Section III Appling Theory X, Theory Y, and Theory XY with Restaurants in Cross strait
III) Haidilao (海底撈)
critiques. Even the renowned American dining group such as Yum! Group that owns KFC, Pizza Hut, and other brands was most interested in Haidilao’s outstanding service. Founder of the company, Zhang Yong (張勇) was asked to come and give a speech about his ravishing success of running the chain. Zhang Yong recalled the experience is like “the elephant learning from an
ant.” It is quite flattering to say the least.
The immense success was due to the hardship that Zhang has endured and he brought his philosophy to his business model. The company’s motto is “Taking fate into your own hands”
shared great value to all employees that all they need to do to succeed in life is to work hard in sincere attitude and honesty and happiness will come their way.
Under Zhang’s management, he is able to offer working and learning opportunities to his
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employees that mostly coming from the most impoverished villages in China, but now they work in China’s most cosmopolitan cities such as Beijing and Shanghai. Although they received minimal education, they are able to communicate a pleasant message to their customers. The management cares for the living standards of employees and helps them solve personal problems.
In return, employees work with passion, creativity, and loyalty towards the management. This is the major difference between impoverished families and wealthy families because impoverished children cherish every opportunity that they are given and they do not take life for granted.
Hence, Zhang thinks impoverished kids from rural areas are honest and sincere than well brought up children living in big cities which make employment management efficient (Zhao, 2011).
Theory Y management
1. Employee Assistance Program (welfares)
Treating everyone like family is the first step of the Theory Y management. Zhang believes human beings are all flesh and blood and so if you treat them nice, they will treat you nice as well. The goal is to make employees treating their company like family or their ‘second home’
and in return they will also take care of their customers like their extended family. In order to make employees feel like home, Haidilao takes care of their employees like one of their own.
Giving them free apartments and nannies. They also receive excellent compensation packages that give them a much higher standard of living than in villages and small towns. Finally, employees of the month and those who have worked as assistant managers or higher-level managers for more than six months can have their parents receive a parental subsidy on a
monthly basis. Other benefits include a housing allowance and children’s educational allowance.
In addition, Haidilao has established a Family Care Team and set aside a 10,000-200,000 RMB annual budget to help employees with family crisis and emergency needs. As a result, many family members feel cared for and are happy to have their children working at Haidilao. For
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employee recruitment, Haidilao encourages employee referrals as well, giving 50 RMB bonus for every successful referral to a position beneath the level of assistant manager. About 60% of Haidilao employees were originally referred by other staff. Haidilao also offers a seven day annual paid vacation for their employees where each were paid with 160 RMB. During the break, the company arranges a family vacation to Hainan for all their employees (Zhao, 2011; 黃鐵 鷹，2014).
2. Employee management (opportunity for hiring)
Every employee working at Haidilao must work from the bottom-up management hierarchy because everyone is given an equal opportunity to have their fate be taken in their own hands.
Therefore Zhang values actual related work experience more rather than education from their employees. In other words, an employee who has not received any higher education can still become a part of the restaurant manager team, or reach even higher level education position through hard work and the willingness to communicate with customers. In addition, Haidilao does not favor employing young and attractive people, but select employees according to the essential qualities laid out by Zhang, including a hardworking personality, honesty, rational thinking, and alignment with company culture. Thus, the age range is between 18 to 50 years old or older and each has their own perspective in life. For instance, older employees would focus on completing the job itself instead of career advancement opportunities. As a result, Haidilao has successfully cultivated a group of young restaurant managers around 24 or 25, who began working at Haidilao at 17 or 18 and got quickly promoted due to their outstanding performance.
3. Performance Evaluation through Management Training
Haidilao also encourages employees to take further initiatives through job rotations. Those who wish to be promoted at Haidilao must rotate through other positions and receive the certificate of
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approval from each position. For instance, it is common that restaurant managers such as kitchen chefs know how to make appetizers. In addition, an employee has to serve as the reserve staff for the target position for a certain period of time before receiving the promotion. Going through each job position allows the employee to be knowledgeable and skillful prior to becoming the new restaurant manager. According to author Huang Tie Ying, there are three ways of job promotions: managers, technicians, and logistics. For management promotion: 1st level-rookie, 2nd level-qualified employee, 3rd level-top notched employee, 4th level-outstanding employee, 5th level-leading management, 6th level-lobby manager, 7th level-store manager, 8th level-regional manager, 9th level-regional general manager, level 9th-vice general manager. For technician promotion: 1st level-rookie, 2nd level-qualified employee, 3rd level-advanced employee, 4th level-role model employee, 5th level-labor model, 6th level-meritorious employee. For logistic
management: 1st level-rookie, 2nd level-qualified employee, 3rd level-advanced employee, 4th level-clerk, cashier, accountant, procurer, logistic, technician department, R and D department, and business manager.
The above are a structuralized organization that any employee is interested in the job promotion must go through each level to get to the position he or she wants (Zhao, 2011;
黃鐵鷹，2014). This is one of the common characteristics found in Theory Y as McGregor (1960) believes the average human being learns, under proper conditions, not only to accept but to seek responsibility (McGregor, 1960).
4. Collective learning and group learning (Learning motivation)
Haidilao not only provides a working place for their employees but also a learning environment for them to stimulate and self-improve through independent learning. For instance, Haidilao allows employees to learn and be familiar with computing and driving, these are the technical assets that employees can acquire from the management. Each time they learn a new skill from
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working, they will use that newly learned skill to fulfill a required task. This enhances the overall cultural standards as these hard working employees genuinely wanted to self-improve their skills through job performance. These are the type of behaviours that Zhang wanted to see from their employees. Zhang values education because he received minimal education just like everyone else in the company.
In order to reinforce the core value of service differentiation, Zhang strongly encourages their outstanding employees to take initiative and form unofficial “study groups” as a
complement to the official reforms in organizational structure. The purpose of the study groups requires assistant managers and team leaders regularly organize discussion opportunities for the employees. Half of the meetings can be relevant to work and the other part should be concerned with raising the overall quality of employees and making them well-rounded people. Hence, their duties would include helping others like brothers and sisters when they first enter the business and take care of them like family. Obviously, Zhang wants the study groups to back up his organization when it is in trouble or need the most help. Those that fail to fulfill the request will be kicked out of the study groups. This is an example of the Good Samaritan that an employee from either department is willing to help out in the kitchen when needed. For instance, when the kitchen area is running out of servers, an accountant is willing to participate in the kitchen to serve meals to customers, hence the accountant will not argue that the server’s job is not part of his or her job requirements but instead he or she is willing to take part because it is part of their responsibility to run Haidilao and does not plan to ruin it (Zhao, 2011; 黃鐵鷹，2014).
5. Haidilao University (Management training)
In order to maintain an higher standards in the organization, he decided to establish a training school called “Haidilao University”. This can carry out more systemic training for the
management team, including restaurant managers, team leaders, and other employees with
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management responsibilities. The president of Haidilao is a university professor, and most teachers are experienced restaurant managers who are proud to share their expertise through teaching at “Haidilao University” (Zhao, 2011; 黃鐵鷹，2014).
6. Opening of new restaurants and training new restaurant management (Performance
Evaluation)
Those who wish to open new restaurants must be evaluated through Level A to C of
performance appraisal. For instance, new restaurants grew only Level A restaurants, whose performance depends on the performance appraisals of their “babies”. If a new restaurant born out of a certain A-level management team could not get itself a higher level than C in 12 months, then the older restaurant could no longer hold its original A-level honor in the same round of performance appraisal. However a new restaurant born out of a certain management team received the honor of an A-level restaurant, then the manager of the old restaurant would receive additional bonuses.
This new policy remains committed to the direct chain model, this change greatly increased the incentives for unit expansion and heightened the restaurant managers’ motivation for opening up new restaurants (Zhao, 2011).
To sum up the business ethics set by Zhang Yong, he believes in anyone who is willing to work hard can one day be somebody. His popular slogan, “Taking fate into your own hands”
can make up something which you lack in life so you do not need to be skillful or knowledgeable to work at Haidilao. In fact, Zhang does not particularly favor in candidate’s strong educational background for job hiring, but if you do, it is a bonus. Everyone at Haidilao is treated equally, and to get promoted, one must climb the ladder of job rotation and passes every test from that position. Hence, one would start from server, then moving to every position and eventually get promoted as the new restaurant manager. This rigorous training process is what makes the
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experience so rewarding for these impoverished children coming from villages and moving to the big city to work at Haidilao, they started with nothing and one day they earned everything through hardship and diligent training. The sense of achievement makes them and their parents proud so they no longer being looked down upon by society because they are willing to put fate into their own hands and had earn the respect they deserved.
7. Creativity and new ideas: (Creativity, ingenuity, and innovation)
Creativity Team: In order to enhance the creativity that Zhang Yong wishes to cultivate from his
talented and gifted employees, the headquarter established a creativity team. Each restaurant compiles employees’ ideas and suggestions on a monthly basis and reports them to thecompany’s creativity team. The creativity team evaluates the ideas and announces the ones that have been chosen for implementation on the company’s internal website and newsletter. This practice highly motives employees to brainstorm and to propose new ideas, because they will receive bonuses paid for every chosen ideas. Zhang quoted “If the creative idea shows good results as it becomes implemented throughout the company, then more bonuses can be paid.”
Haidilao does not limit “creativity” to original ideas and accepts any employee suggestions that make sense, even if they are existing practices at other dining enterprises. As long as they are appropriate to Haidilao, the employee will receive the deserved bonus. This type of appraisal system not only inspires and motivates employees to create but it also gives them a sense of achievement when their ideas are chosen. Once their work gets the recognition, they will continue to work hard to reach that standard (Zhao, 2011).
Theory Y management
Employee empowerment: (Abdication with measures)
This type of Theory Y management as McGregor (1960) noted that abdication is a sign of trust
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between staff and managers and therefore the collaboration will work swiftly (McGregor, 1960).
Trust and responsibility are the two most important concepts in Zhang’s core values. As Huang describes the relation, trust is a type of respect, when the company believes in one’s ability and personal integrity, it will entrust important duties to the person to fulfill and that is a form of respect between man and organization. At Haidilao, trust symbolizes empowerment.
Unfortunately, not everyone in the company can be fully trusted and so Zhang must find ways to protect his company’s fortune from potential thefts and dishonesty. The idea is to combine Theory Y with X into the concept of empowerment, the company then can wholeheartedly abdicate its power but at the same time to prevent anyone who wishes to abuse it (黃鐵鷹，
2014).
Paul Feldman, an economist who is well known for determining white collar crime with his bagel experiment. In order to test the true nature of moral and self-autonomy among white collars. He would purchase 8,400 bagels and deliver them to 140 companies on a weekly basis.
There is a price tag behind every basket of bagel and the employees are supposed to put the money in the basket before taking one. There were small and large companies in his social experiment, according to the statistical result, white collars working in small companies are honest than those working in large companies, because they are willing to pay for the bagels. The ratio is 3 to 5% of white collars who had paid for the bagels in small companies. The size has to determine the reason of low crime rate. Small number of employees working together can easily find out who did the crime as opposed to large number of employees. Those who witnessed the act will report to the head office and so no will dare to take advantage of freebies (黃鐵鷹，
2014).
Zhang was inspired by the bagel experiment and decided to make some changes in his managerial technique because there were employees at Haidilao boldly took advantage of the
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empowerment and abuse it. These common cases were waiving off cheques, returned dishes, charge for extra dishes, and give away free desserts but secretly charge them. Because there are too many loopholes for the employees to take advantage of and so Zhang demanded that all his employees must bravely report any forms of misconduct if they witness one. The witness will then be protected under anonymity and be given a reward for his or her merit and virtue.
Now the precaution is secured and all the employees in Haidilao are proven to be honest and self-autonomy. Zhang can rest assure to decentralize his authorities to his employees to make important decisions without having his consent. Haidilao’s frontline employees have more decision-making power than employees of other dining enterprises. They can draw upon
company guidelines regarding situations where the cheque should be waived off for the customers and make their own decision as to whether a deduction, free appetizers and noodles should be offered, or if the cheque should be waived completely off for an unsatisfied customer.
They do not need to get permission from management before responding to unexpected
situations. In order to reinforce the act of empowerment and to discourage any possible loopholes that employees can find, the company requires them to fill out a form explaining the
circumstances and get a signature from the team leader. This type of management combines both theories X and Y as to closely monitoring their working activity and at the same time to give them power to make decisions. Therefore Zhang’s empowerment is not a complete abdication but rather managing his employees with discretionary measures. This practice greatly increases employee initiative and efficiency in interactions with customers. Haidilao explicitly prohibits punishing employees for inappropriate responses in customer interactions but instead requiring skills training for the employee following such instances (Zhao, 2011; 黃鐵鷹，2014).
Haidilao is famous for its high degree of decentralization which is the management style practiced throughout Haidilao restaurants and permeating through all levels of company culture.
“We treat our employees based on trust in their decision-making abilities.” This is one of the
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most important principles for managerial promotions is whether someone treats people with kindness. In order to achieve efficiency in employee empowerment, the company adopts the
“initial inquiry responsibility” and the “eight-hour response” policies. This type of practice is oriented towards Theory X management when employees are given full responsibilities to address the matter within the given period but fail to do so, he or she will take the responsibility to admit his or her wrongdoings. For example, the “initial inquiry responsibility” designates the employee who first receives a request from a customer or other company staff as the person solely responsible for addressing the request in an appropriate matter as soon as possible. As the person responsible for a certain request, the employee must follow the “eight-hour response”
policy and address the matter within eight hours to the satisfaction of customers or other company staff. If the request exceeds someone’s job responsibility, then he or she should immediately notify the appropriate staff and continuously follow-up on the matter. When the request have been addressed, the original employee is responsible for providing the solution to the customer or staff who made the request. If the employee responsible for the request fails to follow-up and coordinate the issue adequately, then he or she will be held partially accountable for any problems occur (Zhao, 2011).
Another instance which involves an unsatisfactory performance made by frontline employees such as restaurant managers and high-level management staff, Zhang would invite them to have coffee and chat. The conversation topic usually pertains to finding ways to
encouraging employees to take initiative and show leadership in their work. For instance, Zhang called the restaurant managers who had poor performance onto the stage by name and asked everyone in the audience if they thought these managers were intentionally trying to ruin Haidilao. Everyone shook their heads. Then Zhang asked these managers themselves if they were trying to ruin Haidilao. They shook their heads too. Finally, Zhang asked everyone what is the likelihood that they will end up ruining their own restaurants. Zhang opts for a much
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friendlier way to discipline his “children” rather than reprimanding them. Because he does not believe punishment will correct their behaviours and mistakes, so instead he reasons with them.
friendlier way to discipline his “children” rather than reprimanding them. Because he does not believe punishment will correct their behaviours and mistakes, so instead he reasons with them.