How Autonomy Creates Resilience in the Face of Crisis

One Chinese manufacturing giant quickly rebounded from the coronavirus. Here’s what you can learn from its org chart.

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The outbreak of COVID-19 has exposed the fragility of the global supply chain and, in turn, many companies’ organizational structures. In their pursuit to become ever more efficient, bear fewer costs, and eliminate redundancies, many organizations have come to rely on tightly coupled, interdependent systems. In this type of system, there is little slack and few buffers among its parts and, as we are seeing now, little room to maneuver when something goes seriously awry. Dependencies span vast geographic distances, and they can be especially vulnerable to delays in another part of the chain.

In the auto industry, for instance, manufacturers — from Toyota in Japan to General Motors in the U.S. — all rely on parts from China, and the industrywide emphasis on just-in-time delivery means they don’t carry much safety stock. In normal circumstances, this system is fiercely efficient and productive, but no one can build a car with only 99% of its parts. Indeed, when Hyundai first shuttered its assembly plants in South Korea in February, it was not because of the rampant spread of COVID-19 in the country, but because the company couldn’t keep its plants open without Chinese parts. In an inflexible system populated with companies run from the top down that are too slow to adapt, those channels that prove so efficient in periods of calm are now a source of severe disruption.

Organizational rigidness has exacerbated supply chain issues across a number of sectors in recent weeks and in a wide range of companies, including Apple, Toyota, and Hasbro. But this impact has not been universal.

While most manufacturers in China were only just beginning to restart production at the end of February, Haier Group — one of the world’s biggest home appliance manufacturers — already had its factories operating at full capacity again, thanks in large part to the company’s distinctive organizational design. For years, Qingdao-based Haier has organized itself not as a top-down pyramid but as a swarm of self-managing business units that can make their own rapid adjustments to stay afloat in times of crisis.

The organizational reconfiguration that prepared Haier for the shock of coronavirus was several years in the making. Haier CEO Zhang Ruimin has always been obsessed with breaking the bureaucracy, and he is famous for saying “successful companies move with the times.

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