The Human Imperative: The Inclusive Nature of The Huawei Employee Model

“There is a shift from shareholder dominance to stakeholder orientation” Professor Toshio Goto

And so began a fascinating insight into employee governance and empowerment as part of the discussions on the opening day of the 13th Global Peter Drucker Forum.

The subject of corporate governance probably doesn’t get many of us that excited however, Professor Toshio Goto, Japan University of Economics Graduate, argued that the pandemic has shifted the stakeholder vs shareholder debate in favour of the former. And in turn, posed the question, is it helping to redefine the role of business in society? Should corporate value come before corporate governance?

“This pandemic, as other major crises in the past, is a litmus paper which enables us to judge; customer-centricity from profit-centricity, sustainability approach from rapid growth approach, long-term management from short-term management” Professor Toshio Goto

And the employee ownership model — as demonstrated by Huawei, becomes not only compelling within this new post-pandemic context but also when considering human motivation. Because it remains a truth that when there is little or no engagement and sense of ownership, employees quickly feel that they are replaceable.

So, in stark shareholder value terms, there are distinct benefits in terms of productivity from employee ownership.

And whilst this view of corporate governance applies to all sectors, perhaps it applies more to those operating within consumer and services organisations. And none more so than the John Lewis Partnership which was originally created by its founder Spedan Lewis as an experiment when he realised that he, his father and brother took more in salary than the rest of the organisation put together.

“Instead of the many being exploited by the few, there would be genuine partnership for all. Managed and managers alike, all pulling together, for their common advantage” Spedan Lewis

I was reminded of this when listening to Huawei vice president, CEE and Nordic Region when he referred to companies being made by and for people, sharing benefits as well as risks.

“The world is changing, you cannot just have workers, you need to engage them and address the higher layers of Maslow. If we get a sense of pleasure in our work, we are more fulfilled” Radoslaw Kedzia

And that appears to be the secret sauce of the employee ownership model, motivation and a sense of fulfilment. It is of course not a panacea where employee mediocrity is rewarded, both benefits and risks are shared, but the sense of contribution is a powerful motivator. Kedzia continued, “The purpose of organisations is to create value, governance is about the best way to go about that”.

And interestingly, the effect of employee ownership is that it can drive more accountability in management. It avoids a disconnection between management and employees. This is an interesting conundrum as we move back to post-pandemic working where many organisations are expecting their employees to return full time to the office.

However, for many, working from home, or at least a hybrid version of office working, has become advantageous for many reasons. Like anything, one size does not fit all. Possibly the biggest reason people leave is that they don’t feel that they have a voice or are being heard. This new working behaviour is in turn a new challenge to retaining skills.

So in the new world in which we find ourselves, not only giving employees a voice but ensuring that they are heard, will become increasingly critical.

Who Owns And Controls Huawei

I was privileged to have a virtual tour around the Huawei ESOP (Employee Stock Ownership Plan) Room at Shenzhen.

Since its inception in 1987, Huawei has been wholly owned by the employees apart from 0.81% retained by the founder, Mr Ren Zhengfei. It’s an arrangement which continues to this day for all 121,000 employees.

However, Huawei point out that both value and risk are shared — according to each employees’ shareholding. Ownership is managed by election of a Representative’s Commission which is the highest authoritative body, and together with the Board of Directors and the Supervisory Board, the three bodies decide on, manage and oversee major company matters.

Shared value and shared risk; a model that perhaps many more western organisations would do well to embrace.