Huawei Innovates With Rotating CEO System

October 15, 2013 Leave a comment

Oct 14, 2013

Huawei Innovates With Rotating CEO System

JURO OSAWA

China’s Huawei Technologies Co. has a unique management structure that has sometimes raised questions about who makes decisions at the company. At Huawei, three senior executives — Guo Ping, Ken Hu and Eric Xu — take turns and rotate through the chief executive position, with each term for the acting CEO role six months long. The Shenzhen-based company, the world’s second-largest supplier of telecommunications network equipment, adopted the rotating CEO system in 2011.“Other companies may pick just one person to be the leader, but at Huawei, we’ve chosen to let a small team lead the company instead,” said Chen Lifang, a Huawei senior vice president and board director,in a recent interview.  “The rotating CEO mechanism is one form of Huawei’s innovations.”

While each of Huawei’s 13 board directors, including Ms. Chen, has equal voting power at board meetings, the three rotating chiefs have more influence over decision making, in part because they also oversee committees that design the company’s policies. Mr. Guo heads Huawei’s finance committee and Mr. Hu heads the human resources committee, while Mr. Xu leads the business strategy committee.

At the same time, Huawei founder Ren Zhengfei, who set up the company in 1987, maintains his CEO role, which is different from the acting CEO role played by the three senior executives.

What makes Mr. Ren different from other executives is that he has the right to veto decisions made by the board. But so far he has never exercised that right, according to Ms. Chen. Also, Mr. Ren does not have the right to make specific policy recommendations, even though he can share his views with other executives.

Since Huawei adopted the rotating CEO system in 2011, Mr. Ren has been spending a lot of time coaching and mentoring the three rotating CEOs, according to Ms. Chen.

Some observers see the rotating CEO system as a way of narrowing down candidates before choosing the right person to succeed Mr. Ren as the company’s next leader. But according to Huawei, the system is not meant to be a screening process toward choosing one final successor. The company also hasn’t said whether this rotating CEO system would be a temporary arrangement or a permanent structure for its leadership.

“Traditionally, one person was authorized to act as a company CEO, and the fate of the company rested with this single person,” Mr. Ren has said in his statement about the rotating CEO system on Huawei’s official website.”History has proven time and again that this practice poses greater risks.”

A Huawei spokesman said the decision to change the leadership structure in 2011 wasn’t triggered by a specific event or an urgent need to change its leadership. He said it was part of Huawei’s efforts to keep improving its management, and was inspired by a book on business leadership called Flight of the Buffalo, written by James Belasco and Ralph Stayer.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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