Microdivisionalization: Using Teams for Competitive Advantage

This article develops concepts of microdivisionalization and microbusiness units or MBUs. The structure and operation of the microdivisionalized firm and its MBUs are shown in the context of the Haier Group, a $32 billion firm that reorganized into more than 2,000 teams beginning in 2009. Like strategic business units (SBUs) of divisionalized firms, Haier’s MBUs, called ZZJYTs (zi zju jing ying ti in pinyin; 自主经营体 in Chinese, “self-ownership teams” in direct translation) internally, focus on bottom-line financial performance and results for the customer. However, unlike SBUs, Haier’s MBUs compete in an internal market for targets and are subject to takeover or dissolution should they set targets too low or fail to meet targets. We suggest connections between Chinese history and institutions, China’s fragmented and hypercompetitive markets, and the advantages of microdivisionalization. At the same time, we find that microdivisionalization complicates performance management, strains relations between product and manufacturing teams, and in some instances blurs the boundaries between the firm and its customers, ultimately triggering further adjustments in the organization’s structure.