Huawei, 1 of the largest technology companies in the world, has been attracting attention not only due to its innovations, but besides due to its unique ownership model. Unlike many another corporations, Huawei is not controlled by external investors or by a single founder. Instead, the company is owned by its employees through the worker share ownership system. This model, which combines elements of meritocracy and partnership, plays a key function in Huawei's improvement and success.
History of Huawei and the evolution of the proprietary model
Huawei was founded in 1987 by Ren Zhengfei, a erstwhile military engineer, in Shenzhen, China. Initially, the company was active in the production of telephone switches, but rapidly expanded its business to telecommunications and then to IT and consumer devices. From the very beginning, Ren Zhengfei stressed the importance of innovation and long-term development, which became a pillar of Huawei's corporate culture.
In the 1990s Huawei began to introduce the worker share ownership strategy to motivate employees to become more active in the company's development. Ren Zhengfei believed that if employees had a share of the profits and were co-owners of the company, they would be more inclined to hard work and innovation. This created a unique model that combines elements of meritocracy (rewarding for results) and partnership (co-ownership).
Staff Shareholder at Huawei: Key features
The Huawei worker share is based on respective key principles that separate it from another ownership models:
- Co-ownership and joint responsibility: Huawei employees who show advanced performance and long-term commitment may be invited to participate in the worker share ownership programme. This makes them co-owners of the company, which increases their motivation to work for the company's long-term success.
- Meritocracy: The award strategy at Huawei is closely linked to worker performance. Only those who show exceptional achievements can be invited to participate in the Shareholder Program. This makes company culture based on competition and continuous improvement.
- Long-term perspective: The Huawei worker participation is designed to advance long-term engagement. Employees who receive shares are encouraged to stay in the company for many years, which contributes to stableness and continuity of development.
- Redistribution of profits: The profits of the company are redistributed among employees-shareholders in the form of dividends. This not only increases employees' income, but besides strengthens their sense of belonging to the company.
Impact of worker share ownership on the improvement of Huawei
The worker share ownership model at Huawei had a crucial impact on the company's development. Firstly, this strategy has contributed to a strong corporate culture based on cooperation and the pursuit of excellence. Employees who are co-owners of the company are more motivated to accomplish advanced results, which translates into innovation and growth.
Secondly, the worker share ownership helped Huawei keep independency from external investors. This enabled the company to make strategical decisions without force from external shareholders, which is peculiarly crucial in the dynamic and competitive technological sector.
Thirdly, this strategy contributed to the financial stableness of the company. With the redistribution of profits among employees, Huawei could hold liquidity and avoid excessive debt, which is simply a common problem among technology companies.
The Huawei worker share is simply a unique ownership model that combines elements of meritocracy and partnership. Thanks to this system, the company managed to make a strong corporate culture, keep independency from external investors and accomplish financial stability. This model not only motivates workers to accomplish advanced results, but besides contributes to the long-term improvement of the company. In an era where many technology companies face management and financial problems, Huawei is an example of how to effectively manage the ownership and motivation of employees.
Source:
- Jeff Towson, “Huawei’s worker Stock Ownership Plan (ESOP) is simply a large Example of Meritocracy + Partnership in China Tech at Scale (Pt 2 of 3)”, 2023. Link
- SSRN, “Employee Ownership and Firm Performance: Evidence from Huawei”, 2021. Link
- Huawei, “Jiang Xisheng: No 1 Owns Huawei but Its Employees”, 2023. Link
- Own cognition of business models and corporate management.
Leszek B. Glass
Email: [email protected]
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