Labor Organization, Haidilao, Modern Utopian Society

Hai Song

Lerner Business & Economics, University of Delaware, Newark, Delaware, U.S.A.

Keywords: Labor Organization, Human Relations Management, Haidilao, Business Administration, Utopian.

Abstract: Historical evolution about labor began even before the term was coined. During the Industrial Revolution,

scientific management accelerated how factories eliminated small workshops. More recently, it has been

discovered that humans usually cannot precisely handle the job organizations require. Human relations

management is proposed to solve this problem by understanding human nature and more properly maintaining

employee relationships to improve work efficiency. Haidilao, as an enormous and innovative restaurant

company, has some similarities to human relations management. Its case reflects the irrationality of human

behavior and reveals the importance of understanding human nature itself to the labor organization. This paper

is designated to reconsider the essential factors of forming a modern utopian society from experience learning

from the evolution of labor organization and the modern Haidilao.

1 INTRODUCTION

Haidilao, a well-known hotpot restaurant, approaches

enormous business success by functioning some own-

created management method, which later creates a

shocking management system. The CEO of

“Haidilao”: Zhang established close and systematical

relations with his employees by providing them with

extra autonomy, such as the right of exempting the bill

for the customer, providing employees with nannies,

free apartment, parental subsidies, and even, a special

fund, which is designated to help employees with their

emergencies. Those unique specialties in Haidilao’s

management later push Haidilao has become one of

the highest retention rates in the business world.

2 THE LABOR DISCUSSION IN

THE EARLY INDUSTRIAL

PERIOD

The argument of labor has continually attracted the

academy's attention throughout history. The

philosophy of ancient Greeks and Romans despised

the laboring classes, and Aristotle's disapprobation of

the labor also supported similar ideas. After a few

centuries, the impact of industrial changes sweptwing

over the world has undermined the labor in the rank of

society. The transformation from muscular power to

mechanical power and the vast demand for capital and

entrepreneurial capabilities have made labor

dependent on capital in massive aspects, factories

have gradually replaced small workshops, and

workers have since been at the mercy of employers.

Karl Polanyi pointed out in the book "The Great

transformation" that the early factory system not only

exploited workers economically but even more

barbarously, it also destroyed the ancient cultural

model and gave nothing under their position.

Since then, employers seem to stand opposite of

employees, and their relationship has no longer stayed

in the original state but has become a game of

interests.

As the central theme of management in this period,

scientific management describes how managers view

employees as part of a rigid company machine

psychologically, they conduct employees to

participate in their job by continuously emphasizing

the division of labor and piece-rate wages. To further

exploit the word of scientific management, the pioneer

of scientific management, Frederick Taylor explained

that the idealized interest of "scientific management

leader" concentrate on the amount of employees'

salary because this could manage and control

employee behavior.

1000

Song, H.

Labor Organization, Haidilao, Modern Utopian Society.

DOI: 10.5220/0011361900003440

In Proceedings of the International Conference on Big Data Economy and Digital Management (BDEDM 2022), pages 1000-1004

ISBN: 978-989-758-593-7

3 MODERN LABOR

MANAGEMENT THEORY

President Woodrow has an aphorism that "the

spontaneous cooperation of free people provides the

highest form of efficiency." In the Cooperative Game,

only attendants are doing something beneficial to their

group set can increase the premium of their total

profits, otherwise, it will result in a double loss. The

cornerstone of a comprehensive employee relations

plan is to give individuals a sense of dignity and

participation in the competition. Profit-sharing is just

a bridge that satisfies the individual's psychological

desire for belonging, participation, and security.

In the academic paper "The Night-Mind industry,"

Elton mayo points out that the human mind and social

organism are still very largely uncivilized. Modern

scientific management is considered monotonous, on

employees' position, long period of repetitive thinking

and work can be combined to make pessimistic or

depression.

The dean of the department of personnel

management and industrial relations, Abhijit

Gangopadhyay, points out that technology's

effectiveness lies in people being able to operate and

maintain the machines they design. The equipment

design consciously utilizes human abilities and limits

oneself within human limits, thereby amplifying and

increasing the system's output. On the contrary, the

equipment design will reduce system performance and

challenge its original intention. Related issues of this

kind are more important today than in the past because

the highly complex systems we develop are

increasingly pushing human functions to their limits

of efficiency and safety.

From the lessons of the machine factory in the

industrial revolution, we can conclude that people are

not a "simple machine" that can be completely

transparent and understood. Long-term work similar

to machines often produces individual mental

illnesses. Therefore, establishing an employee's

working environment often requires managers to

conduct a lot of investigation and research. A survey

conducted in the Harvard Fatigue Laboratory showed

that in a treadmill experiment on a group of people, a

40-year-old middle-aged man with marathon

experience had better anti-fatigue ability than an 18-

year-old young man. De Mar has at 40 years old, but

he is a multi-marathon winner, he can adjust his body

to increase his efforts without disrupting the physical

or psychological balance. In summary, the researchers

concluded that if a person cannot maintain a relative

psychological or physical balance at work, it is

difficult for him to continue and vigorously pay effort.

After a few centuries, Human relations

management was proposed in 1933, which has been

academically found relevant several management

advantages, enhancing the sense of group

identification to improve the work performance,

providing employees with affluent perks to retain the

employees and maintain the development of the

company. Several elements were considered as the

characteristics of human relations management

(HRM). HRM leaders are deeming that maintaining

the relationship with employees can benefit the

development of the company. Meanwhile, HRM

leaders will become a guide during the work period,

conducting employees to have a specific business goal

and improve their efficiency. Otherwise, HRM leaders

use motivational theory to provide appropriate

recognition and rewards when employees achieve

organizational goals.

In comparing HRM and scientific management,

human relations management can guide employees to

intuitively obtain business goals and more financial

rewards and provide their employees with more

opportunities to obtain additional benefits, on the

contrary, unmotivated employees may have less

salary or even be eliminated. Scientific management

can have a stable structure in their organization,

however, it also decreases the correlation between

employees and their upper organization company,

especially psychologically.

The working environment and status of employees

may be crucial in management. Research in

Hawthorne shows that people often do not firmly

pursue economic benefits such as salary. On the

contrary, a comfortable working environment is often

more attractive than a higher salary, for example, from

the manager's particular attention in the workplace.

4 THE LINKAGE BETWEEN

HUMAN RELATIONS

MANAGEMENT AND

HAIDILAO

In modern management in the 21st century, HRM

has become a necessary force. The well-known sense

of team identity and high employee retention rate

encourage managers to create more humanized

management models. HRM leaders strengthen

employees' sense of group identity by strengthening

communication with employees and paying additional

attention to employees. At the same time, HRM also

serves as a powerful model to effectively prevent

Employee turnover and maintain the Company's

Labor Organization, Haidilao, Modern Utopian Society

1001

financial stability. Matt Petryni, a columnist at the

"Oregon Daily Emerald," points out that employee

retention is highly relevant to the quality of their

workplace and rounding environment, also, an

attractive management model can perform better on

retaining the employees.

The CEO of Haidilao, Zhang Yong, who has

emphasized people-oriented management since the

first brick of the Company's foundation, has an

inevitable similarity with human relations

management. Zhang established a cooperative system:

"Apprentices" system, When the previous managers

open a new branch, his apprentice will be designated

to the new manager at the original branch, and the

manager can have a proportion of profit from his

apprentice's branch, which can have a chain effect

between manager and the step-managers, previously

known as his apprentice. This system illuminatingly

forms an independent cooperative group inside the

Company, automatically creates an emotional

connection among employees, maintains a highly

relevant group effect, and enhances the sense of group

identification.

According to Company's research, Haidilao also

empowered managers with an equity-like incentive

scheme by sharing roughly 3% of the restaurants'

profits. Meanwhile, to create a life-pressure-free

environment, middle and senior employees were also

providing nannies, free apartments, and even parental

subsidies. What is more, Haidilao established a special

fund for helping employees with their emergencies.

5 HAIDILAO MODEL AND ITS

SOCIAL CONDITIONS

Haidilao's model has given people a substantial

cognitive impact, especially under its social status.

The Chinese era in which Haidilao is located has just

experienced drastic social changes, the Chinese

government implemented Chinese economic reform

in 1978. Since then, the original socialist system and

market mechanism have gradually moved towards

capitalization. The Shanghai Stock Exchange,

established in 1990, also became a milestone in

capitalization in China. The rapid growth of personal

and social wealth has promoted the unity of the social,

spiritual theme into the pursuit of interests and the

development of the country's economy.

In China, salary is a significant indicator for some

laborers to choose jobs. In the Critique of Pure Reason

published in 1790, Kant proposed the term

"involution" to describe the objective change law of a

single thing, and the public now uses it to describe the

inner mental state of the Chinese people under fierce

competition. The term "内卷 " means that Vicious

competition with the surrounding people will reduce

the individual's happiness and significantly reduce the

ratio of benefits generated by the individual.

No doubt,

salary is an important indicator for a person to gain

recognition with the surrounding society.

However, in terms of employee retention rate,

Haidilao's high index betray the theory of people’s

cognition of rational economic man. In an interview,

CEO Zhang Yong said Haidilao's wages are not high

compared with those of its competitors, or even

median. Even if the company's increased product price

surplus only covers the cost of some employees’

welfare, it is not an obvious attraction with the salaries

of peers that closely compete with Haidilao.

There is no doubt that the high employee retention

rate of Haidilao does not match the direct economic

benefits it provides. A possible factor was found in the

investigation of Haidilao, under the "people-oriented"

principle of Zhang Yong, the middle and senior

management all adhere to the unifying principle: Treat

employees like family members. Zhang Yong

mentioned that when Haidilao was still a single

restaurant, he would lend money to employees when

their parents were having severe sick. Currently, he

has set up a team inside each branch to prepare unique

birthday surprises for its employees even though the

Haidilao is now quite large.

Regarding the company's administrative costs, it

may be relatively easy and low-cost to maintain close

relationships with employees when the restaurant-

Chain stays small, but after the IPO, maintaining close

relationships with individual employees in a

systematic way is still considered one of Haidilao's

significant business moats.

Some opinion reveals the drawback of the

Haidilao model. The perks provided by Haidilao may

contribute to the loss of work enthusiasm of

employees, no doubt, those perks could improve the

work enthusiasm of employees in a short period by

rapidly increasing the life happiness on their position.

However, those perks are not significantly benefiting

the company's profits, indeed, it may create a triangle-

shaped shadow behind the sunshine, a pressure-free

working environment may cause their employees to

lose the initiative to work since working hard has

already become an option to pursue a satisfying life.

Meanwhile, Haidilao is providing employees with

affluent incentives: housing, trip outside China, and

education for their children, which is also a heavy

expenditure. From this slide, whether the company

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1002

can obtain enough profit to maintain their structure of

system might become a debatable problem.

The actual situation of Haidilao can dispel some

opponents' opinions. “I have been blown away by the

professionalism and hospitality of the staff at the

Irvine branch of HAIDILAO”, Familiar comments are

common after customers experienced the Haidilao

service. Furthermore, waiting customers were also

serviced with Chinese snacks and drinks and

complimentary services such as nail salons and

massage.

On the company's finances, Haidilao has already

made a significant profit and continually developing.

By July 2018, Haidilao, through a Hong Kong IPO,

Zhang has already become the world's most

prosperous eatery entrepreneur, besides, in 2018, "the

revenues of HAIDILAO has raised 36% from last year

to $10.4 billion."

As a man who is originally from China's third-tier

cities, the CEO of Haidilao: Zhang has established a

chain that is praised to "created the world's richest

restaurant." He shared the 3% of the restaurants' profit

with the manager, which established the solid and

continuous connection between manager and

company, guiding managers to have a particular

business goal, which forming the common sense that

"to make as much money as possible for the company

because the more money the company makes, the

more money I make." Under this situation,

employees' profits have a direct and significant

relationship with the company's interest.

6 HAIDILAO AND MODERN

UTOPIAN SOCIETY

Haidilao has implemented a package system for the

welfare of employees. As a catering company that

provides services for labor output, they provide

employees with a considerable amount of

accommodation while also equipped with complete

entertainment facilities, such as computers and TVs.

The aunt hired by the company cleans the room every

day, and the outsourcing clothing also prevents

employees from spending extra energy on laundry

after getting off work, "all this is to ensure that

employees spend all their energy on serving

customers," a senior company executive said.

"Company", as an ancient word, is thought to have

been first coined in Old French in 1150, meaning

society, friendship, soldier's body, and its abbreviation

"Co" also stands for close cooperation and symbiosis.

As an essential part of capitalism, the company is

illustrated legal entities with a specific common goal.

Under the rich welfare system of Haidilao, employees

seem to give up the pursuit of absolute economic

profit and settle down to develop under the system of

Haidilao.

It might not be comparably accurate to use a

business case to demonstrate the feasibility of a

utopian society. However, as a successful individual

case of using a unique scheme in the business world,

Haidilao has profound significance in dealing with the

relationship between labor organizations and people.

In some of the surveys, the turnover rate was far lower

than the average of 28.6 percent in the highly

competitive restaurant industry. It seems to illustrate a

trend that people are not a species chasing a firm

economic profit. Under certain circumstances, people

may be more willing to live under an

organized system.

In the last century, the Soviet Union's collective

agricultural movement and the Communist Party of

China's people's communes, rural areas were

classified as people's communes, roughly conducted

4-5 thousand households. Communes collected the

materials of production, and communes also

distributed every individual’s daily workload.

Although there are many different opinions on the

praise and derogation of the People's Commune, it is

certain that it has hit the enthusiasm for production to

a certain extent, and the supreme ideal of distribution

according to work has not moved in the direction of

reform. Pay-on-demand as a major feature of "大同

社会 " (meaning utopia in Chinese) significantly

dampened farmers' enthusiasm for producing.

"干也是一年，不干也是一年" (Working hard

or being lazy are not making a difference) has become

a folk slang passed down by the people at that time.

On the side, the system of free food and necessities

provided by the communes did not arouse farmers'

enthusiasm to produce actively but significantly

decreased their enthusiasm for production.

One of the critical reasons may be that the

administrative unit of the people's commune is too

large. Individual efforts are not easy to get feedback

on the results of collective production, and the

enthusiasm for production will be undermined.

Meanwhile, the reform of utopian society often

emphasizes a strong social order, but in this process,

the policy does not take human nature and human

feelings into consideration.

Labor Organization, Haidilao, Modern Utopian Society

1003

7 CONCLUSIONS

Zhang Yong said in the interview "海底捞你学

不会 ", people are the key to an enterprise, and

people-oriented is the core of Haidilao. In Zhang

Yong's management theory, understanding people's

feelings shape the core strength of the development

and maintenance of the organizational system. Also,

in human relations management theory, it has been

shown that people are incapable of completing work

as precisely as machines. Understanding the errors

that human nature may produce in daily life, to a

certain extent, create a more efficient organizational

structure. From the People's Commune lesson, we

have also seen that the result of ignoring the

understanding of people to productivity, to a certain

extent, human feelings may determine the vitality of

labor organization and the reform of utopian. Just like

people gradually accept the transformation from

scientific management to human relations

management, understanding humans themself may

further promote the dream of utopian.

Elton Mayo, a contemporary of Soviet

communism and a pioneer in psychology, argued in

"The Industrial Heart of the Night" that communism

and Soviet Russia were merely psychotic symptoms

of a time when humans were not satisfied with the

repetition of the status quo. However, social science is

often entrusted with some human consciousness,

always looking for solutions before every disaster

strikes.

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