Credit: Huawei

Why Huawei swaps CEO every six months

No, the board hasn't been trigger-happy and firing everyone. It's an innovative approach to leadership apparently.

by Rebecca Smith
Last Updated: 07 Apr 2016

Chinese businessman Ren Zhengfei was reportedly so taken with a book encouraging ‘employee leadership’, called Flight of the Buffalo, that he took inspiration for his own firm and brought in a rotating CEO system. And we're not talking about a budding start-up, free to be experimental with its hierarchy, but electronics giant Huawei, which turns over $60bn annually, employs 170,000 staff and is currently giving the likes of Apple and Samsung a run for their money in the smartphone market.

A significant leadership change for a company of that size is risky, but Ren says he considered the alternative riskier still. ‘Traditionally, one person was authorised to act as a company CEO, and the fate of the company rested with this single person,’ he said in his statement about Huawei’s rotating CEO system, which is implemented under the Board of Directors' leadership. ‘History has proven time and again that this practice poses greater risks.’ Since 2011, three deputy chairmen have taken it in terms to be CEO for six months at a time at the company. Ken Hu has just been appointed the rotating chief exec for April and will stay there until September.

The CEO is in charge of the firm’s operations and crisis management during the tenure, as well as chairing the meetings of the Board of Directors’ executive committee. The execs bring knowledge from different parts of the company, whether R&D or marketing, and their normal duties don’t waver while acting as CEO in an effort to keep stability.

Ren Zhengfei - Credit: Huawei

There’s a lot of speculation about why Huawei introduced the system, but one reason is surely succession planning. It makes to give potential candidates a taste of the hot seat and make sure they’re all familiar with the company ethos – similar to BP’s Turtle training ground for talented execs who were given insight into running the whole shebang. But even the bst laid succession plans don't always work out - former BP CEO Tony 'I want my life back' Hayward previously served as a Turtle to John Browne.

But here's the thing - for Huawei, Ren clearly remains the big cheese. Like many founders who can’t help but stay close to their business, he doesn’t want to step back too far. A cynic might say that bringing in rotating CEOs is thus a question of divide and rule rather than anything else - it doesn't give anyone long enough to mount a serious challenge to his authority.

Proof, if it were neeed, of this is that Ren is also a CEO (yes another one), and first among equals too with a veto power denied the occupier of the rotating position. In other words, he's the actual boss.

And in that respect, the rotating three aren't really CEOs - they're more like COOs. They have no more voting power than any other member of the board, athough they probably have more influence over what gets put ot the vote in the first place. 

Huawei isn’t public – it’s officially employee-owned under an ‘employee stock option plan’, but the details on that have been murky for some time. Chinese corporate governance isn't like Western corporate governance and Chinese firms don't tend to be known for their transparency on that front.

So whether this really is a genuine attempt to bring on executive talent and prepare for Ren eventual departure, or a case of the founder keeping his underlings busy looking over their shoulders and in no doubt as to who is really in charge, isn't clear. It's certianly a novel approach though.

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