristics and their results are:
1. Organizations that treat workers like intrapreneurs rather than employees are 1.6X more likely to attract and retain talent and 1.4X more likely to financially outperform their competitors.
2. Organizations that operate in small decentralized teams rather than hierarchical business units are 1.2X more likely to attract and retain talent and 1.3X to financially outperform their competitors.
3. Organizations that make budgeting decisions through an internal marketplace rather than control through a centralized system are 1.5X more likely to attract and retain talent and 1.3X to financially outperform their competitors.
4. Organizations that offer a choice of shared services rather than designating shared services are 1.6X more likely to attract and retain talent and 1.3X to financially outperform their competitors.

Management and strategy experts Rita McGrath of Columbia Business School, Martin Reeves of BCG Henderson Institute, and Tony O’Driscoll say the results have tremendous implications for leadership, strategy, and the structures in which companies organize themselves.

“One of the things I talk about is a new playbook for strategy. It really has to do with accepting that change is the normal thing, not stability, and that’s a big shift. Strategy itself came from industrial economics which makes two assumptions: 1) Industries exist and 2) The normal state of things is equilibrium. The first principle of the new playbook is no, the normal state of things is not necessarily equilibrium.” Rita McGrath, Columbia Business School

“Technology is forcing us to do a number of things differently. It’s forcing us to be faster (algorithmic speeds are very fast), it is taking away some operations from humans, so when we embrace alternative organizational structures, maybe we should even consider more radical structures.” Martin Reeves, BCG Henderson Institute

“The evolution of technology supports that we can better understand who works with whom to get what done in a more organic way, and the leadership system needs to support that organic flow.” Tony O’Driscoll, Duke University Fuqua School of Business

For more information on applying Haier’s RenDanHeYi model and the implications of open, decentralized structures on organizational design and the future of work, visit Outthinker’s “Beyond Hierarchy” page.

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Tess Woods
Outthinker
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