156 CASE In Feet First Zhu Guofan grew up in the Henan Province in Central China....

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156 CASE In Feet First Zhu Guofan grew up in the Henan Province in Central China. His parents earned money by collecting rubbish. At the age of 13, he dropped out of school and opened a kebab stand. He then became involved in garment trading, and by the mid-1990s, he was running at small chain of restaurants. It was exhausting work. One afternoon, he went to a barbershop for a head massage. He felt so relaxed that he fell asleep, and when he woke up, he had a brilliant idea: he would open a business that would offer foot massages along with snacks and drinks. He took advice from a relative who did research on treatments for him, and he began looking for skilled therapists. All of the selected treatments were first tested on Zhu himself. From the outset, the major obstacle was that massage parlors had a very poor reputation in China. To brand the company, in 1997, Zhu chose a name that would make the idea of massages more appealing to customers: "Liangzi." which means "good children, good family. The new company grew very rapidly, and by 2004, it had more than a thousand foot massage parlors, with 37,000 employees. However, one of Zhu's major problems was the thousands of fake Liangzi parlors that were being run by rival companies. It was a stressful time for Zhu, and he had dif- ficulty sleeping. To give himself time to think things through and to make significant changes in his life and his business, he took a walk from Shanghai to Beijing, a distance of 1,000 km. This trip gave him the chance to think, and by the end of it he had come up with a radical and innovative idea: he would give most of his massage parlors to the current managers and begin again with a smaller chain that he could manage himself. The new massage parlors would stress quality control, which he felt had been lost in his earlier franchise chain. He set up his new headquarters on the outskirts of Beijing: it would operate as a training center and a place to test blends of herbs and oils. New employees spend up to 10 hours a day building up the strength needed to massage legs and feet. Employees return to the training camp each year for 10 days to retrain. His decision to create a new company came at an ideal time in China's economic devel- opment. The middle class was expanding, which brought greater opportunities for the service sector. The new company has been growing fast and is much more profitable than the earlier one. In 2009, the chain showed a revenue of $60 million, with profits of $15 million. Zhu is still looking to expand, albeit in a more measured way. He wants no more than 120 massage parlors across China, but he is also expanding overseas, particularly in Korea, and already has an outlet in Turkey. More potential partners have been found in Cyprus, the United States, France, Italy, and Spain. Chapter 5 Leading Change and Innovation Zhu Guofan is not your typical CEO focused purely on profits, and he does not surround himself with the trappings of success. He takes time off each year to relax and enjoy life. His new business focuses on employee happiness and the trust of the customers. He pays his mas- seurs twice as much as most other companies. He believes that his employees give better service and remain loyal because good salaries help them to support their families and enjoy a better quality of life. Sources: "Putting His Best Foot Forward." Basiseverk, November 8, 2004. "In It from Head to toe." Forbes Magazine, October 11, 2010. Beijing Zhu GuoFan Fitness Technology Development Co. Ltd. www.langri.com.cn Questions 1. Why did Zhu take such radical steps to implement change? 2. How can Zhu better control the pace of change in his new company? 3. Evaluate the change leadership provided by the CEO 156 CASE In Feet First Zhu Guofan grew up in the Henan Province in Central China. His parents earned money by collecting rubbish. At the age of 13, he dropped out of school and opened a kebab stand. He then became involved in garment trading, and by the mid-1990s, he was running at small chain of restaurants. It was exhausting work. One afternoon, he went to a barbershop for a head massage. He felt so relaxed that he fell asleep, and when he woke up, he had a brilliant idea: he would open a business that would offer foot massages along with snacks and drinks. He took advice from a relative who did research on treatments for him, and he began looking for skilled therapists. All of the selected treatments were first tested on Zhu himself. From the outset, the major obstacle was that massage parlors had a very poor reputation in China. To brand the company, in 1997, Zhu chose a name that would make the idea of massages more appealing to customers: "Liangzi." which means "good children, good family. The new company grew very rapidly, and by 2004, it had more than a thousand foot massage parlors, with 37,000 employees. However, one of Zhu's major problems was the thousands of fake Liangzi parlors that were being run by rival companies. It was a stressful time for Zhu, and he had dif- ficulty sleeping. To give himself time to think things through and to make significant changes in his life and his business, he took a walk from Shanghai to Beijing, a distance of 1,000 km. This trip gave him the chance to think, and by the end of it he had come up with a radical and innovative idea: he would give most of his massage parlors to the current managers and begin again with a smaller chain that he could manage himself. The new massage parlors would stress quality control, which he felt had been lost in his earlier franchise chain. He set up his new headquarters on the outskirts of Beijing: it would operate as a training center and a place to test blends of herbs and oils. New employees spend up to 10 hours a day building up the strength needed to massage legs and feet. Employees return to the training camp each year for 10 days to retrain. His decision to create a new company came at an ideal time in China's economic devel- opment. The middle class was expanding, which brought greater opportunities for the service sector. The new company has been growing fast and is much more profitable than the earlier one. In 2009, the chain showed a revenue of $60 million, with profits of $15 million. Zhu is still looking to expand, albeit in a more measured way. He wants no more than 120 massage parlors across China, but he is also expanding overseas, particularly in Korea, and already has an outlet in Turkey. More potential partners have been found in Cyprus, the United States, France, Italy, and Spain. Chapter 5 Leading Change and Innovation Zhu Guofan is not your typical CEO focused purely on profits, and he does not surround himself with the trappings of success. He takes time off each year to relax and enjoy life. His new business focuses on employee happiness and the trust of the customers. He pays his mas- seurs twice as much as most other companies. He believes that his employees give better service and remain loyal because good salaries help them to support their families and enjoy a better quality of life. Sources: "Putting His Best Foot Forward." Basiseverk, November 8, 2004. "In It from Head to toe." Forbes Magazine, October 11, 2010. Beijing Zhu GuoFan Fitness Technology Development Co. Ltd. www.langri.com.cn Questions 1. Why did Zhu take such radical steps to implement change? 2. How can Zhu better control the pace of change in his new company? 3. Evaluate the change leadership provided by the CEO

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QUESTION 1 Competitor pressure Zhu faced challenges from rival companies running fake Liangzi parlors which not only affected the reputation of his business but also posed a threat to its profitabilit... View the full answer