2019.4.19
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" There are no borders in business" Learning from Hon Hai: True Globalisation

(Impact Photography/Shutterstock.com)
(Impact Photography/Shutterstock.com)
In just over 40 years, Hon Hai Precision Industry Co., Ltd. has grown from a small-town factory in Taiwan to the world's largest contract electronics manufacturer (EMS) with sales of T$4,707,400,000,000.

Chairman Terry Gou, who established the Hon Hai Empire, which now has one million employees worldwide, has a global perspective and believes that "There are no borders in business."

Management policy of the Hon Hai Empire 

At the heart of Hon Hai's management policy is its tenacious bargaining power and prompt decision making based on past experiences and intuition. Competent people with good control hold middle management positions. They are the people who make decisions, whilst top management has absolute power.

They have won orders from large global companies such as Apple, Google, Microsoft, Sony, and Nintendo thanks to their unwavering commitment to responding to demanding customer orders and striving for even higher levels of business as they overcome hurdles. By supplying products that meet customers’ demands, they have earned a reputation as a global factory.

Hon Hai's definition of true globalisation

In response to concerns about cultural differences at the time of the acquisition of Sharp, Chairman Terry Gou said, "These differences will drive growth and push both companies to greater heights".

As times change, business borders disappear, and only companies with global operations can sustain growth. Terry Gou defines true globalisation as "localisation". He believes that sustainable success can be expected by focusing on securing and managing human resources, including local development.

One of the pitfalls of localisation is that the organisational structure is not localised. The pattern is that even if local human resources are hired, the expatriates have authority over management strategies and personnel affairs.

Hon Hai's global strategy is based on profit law which was established based on its success in Taiwan and China. Employees are local staff at overseas plants. Through thorough training, Hon Hai will teach employees their company's management philosophy and aim to localise their operations by taking advantage of the culture and characteristics of each country.

What is the basic idea behind Sharp's personnel review system?

In 2016, chief Tai Jeng-wu, who was inaugurated in the new Sharp Corporation, implemented a bonus reform based on the "Principle of rewards and punishment" as part of the restructuring of the business. The Salary Bonus Reform is designed to encourage the active participation of talented employees of all ages and experience.

In the fiscal year 2017, 1 to 8 months of bonuses were paid to employees according to their achievements. Tai also dished out a large sum as a Special Prize to one superior employee.

Along with these new reforms, a position-based grade system was also implemented. Under this system, each employee is graded according to the importance of their role. Equal wages for equal positions is the aim, so all employees get a salary that is commensurate with their achievements.

With these systems, Hon Hai's attitude clearly emphasises leadership and governance. In Japan, where seniority-based personnel management is firmly established, it may be regarded as a very rational but cold system. However, Tai sees the fall of the former Sharp Corporation as coming down to a lack of governance.

What are the measures needed to strengthen organisational power in terms of treatment of employees?

Though employees’ performances are evaluated severely, the company offers generous benefits to all workers, including factory workers. In particular, the company has been criticised for its long working hours and harsh working conditions at its factories, but it also has a dormitory and a dining room, and it is said that every job offer attracts thousands of applicants. The company is also working to improve the environment at factories in China, which are considered problematic.

Employee satisfaction has a significant impact on the productivity and performance of individuals and organisations. By providing a work environment in which employees feel rewarded and can devote themselves to their work with vitality, their loyalty to the company and the retention rate of excellent employees will increase, leading to a long-term strengthening of the organisation.

In Japan, the way in which Hon Hai plans to reinvigorate Sharp is up for much discussion, but Hon Hai's goal is to grow as a truly global company that is not bound by national borders.
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