Mr. Zhang Yong shares lessons in humility and using manager “families” to grow the brand’s unwavering commitment to customer experience.
Mr. Zhang Yong did not graduate from senior high school. At the age of seven, his mother could not afford to attend his cousin’s wedding– which would have cost her $1 back then. Flash forward to the present: Mr. Zhang, the Founder of Haidilao, is a billionaire restaurant icon. He made the trip from China to Boston, along with Dr. Zhou Zhaocheng, Board Director of Haidilao International Holding, to discuss the case “Haidilao: Changing your Future with your Own Hands.”
Haidilao is one of the top five most valuable food brands in the world, only surpassed by Starbucks, McDonalds, and KFC. The company operates restaurants that serve hotpot, a common food in China that centers around a large bowl of soup broth into which patrons dip thinly sliced meats, vegetables, and noodles. Haidilao is comfort food to many in China and a new experience for others visiting the company’s global locations, but regardless of which store a customer visits, the experience is defined by things you are hard pressed to find in other restaurants: complimentary manicures and hand massages for guests waiting for their table, dolls to sit across from single diners, and the company’s famous dance that accompanies an order of noodles.
Haidilao’s commitment to delivering a unique experience, coupled with a high quality of food and alignment with China’s rapid rise and global recognition over the past several decades, has propelled the brand to become a company now worth more than $12 billion.
Despite the financial success of the company, it was clear through Zhang’s talk that the money does not drive him. Rather, his motivation is the employee experience. In fact, Zhang is obsessed with how carefully-crafted incentive programs can make a company in the restaurant space– an industry that often struggles with high levels of employee turnover– a place where employees want to work for life. While there are many aspects of Haidilao’s brand that contribute to their success, it is this commitment to employee experience that may very well be the secret sauce to Haidilao’s hotpot growth recipe.
Giving autonomy to employees and the company’s unique “family” manager model
At Haidilao, store managers have an incentive to train and groom their top-performing employees to become store managers of new locations. In doing so, both the new store manager and their “parent”–the name given to their mentor– take part in a profit sharing program. New store managers can then go on to groom other store managers, creating a “family” which can span multiple generations. At present, Haidilao boasts over 90 families. Being the “head of a household” comes with accountability: you have not just your mentorship responsibilities, but you also remain responsible for the success of your location and all of the people working under the roof of your restaurant.
A key part of the brand is giving autonomy to employees so that they can best serve customers. Zhang and Zhaocheng visited the HBS campus on the day the case about Haidilao was being discussed amongst the 950 first year students in the Financial Reporting and Control course. In one of these class discussions, a student shared their personal experience at Haidilao where they were surprisingly given a large take home container of dipping sauce– for free– after remarking to a waiter how much they like the sauce. Another student shared a photo with their class section of their birthday celebration at a Haidilao location in Beijing. Needless to say, the Haidilao model of providing independence to employees to enable them to create above-and-beyond experiences works.
Challenges for Zhang and Haidilao
As Haidilao grows, so does the responsibility of the brand at large. Namely, food safety is of utmost priority. Zhang explained that when you are a small company, customers are not paying that much attention to you. As the company has grown into the behemoth it is today, a challenging tradeoff has emerged: optimizing for profit and shareholder return while also maintaining food safety and ensuring that store managers stay focused on store quality. Unfortunately, not everyone is diligent and Haidilao is well aware of this. In the same way that family growth is rewarded and celebrated throughout the company, discipline for underperformance is also a norm. Managerial standing is not a fixed status; it must be retained, and when goals are not met, managers have an opportunity to improve their performance and get back on track.
Zhang acknowledged that while their managerial growth system has been effective in creating successful careers for employees, they need to do better in how they compensate other non-managerial positions at stores, such as those washing dishes. The reason this matters to Zhang is very personal: he worries that if employees are not earning decent enough compensation, then they cannot provide an education for their kids. Having only had the opportunity to receive education through middle school, Zhang is passionate about how he can create further education opportunities for the families of employees at Haidilao.
Despite the continued success of Haidilao, it has not been without difficulties. Notably, Covid-19 was deeply challenging to the company and its employees. The impact of the pandemic was “beyond [his] imagination.” The company– despite being driven by employee engagement and retention– lost a lot of employees. China re-opened last December from its Covid-19 restrictions and it was not until March of this year that the company was able to resolve staffing shortages. The journey through the pandemic was tough: there were misunderstandings amongst employees and people were unhappy. For someone who had so proudly built the company brand around employee experience and growth, the challenging employee situation was so hard on Zhang that he found himself grinding his teeth while sleeping.
Global growth has not been easy for the brand. Zhang acknowledges that he is not sure that the company has found the right way forward for international expansion, and during his visit, he even invited the HBS professors in the room to share any recommendations they may have. There was another expansion-related question that the hotpot-loving (and curious) attendees wanted to get Zhang’s thoughts on: is a Haidilao location going to come to Boston? It may take a year or two to open up, but the answer is yes.
Personal reflections on Zhang’s past
Zhang showed vulnerability and shared wisdom with attendees throughout the conversation, explaining to students that they need to be clear on what defines success. While no one can argue with Zhang’s success in business, he does not necessarily feel successful on a personal level. He acknowledged the time that went into growing Haidilao made it tougher to spend as much time with his kids as he might have liked.
Hotpot is a meal of many options. So what does Zhang put in the boiling broth at the center of the table? Sweet potato noodles. Decades ago, he would cook what was left on the table of customers late at night and add more sweet potato noodles. To this day, they serve as a sense of comfort to him– and likely also a reminder of his beginnings.
There was something else Zhang wanted to make sure to express in the conversation: “thank you.” Zhang has a deep sense of appreciation for his employees, customers, and to have had this opportunity to start a company that has evolved into what it is today. When he was asked about his joys since starting Haidilao in 1994, he shared that “the most surprising joy was to come [to HBS] to give a talk.” Hopefully Zhang could tell by the response of the students in the room– some of whom were overwhelmed with emotion listening to his personal story– that we are honored to have had him here.
Chuck Isgar (MBA ’25) loves all things startups. Most recently, he served as the Chief of Staff at Scenery, a Series A-stage startup backed by investors such as Greylock. Previously, he was awarded a Schwarzman Scholarship, which provided him the opportunity to earn a Master in Global Affairs from Tsinghua University in Beijing, China. Chuck co-founded and was the CEO of Intern From Home, a recruiting technology startup that served students from over 600 colleges and was featured in publications such as The New York Times. Chuck earned his bachelor’s from Brown University, where he served as the Co-President of the Brown Entrepreneurship Program. He loves to golf, cook, and go on long walks.