---
title: "A Practical and Down-to-Earth Daily Management Handbook for Small and Medium Distributors"
description: "This article offers a practical guide for small and medium distributors, covering key management topics such as retaining key employees, delegation, cost-saving, diversification, recruitment, and policy-making. It emphasizes the importance of clear systems, transparent communication, and aligning employee interests with company goals."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-07-18"
language: "en"
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---

# A Practical and Down-to-Earth Daily Management Handbook for Small and Medium Distributors

> This article offers a practical guide for small and medium distributors, covering key management topics such as retaining key employees, delegation, cost-saving, diversification, recruitment, and policy-making. It emphasizes the importance of clear systems, transparent communication, and aligning employee interests with company goals.

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**1. How to Retain Key Employees in a Small Company:**
Over the years, prices and costs have risen, but company profits haven't increased much. Every employee hopes for a significant salary increase, but it's estimated that over 90% of small companies can't afford this. Sometimes, as the boss, I wish I could just close the company and invest in stocks or property for peace of mind. Although in recent years, due to paying social insurance and housing fund for each employee, the per capita cost has increased by a few hundred yuan per month, employees don't appreciate it. They only count how much they take home each month, and the company's expenses are none of their business.
Since I can't satisfy everyone, I only aim to satisfy the 20% of key employees.
First, I develop key employees by offering them shares: I sell company shares at half price, with a buy-one-get-one-free deal. If they withdraw within five years, they only get their principal back; after five years, I redeem at three times the amount. Each year, I distribute 60% of profits as dividends. After all, if there's money, everyone shares, but if a shareholder does something disloyal, they are doubly punished, deducted from their share capital. This tactic has worked well; in the past five years, no shareholder has left, and key positions are held by shareholders, saving me a lot of effort.
Why not give shares to key employees for free? Actually, I don't care about the money, but people don't cherish what's given for free. Also, the money they invest serves as a deposit to prevent misconduct. Moreover, employees can recoup their investment through dividends within five years. No input, no output.
**2. On Delegation:**
I remember when the company had just over a dozen people, I was the busiest, often taking two or three sales calls simultaneously, arranging deliveries, settling accounts, and purchasing. I arrived earliest and left latest. Once my brother visited and remarked, "Bro, I feel like you're supporting everyone in the company!" I was proud at the time. But the company didn't grow much in four or five years, staying at a dozen people, and employees felt oppressed with no room for growth. Eventually, I realized I had to delegate, even if employees could only do 70% as well as I could. Sometimes it's really frustrating—salespeople just can't close a deal I could easily close, and I want to rush in myself, but I have to hold back, or else how will my subordinates improve?
In the development of a small company, 15 people is a hurdle, 50 is a hurdle, and 200 is another. Without improving management methods, further growth is impossible. A boss who does everything himself will find it hard to get past 15 people. A capable person can directly manage seven or eight people; an average one can only lead four or five. The most efficient organization in any country is the military. Look at its structure: a squad has 11-12 people, with a squad leader and an assistant; three squads make a platoon, three platoons a company, and so on. A regiment commander manages over a thousand people but may only know a hundred or so. If he sees a soldier with a problem, he won't scold the soldier; he'll scold the battalion commander, who then scolds the company commander, and so on down to the squad leader, who deals with the soldier. So even with thousands of troops, the military can enforce orders.
Now when customers ask me to buy something, I often say, "I'm sorry, I don't know the price. Let me introduce you to a salesperson who will contact you."
**3. Some Money Should Not Be Saved:**
When I first started, there were only one or two people. I did sales, purchasing, repairs, and bank runs myself. At that time, I had no registered capital, so I borrowed a friend's business license. After learning accounting for a few months, I started making reports blindly. At the end of the month, I went to the tax bureau to file taxes. When I submitted the report, the tax officer glanced at it and started asking questions. I didn't understand the questions at all, let alone answer them. The officer looked displeased and asked, "Do you understand?" I smiled and said, "No, I don't." "If you don't understand, why are you here? Send someone who does." "Okay, okay, next time I'll send someone who does." The next month, I made another blind report and went to the tax bureau. The officer clearly remembered me: "Why are you here again?" I had to make up a story: "The accountant is pregnant and can't come, so I had to." The next day, I hired an accounting firm for 300 yuan a month and never went to the tax bureau myself again. Even when the company grew to over a dozen people, I still used the accounting firm. The company only had a cashier, no full-time accountant or warehouse keeper. In the following years, business went well, and we made money, but at year-end, the company's bank balance didn't increase much. Later, I realized that once a company has more than ten people, the boss alone can't oversee everything. The whole company is like a sieve, full of holes. It's a wonder any money is left. Expecting employees to be like Jiao Yulu or Lei Feng is impossible. Even if you give employees 70% commission, they'll still covet the remaining 30%. Only a fool wouldn't embezzle. Only with sound systems can you prevent dishonest people from exploiting and manage the company well. I'm grateful to my current accountant for being extremely responsible. If I ever start another company, as long as there are four people, it will be one boss, one accountant, one cashier, and one warehouse keeper. I'll never save that money again.
**4. Cross-Industry Ventures Don't Make Money:**
This saying holds true for 90% of companies. Of course, if you think you're in the remaining 10%, you might give it a try.
Generally, once a company survives three to five years and makes some money, the boss starts thinking about other ventures. Most people think their own industry is less profitable than others. Unfortunately, I'm one of them (I think my experience could fill a book on small business mistakes). At the end of the last century, on a whim, I opened a restaurant, and my troubles began. I thought my sales talent would make it a success. But a restaurant needs more than sales; if the food isn't good, customers won't return. I'm not a foodie and had no patience to develop new dishes with the chef. Moreover, a restaurant requires managing purchases, accounts, hygiene, and dealing with industry and commerce, public security—it's exhausting and different from running a company. I had no patience, so I hired a department manager to run it, but it was a mess. Within six months, I lost hundreds of thousands and closed it. Now, if anyone mentions opening a restaurant, I get angry. Eating at a restaurant is fine, but anything else is off the table.
If you're interested in opening a restaurant, think through the following: A: Can you endure the hard work, rising early and staying late? B: If you're taking over a restaurant, find out why the previous owner is selling (don't just listen to one side; observe for a couple of days). C: Calculate the rent, staff costs, etc., per table per day. Determine the restaurant's positioning, target customers, table turnover rate, average spending per table, and gross margin. Can you make a profit? (Calculate carefully, even using your toes if necessary, or you'll lose everything.) D: Can you handle the local industry and commerce, health, public security, and local thugs? E: Parking issues. F: Find a chef. How will you manage him—contract the kitchen or give a percentage of sales? G: Is your wife willing to do purchasing, or can you find someone as loyal as your wife? H: Restaurant staff need room and board, and wages are rising quickly, so budget generously. If you miscalculate, you'll end up exploiting yourself and your parents and wife.
**5. On Recruitment:**
Over the years, I've done a lot of recruiting. At the peak, I interviewed 50-60 people in one afternoon. At first, I had no experience and always hired the best. For a customer service position with a salary of 1,000 yuan, I often hired top university graduates with CET-4 English. Later, I found they didn't stay. For simple jobs, a vocational school graduate is fully capable. Hiring a bachelor's degree holder is unsuitable for both sides; it only helps when writing the company profile. Also, don't fully trust what candidates say in interviews. Sometimes, after losing a job, they're desperate and will promise anything. Once, we were hiring for a business position with a salary of about 2,000 yuan. A girl with a bachelor's degree and three years of experience, whose previous salary was 2,500, applied. I asked if she could accept a lower salary. She said yes without hesitation. Since she was suitable, I hired her. Half a month later, after the previous employee handed over and left, she also quit the next day, citing the low salary, leaving the company in a difficult position. Next time, I hired a girl whose previous salary was 1,500. She's still in that position, doing well and satisfied with her salary. Most people can only accept a new job with equal or higher pay; very few can accept a step down. Deng Xiaoping might be one.
My recruitment experience: Better to miss a thousand than hire one wrong person (from a famous historical figure's saying). In my experience, it's more effective to hire one level lower and pay one level higher (i.e., hire third-rate talent, do second-rate work, pay first-rate wages. Of course, these are relative). During recruitment, take the trouble to verify candidates' identities carefully. Last year, two new employees absconded with company funds. When we called, they were brazen: "My ID, diploma, and address were all fake. The police won't bother with a few thousand yuan." And indeed, the police didn't. Now, for local candidates, we verify everything; for non-locals, we require a local guarantor. Anyone caught falsifying is rejected. Since then, no such incidents have occurred.
I have some prejudice against laid-off workers. Most, especially older ones from state-owned enterprises, are full of complaints, feeling society has wronged them. They bring their dissatisfaction and bad habits to the new company, expecting benefits as their due, thinking everyone owes them. They find it hard to integrate, and only a few are hardworking. Perhaps private enterprises aren't suitable for laid-off workers. Also, use relatives and friends as little as possible. I'll touch on this later.
**6. The Boss Should Play the Good Cop:**
Every day, many things happen in the company—some deserve praise, some criticism. Who should deliver criticism and praise?
When I first started, I didn't feel like a boss and disliked managing people, so I rarely said anything about employee issues. As a result, employees were undisciplined, no one respected anyone, and work couldn't proceed. Later, I realized I had to change, so I started to be stern. But new problems arose: almost all conflicts were between me and employees. Employees often argued with me face-to-face. Being a boss was depressing, and I didn't want to be a harsh manager. After more contact with Japanese companies, I discovered some secrets. Japanese general managers rarely scold ordinary employees; they're very kind to lower-level staff. But they often scold middle managers in front of employees. When ordinary employees make mistakes, their direct supervisor handles it. Of course, at month-end, the GM is strict about pay. This way, the company is well-managed, and employees feel balanced.
"Stones from other hills can polish jade." So I did it. Our company isn't big, but we have some supervisors. I held a meeting to clarify responsibilities: whoever's subordinate has a problem, that supervisor handles it. Don't push everything to me. Usually, I only praise good deeds and encourage. When supervisors make mistakes, I rarely criticize them publicly; I talk privately. Soon, management became smoother, and my image improved; employees respected me more.
Sometimes I think a boss is to a company what an emperor is to a country. If the emperor is wise but ministers are incompetent, people still have hope; they might just replace the ministers. But if the emperor is incompetent, people think the country is doomed and start thinking of rebellion. As a boss, I can't let employees revolt or leave. Since supervisors and department managers enjoy position allowances, they should share the boss's burdens. They should play the bad cop when needed, while the boss maintains a detached stance, seeing things clearly from outside. However, when department managers need support, as long as it's not a matter of principle, I usually support them clearly.
**7. Relatives in the Company:**
On this issue, I have only lessons, no experience. Fortunately, my wife's job has always been good—at a Fortune 500 company—so she has no interest in my small company. When the company was founded, based on what I'd seen, I decided to avoid using relatives and friends as much as possible. Later, when the company reached a certain size, an elder from out of town called, saying her son (my cousin) had graduated a year ago and was working as a salesperson at a small company in our industry, with a modest income. She hoped he could develop in Beijing. My relative's family was struggling; one child couldn't work due to special circumstances. I had met this cousin before; he was 18 or 19, quite smart. At the time, the company needed people, so I agreed readily.
When my cousin first arrived in Beijing, he lived with my parents. The generation gap caused friction, and my mother often complained. After a while, I moved him to the company dormitory, solving the problem. My cousin was sharp and good at socializing. Within months, he adapted fully and performed well in his department, often ranking top in commissions. Later, I noticed he often flaunted his special status, bossing colleagues around, causing resentment. I talked to him several times, and he promised to change, but with little effect. A year passed, and he was thriving in the industry. Then he told me he had several smart and reliable classmates back home and wanted to bring them to the company. I thought it was a good idea and agreed. That's when trouble began.
My cousin and his friends lived and ate together, speaking only their hometown dialect, which no one else understood. Although they were in different departments, supervisors noticed they were colluding to make illicit money. My cousin was clever; he spread rumors that there were conflicts among shareholders, and he was on my side, warning his direct supervisor not to pick the wrong side. Many employees were intimidated. After a while, the issue reached me. The company's policy was: first offense, fine and warning; second offense, dismissal. I talked to my cousin, and he swore he wouldn't do it again. But within a month, another supervisor reported that my cousin's clique was doing shady work, not even hiding it from others, and even encouraging others to join. I was in a dilemma. If I didn't act, I'd be raising a tiger. I wanted the company to grow and provide for the founding shareholders. Better to suffer short-term pain than long-term. I gritted my teeth and let my cousin and his clique go. The company's business was shaken for six months.
My cousin, using the clients he took from the company, is still in the industry, making good money and even bought a car.
It's best not to use relatives and friends; otherwise, you might lose both the business and the relationship.
I once heard another company president talk about how he handled relatives after the company grew. His five or six relatives helped him selflessly during the startup, but later they couldn't keep up with the company's pace and held high positions that were hard to manage. He chose to sacrifice money to preserve family ties: he gave the older ones a sum to start their own businesses, and paid for the younger ones to study abroad, covering all expenses, and after they got MBAs, helped them find jobs. That solved the problem neatly. Clever!
**8. Being a Boss and Driving:**
Last year, I went back to my hometown, riding with a relative who had just gotten his license. The road was wide and straight, but the driver's hands kept moving, left and right, the car weaving. I sat in the passenger seat, nervous, buckled up, and said little, pressing my feet as if braking. Cars in the next lane kept honking. Fortunately, we arrived safely. I recalled ten years ago when I first got my license, my brother, an experienced driver, had the same complaint. At the time, I was confident and didn't understand why passengers felt that way. Now I get it.
Running a company, I often make similar mistakes. Policies change frequently. I see a new rule in another company and adopt it on a whim, then find it ineffective and overturn it, leaving employees confused. Some commission and reward methods were already good, tested and reasonable, and accepted by employees. But after listening to an expert lecture or reading a management book, I'd copy it without deep thought or adaptation, immediately making new policies. Then the accountant complains it's hard to implement, employees complain it's unreasonable, and after a lot of fuss, we revert to the original.
Now I often think running a company is like driving. The boss is the driver. As long as the car stays within the lane's white lines, there's no need to constantly adjust the steering wheel. Otherwise, the driver gets tired, passengers get tired, and the car weaves dangerously—wasted effort. Similarly, as long as the company operates within controllable bounds without major errors, policies should be stable and consistent, giving employees a sense of security. In a small company, the boss has all the power and lacks oversight, so policy-making should be cautious. Otherwise, constant adjustments make employees feel unstable, and they'll leave. Think about why Deng Xiaoping promised that Hong Kong's system would remain unchanged for 50 years after the handover.
**9. Pay Wages on Time:**
This is the most basic quality of a boss. I estimate no boss would disagree (at least verbally), but in reality, many companies fail to do this.
In daily operations, companies often face cash flow shortages, such as at month-end or year-end when stocking up for discounts, when a client delays payment, or when a bank loan is due. For a boss, these are all excuses for delaying wages. A boss might think: "It's not that I'm not paying; it's just a few days late. The company is short on cash; employees should understand." But the truth is: no matter the reason, employees cannot understand late or partial payment. Wages are not a gift from the boss; they are hard-earned. Maybe an employee is waiting to pay rent, a mortgage, or school fees. A delay could threaten their livelihood. Normally, the boss has more financial flexibility, so he assumes a few days' delay is fine.
So what to do when cash is tight? Generally, do business within your means. If you need money, borrow from a bank. If the bank won't lend, consider internal or family/friend loans, clearly stating the purpose, term, and interest. Most employees are willing to invest in a business they trust. If you truly can't pay wages at month-end and want to continue, the boss should first use personal savings, then pawn property or cars, and redeem them when cash flow recovers.
Delaying wages is like drug addiction: once you do it, you'll do it again. Whenever cash is tight, you'll delay wages, and employees will lose all trust in the company and boss. Surveys show that the most intolerable thing for employees is delayed wages, often the main reason for turnover.
**10. Learn to Say "No":**
Chinese people care about face, so "no" is hard to say. But the boss is the last line of defense and sometimes must say "no" despite discomfort.
Our company has a rule: company funds are never lent to individuals. Of course, in special cases, employees can get an advance on wages. Two years ago, a key employee came to chat and asked, "If an employee contributes several times more than others, would the company lend him money?" I hesitated and thought for a while, then said, "The company has a rule: company funds are never lent to individuals." He persisted, "Even for key employees?" I said, "The company treats everyone equally. Key employees can get higher salaries and bonuses, and favorable terms for shares, but this rule has no exceptions." Then I asked if he wanted to borrow. He admitted he wanted to buy a house and needed 300,000. I was puzzled; he could get a bank loan. He said bank loans require interest and fees, and he thought borrowing from the company would be interest-free. Later, I learned he already had a house and wanted to buy another to profit from appreciation. A year later, he left for other reasons. If I had lent him the money, it would have been hard to recover. After refusing once, similar situations became easier. Over the years, all shareholders, including me, have borrowed from banks for house purchases, not from company working capital. No matter how rich the company is, it can't replace the bank.
Sometimes there are special cases, but on matters of principle, the boss must stand firm. Rules apply to everyone. As the saying goes, "It's not the scarcity but the unfairness that causes discontent." Walls have ears. Once you make an exception, managing others becomes difficult. In recent years, the media has advocated rule of law over rule of man, and there's reason. When the boss should say "no," he must say it, to anyone. It's better to be cursed at for a moment than to suffer for a lifetime because the company collapsed. Many companies went bankrupt because the boss couldn't refuse to guarantee or lend money. If the boss doesn't take responsibility for the company, no one else will.
**11. Don't Expect to Make Friends Within the Company:**
When I first became a boss, I wasn't used to managing people. I thought everyone should be equal and friends, and we could discuss things. After a while, I found the company chaotic, rules ignored, and mistakes cheap. People did as they pleased, and at month-end, everyone got paid.
One day, a friend from a big company visited for half a day. As he left, he said with feeling, "You need to tighten management. I couldn't tell who the boss was. Employees aren't afraid of you or listen to you." I thought he was right but didn't know how to change. Eventually, problems erupted: serious embezzlement, low efficiency, employees felt hopeless, and several key employees teamed up to start their own business. Of the dozen or so employees, seven or eight left, taking half the clients.
Fortunately, I had a smaller branch company and had hired some new salespeople. Since I started from scratch, I had strong resilience. I gritted my teeth and started over. This time, I learned from my mistakes: I established strict rules and enforced them. Business quickly improved, and within a year, the staff was back to a dozen, with profits higher than before.
Looking back, my mindset was wrong. I thought the company should be like a state-owned enterprise, where everyone is the master, equal, and works diligently. That's nonsense. In a company, interests and positions differ; there's no absolute equality. Although people are equal in dignity, how can positions, authority, wages, and bonuses be equal? Why did most state-owned enterprises fail, except monopolies? Because their management concepts and methods don't fit the current market economy and social environment. I think the education we received fundamentally contradicts human nature. In the opera "Red Lantern," the villain Jiu Shan said, "Everyone for himself, and the devil take the hindmost," which was always criticized as a negative example. But now I think it reflects people's natural first reaction. "The world bustles with activity for profit." Even monks understand this. So be a boss. You can't have it both ways. I no longer expect to be friends with employees. Everything follows the rules. As long as I manage well, pay good wages and bonuses, provide insurance, and let key employees share in the company's success through shares, I've done my duty. Being a boss is a lonely profession. Make friends outside the company.
As for rules, every moderately sized company has a big book, but management levels vary greatly. The key is whether rules are strictly enforced and whether the boss himself respects them and ensures compliance. If rules are enforced, personnel management follows naturally. Everything by the book, and the boss doesn't have to scold employees all day. Actually, since starting the company, I've never scolded any employee. A few employees left and returned, saying they couldn't stand their new boss's temper. Ha, but I feel I have authority now; at least friends won't say they can't tell who the boss is.
**12. Avoid Making Decisions on the Spot:**
In movies, TV, and radio, there are often scenes where leaders hold on-site meetings or visit grassroots, and people with tears complain about long-unresolved issues. The leader waves his hand, angrily rebukes the corrupt officials, dismisses or prosecutes them, and solves in five minutes what wasn't solved in years. How satisfying!
Not long after becoming a boss, as the company grew, my desire for leadership swelled. I often made decisions on a whim. Once, salesperson A complained that salesperson B was poaching his client by quoting a lower price, causing the client not to buy from A and the company to lose profit. I was furious. Such selfishness couldn't be tolerated. I posted a notice: B would get no commission, be publicly criticized, and all commission and rewards would go to A. Later, B came to me agitated, saying he had been following that client for over six months, and the price and model were almost settled. A few days earlier, while B was out visiting another client, the client called to finalize details, and A answered. A didn't relay the message but instead told the client to deal directly with him, promising more discounts, nearly ruining the deal. I was shocked—it was completely different from A's story. After checking with other salespeople, B's account was basically true. But the notice was already posted. What to do? I did damage control and made rules to prevent recurrence. Reflecting, why didn't I investigate before deciding? If B had been more introverted, he might have quit without defending himself, causing greater loss and affecting other employees. I recalled many hasty decisions recently and regretted them. It seems the bureaucrat's phrase "Let's consider and study this" has merit. In the past, the emperor's words were final. Today's boss can't make decisions without thought and investigation, or he'll lose authority with constant changes.
Now when employees come to me with problems, I usually say, "Okay, I see. Let me check and get back to you in a few days." This way, such mistakes rarely happen. It seems you can't just act for momentary satisfaction; you must consider everything. The higher your position, the more you should avoid on-the-spot decisions. That's why people think big companies are slow to respond. If big companies reacted as fast as individual businesses, they'd soon become individual businesses.
**13. Policy-Making:**
After years of effort, our company finally got the agency for a famous brand in Beijing. I was thrilled. To meet the annual sales target, we held a sales meeting where I assigned tasks to each salesperson and set annual goals.
Three months later, sales of the agency brand didn't meet the quarterly target. Why? Overall sales were good, but the product mix was scattered. Was it that salespeople weren't good at selling the main product? Or was training lacking?
Overhearing a conversation between salespeople solved the mystery.
After work, I was about to leave when I heard two salespeople chatting outside.
A: "You did well today—one order over 50,000. Why don't you push our main product?"
B: "Customers are used to another brand. Besides, selling that brand gives me 500 yuan more profit, so my commission is over 100 yuan more."
So that was it. B was not only a key employee but also a small shareholder. If he thought that way, what about others?
I reflected and realized the fault was mine. Selling the main product might yield slightly less immediate profit, but considering after-sales costs and the manufacturer's promotional support after meeting targets, it's more beneficial. The problem was employees didn't care; they only cared about their own gains. After all, human nature is selfish (not in line with the mainstream, but true). The sales policy was flawed.
The next day, I revised the sales reward policy to favor the main product: selling it earned both profit commission and turnover commission, and failing to meet quarterly turnover targets for the main product would affect the quarterly bonus. The change was immediate; the second quarter's main product sales were completed on time.
Generally, employees' interests and the boss's interests are not aligned, and conflicts are common. Expecting employees to sacrifice personal interests for the company is a fantasy. But the boss has an advantage: he makes the policies. He can use people's tendency to seek benefit and avoid harm to align employee interests with company interests, making them rise and fall together. Then no ideological work is needed; employees will naturally work toward the boss's goals. Like Yu the Great controlling floods: mainly by channeling, with blocking as a supplement. A wise policy must conform to human nature. All empty talk should be discarded. Some leaders (including me, who used to think about reducing bonuses and lecturing employees on life philosophy) give grand speeches they don't believe themselves. Who's fooling whom? Without benefits, no amount of preaching works. In the last century, the rural land contract reform worked because it finally aligned with human nature.
**14. Choosing the Best of a Bad Lot:**
For a long time, the sales department had no supervisor. I managed over a dozen salespeople myself. It wasn't that I didn't want to appoint one, but the key employees were similar in ability, none outstanding. Also, due to industry constraints and sales policies, each salesperson worked independently with little cooperation, making them selfish. Other employees were less capable and had high turnover. So the sales department had no head.
Every day, besides communicating with other department managers, I had to manage the sales team in detail. It drove me crazy. When the sales department needed coordination with other departments, since it had no supervisor, other managers often didn't cooperate. Status mismatch, so they came to me. Ugh.
I couldn't stand it anymore. I had to promote someone, even if not ideal.
So I set promotion criteria based on performance, ability, and teamwork, and finally selected a supervisor. Not perfect, but we'd train him on the job.
A year passed. The supervisor wasn't outstanding, but he managed daily affairs well. Previously, I had to personally assign tasks like unloading goods, cleaning common areas, and holiday duty schedules, often playing both good cop and bad cop. Now, with a supervisor, since he gets a monthly allowance, he should take on more responsibility. "He who eats the king's grain should share the king's worries." I just tell the sales supervisor to arrange things. I also delegated contacting manufacturers for training and coordinating with other departments. No major mistakes in a year. It seems even an average supervisor is better than none. People's abilities aren't innate. Like bees: at birth, they're all the same. If you feed them royal jelly and raise them as queens, they become queens.
**15. Some Things Are Better Transparent:**
Bosses usually keep the actual cost of goods confidential when announcing sales policies, whether to employees, partners, or downstream distributors.
In 2006, we set up a branch in a city near Beijing by acquiring part of a local partner's shares and sending key employees. The local partner, General Manager Ma, continued as GM, handling daily operations. Since it was a mature, profitable company, we didn't worry about initial losses. At the start, we agreed: the branch would be the sole distributor for one of our products in that city, enjoying the same base price from the manufacturer and the same promotional policies, receiving business guidance from headquarters, and sharing year-end profits according to share ratios.
Once things were on track, I handed over all cooperation with the branch to Lao He, the vice president in charge of channel management. Until year-end, all was well.
The second year, conflicts arose. Since the branch purchased from headquarters, it needed VAT invoices, and headquarters had to send a vehicle to pick up goods from the manufacturer's warehouse and ship them to the branch's city, incurring significant logistics and tax costs.
Lao He, considering the costs, quietly added 2% to the product prices and policies he sent to the branch in the new year. Walls have ears. Manager Ma, with years in the industry and contacts with distributors nationwide, saw through it within a month. At a manufacturer's sales meeting, Ma confronted Lao He, who tried to cover up, and they nearly came to blows.
Ma lost all trust in Lao He and came directly to me, saying if the issue wasn't resolved, cooperation would end.
I calmed him down, showed him the original agency agreement with the manufacturer, and detailed the costs of picking up and shipping goods, capital occupation, storage, and taxes, which totaled about 2% of turnover. Ma was satisfied, admitting that as long as he wasn't kept in the dark about the manufacturer's base price and policies, he could understand and accept the 2%. I then promised to apply for more support from the manufacturer due to our combined volume, ensuring the branch got better prices and policies than if it operated alone. Ma left satisfied, and the dispute dissolved. I thought: what partners want is the right to know, the right to equal access to the manufacturer's true policies.
In today's highly connected world, keeping secrets is nearly impossible. The days when "the south side of town knows about a two-cent discount on cloth, but the north side doesn't for half a month" are gone. As long as it doesn't involve personal privacy or harm the company's fundamental interests, our company's affairs are mostly transparent. We disclose the base price of goods to all salespeople, explaining how logistics, storage, taxes, etc., are calculated and setting a minimum sales price. Everything else is up to the salesperson. This not only enhances mutual trust but also simplifies sales processes and speeds up response.
**16. Distributing Labor Protection Supplies:**
When I first started the company, I was used to the state-owned enterprise practice of giving out labor protection supplies during holidays, like drinks and cooking oil. Each time, we'd send a vehicle to buy them, and there'd be a chaotic scramble. Employees would carry them home by bike, taxi, or in bits. As the company grew and business got busy, we stopped.
Last year before Spring Festival, I visited a friend's company. They were distributing holiday gifts: each employee got two large rolls of toilet paper, a small bottle of cooking oil, several large bottles of cola, and a box of tangerines. A dozen employees each had a small pile, and many were worrying about how to carry it home—taxi wasn't worth it, and the bus couldn't handle it.
I went into my friend's office; he was doing calculations. Seeing me, he grinned and said, "See how lively it is? We're giving out holiday gifts."
I asked, "Why give those things? They're hard to carry."
He said mysteriously, "You don't get it. When employees take these home, their families see our company has good benefits. It gives employees face. These things cost only about 100 yuan per person but look like a lot. What a deal!"
I asked, "But your employees have been asking for social insurance. Why not use the money for that?"
"Who wants that? It costs the company several hundred yuan per person per month."
After the holiday, many key employees left my friend's company.
In March, when we were recruiting, one applicant had worked at my friend's company.
I asked, "Why did you leave? The company seemed good, giving out gifts for holidays."
He scoffed, "Those things are worth only about 100 yuan. Who are they fooling? They don't provide social insurance, and year-end bonuses aren't paid. The boss is too calculating."
I felt ashamed. When I used to give out labor protection supplies, I also hoped to save on bonuses. Employees must have been complaining privately.
In today's society, who's fooling whom? The boss knows toilet paper isn't worth much, and so do employees. Goods are abundant, and supermarkets have everything at clear prices. When making decisions, a boss should consider things from the employees' perspective to avoid silly mistakes. Otherwise, thinking you're smarter than everyone else will eventually lead to a fall.
**17. Financial System: Signatures and Vouchers:**
A few years ago, I was editing an ad when I heard an argument from the finance office. Soon, the cashier Xiao Li and salesperson Xiao Ma came to me, red-faced. Xiao Ma said, "Last Friday, I gave a 3,000-yuan check to Xiao Li. Today, the accountant asked me to pay the goods, and I said I gave it to Xiao Li, but she denies it."
Xiao Li cried, "I never received that check. I just searched all the folders and checked the bank statement. It's not there."
Xiao Ma insisted, "I clearly put it on Xiao Li's desk. How could it be missing?"
Xiao Li said, "Manager, you can ask the finance staff. They can all testify I never received Xiao Ma's check."
It was a confusing dispute, and my head was spinning.
I said, "Search the finance office again carefully, including corners, behind cabinets, and under desks."
Ten minutes later, cheers came from the finance office. The check was found in the crack between two desks.
This incident struck me. There were loopholes in the financial process. If the check hadn't been found, who would be responsible? I couldn't decide. We had always been strict with cash: when salespeople returned cash, the cashier on duty would verify it, issue a cash receipt with the amount, payer, customer name, date, and the payer's signature. The salesperson gave one copy to the accountant for bookkeeping, and the accountant checked the cash balance daily. Cash had never been a problem. But check management was lax; salespeople just handed checks to the cashier.
After this, we immediately changed the process: when the cashier receives a check from a salesperson, they must sign the salesperson's work order, and the salesperson must note the check number and amount on the work order beforehand. This way, any dispute can be checked. With clear responsibility, similar disputes are unlikely.
Reflecting on these years, I think a company must have a sound financial system that is strictly enforced. As the company grows, staff quality varies. If there are loopholes, someone will exploit them for illegal gain, harming the company and setting a bad example. Other employees might think they're at a disadvantage if they don't exploit the loopholes, and the company culture deteriorates. By then, the boss will be crying. A thousand-mile dike collapses from an ant hole. Any small financial loophole should be plugged. Also, original vouchers are crucial. A good memory is no match for a pen. No one can remember details of every expense from six months or a year ago, but a proper voucher can. Financial systems and standards have their reasons, even if they limit the boss's freedom. Whether financial staff are complete and systems sound is a key difference between running a business and being a self-employed individual. When you grow from a solo or family shop to three or five people, you can't avoid this. Unfortunately, I was ignorant and had no mentor, so I took many detours. Otherwise, I'd have gotten rich earlier.
**18. On Shareholding, Dividends, and Year-End Bonuses:**
Companies implement shareholding differently. I don't fully understand how listed companies calculate and transfer share prices, but they probably consider fixed assets, working capital, annual profitability, intangible assets, P/E ratio, debt ratio, etc.
In my company, when employees buy shares, we don't include intangible assets or P/E ratio. The boss gives up some profit, and employees get real benefits. We only calculate net assets. At year-end, the accountant produces a report listing fixed assets, working capital, receivables/payables, prepaid expenses and depreciation, annual profit, expenses, taxes, etc., clearly. This is open to key employees interested in buying shares. Since employees trust me, most don't even look at the report; they just need to know the net asset value and the approximate dividend and appreciation rate. Of course, the proper method is to have a third-party accounting firm assess assets and issue a report, but employees think it's unnecessary, so I'm happy to save the trouble. After employees buy shares, we give each a receipt stating the amount, and sign a shareholding agreement with each shareholder, detailing the actual investment, percentage of total shares, annual dividend plan, rights and responsibilities, and exit method. Both parties sign and seal, each keeping a copy. That's it. For exit after five years, we either redeem at the current net asset value or at three times the actual investment. The first batch of shareholders has been in for over five years, and since the company is doing well, no one has exited.
I noticed a phenomenon: sales department employees are most eager to buy shares, while finance department employees are the least. This probably relates to their work nature and perspectives. Salespeople are proactive and impulsive, focusing on the positive and ignoring the negative. Finance people are cautious, focusing on the negative and ignoring the positive. So when making major decisions, I often listen to both departments and balance their opinions.
Niu Gensheng, the boss of Mengniu, said well: "When wealth is gathered, people scatter; when wealth is scattered, people gather." Giving employees shares not only retains talent but also motivates them to work better, because shares come with responsibility. When a boss gives away more than 50% of shares, he feels the burden lighten by more than 50%, and he can relax on vacation with his family. Actually, a boss doesn't need to hold more than 50% to control the company. If other small shareholders each hold less than 5%, then 20-30% is enough to be the largest shareholder. The boss shouldn't be so bad that all small shareholders unite against him.
In the early years, I distributed 30% of annual profits as dividends. Although the total was significant, it was negligible for small shareholders. In the last two years, following advice, since the company has enough working capital and inflation is high, I raised the dividend ratio to 60% of net profit. When announced, small shareholders were overjoyed, and previously hesitant employees started asking about buying shares.
Year-end bonuses used to be allocated by me personally. Now that the company is bigger, I can't know every employee's work details. So we set a total bonus based on annual performance, then allocate it to departments based on contribution and headcount. Department managers and HR allocate to individuals based on performance standards. Finally, I only evaluate department managers' bonuses based on their department's annual performance.
Previously, year-end dividends and bonuses were treated as expenses amortized monthly in the following year, which wasn't scientific. Now we accrue them monthly in the current year, setting aside the amount from profits each month. This way, we know the total at year-end, and departments have a basis for calculating bonuses.
**19. On Salary Increases:**
This issue gives me a headache. In the last two years, prices have risen sharply, inflation is high, and monopoly industries and civil servants have loudly increased salaries. Employees often ask, "Boss, when will we get a raise?"
I'd like to raise salaries, but our industry's products are constantly dropping in price, squeezing profit margins. Also, due to social insurance and housing fund, the cost per employee has increased by nearly 10,000 yuan per year compared to a few years ago, but that increase isn't in employees' hands, so they don't see it. Alas, even the landlord has no surplus grain.
Management books often say: give employees lofty ideals, create development space, plan careers, analyze the company's situation and long-term plans, inspire teamwork, and boost morale. Through years of practice, I've found it's really hard to do all that perfectly. I'm not good at speaking, and giving reports isn't my strength. Besides, spiritual motivation without material rewards only works temporarily. The salary issue can't be avoided.
Most ordinary employees, except shareholders, aren't interested in the company's operational difficulties. They think if the company isn't doing well, it's the boss's incompetence. Their salaries should still rise. If they're not satisfied, they'll vote with their feet and leave for a better-paying job.
Since this issue can't be avoided, we must solve it. According to the 80/20 rule, 80% of profits come from 20% of key employees. So the primary task is to retain that 20%. The company can afford to raise salaries for 20% of employees. For the other 80%, adjust salaries based on tenure, do ideological work, and if that fails, let it be. In recent years, 85% of key employees have been stable, and the company hasn't had major upheavals.
There's a department with three employees: Master Zhang, Master Wang, and Master Li. All three were laid off from state-owned enterprises. Zhang has been with us for six or seven years and is hardworking; Wang for four or five years, steady; Li for two years, sometimes lazy and complaining. One day, Li came to me and said, "Manager, our department's salaries haven't been raised in a long time. The masters work hard. Could you consider a raise? Otherwise, morale will suffer. We've discussed it and would like to meet with you."
I understood: Li had likely rallied the others to pressure me. I couldn't let this become a trend, or everyone would do the same. Besides, the department's average salary was already above industry average. So I replied, "I'm busy these two days. How about a meeting after work the day after tomorrow?"
"Great," Li smiled.
The next day, I called Master Zhang into my office. After some small talk, I praised his work and said, "Given your consistent effort, starting next month, I'll give you an additional quarterly bonus. But this extra reward is only for you; please keep it confidential." Then I asked his opinion on the department's salaries. He said, "Manager, I think the current salaries are about right. For long-serving employees, it's a bit low, but with the quarterly bonus, I'm satisfied. I promise to work hard!"
Near the end of the day, I called Master Wang in. After small talk, I said, "This year, the company is struggling with profits, so we may not be able to raise everyone's salary. Due to lower business volume, your department may need to reduce one person. The other two will be busier, and we'll consider that in the year-end bonus. Do you have any suggestions?"
Wang thought and said, "Manager, I understand. I think the current salary is fine. When profits increase, you'll naturally consider raises. I have no complaints; I'll keep working as before."
The next day after work, the meeting was held as scheduled.
First, Li spoke: "Manager, we three discussed and feel the current salaries are low. Could the company consider a raise? Otherwise, it affects morale, which isn't good for the company."
I said, "Your department's salaries are already relatively high in the industry. This year's market is tough, and the company is adjusting and launching new projects. Profits may be lower than last year. I hope you can bear with it. When profits increase, everyone's salary will rise."
Li was unhappy: "Manager, the company's profits are the manager's concern, not ours. If profits fall, it's because the boss is incompetent. Employee salaries shouldn't be affected; they should still rise. Besides, we work for money. We do as much as we're paid. Right, masters?" Li turned to the others.
Zhang and Wang showed no expression and said nothing.
The meeting continued for twenty minutes, with me explaining and Li making impassioned speeches. Suddenly, Zhang said, "Manager, I just remembered a job that must be finished today. I need to leave now."
"Okay, thanks for your hard work. Go ahead," I said.
"Manager," Wang took the opportunity, "I have a stomachache. I need to use the restroom."
"Go ahead, go ahead. How can I refuse a restroom break?" I said.
In an instant, only Li was left at the table, stunned.
**20. Fully Utilize Technology in Management:**
Modern technology advances rapidly and solves many management problems.
When the company was founded, attendance was recorded by a timekeeper, but this had issues: first, the timekeeper might not be punctual; second, if the timekeeper was absent, no one replaced them; third, the timekeeper's relationships with other employees varied, so fairness wasn't guaranteed.
In the late 1990s, time clocks became common. We bought one and placed it at the entrance. Employees stamped their cards when arriving and leaving, and HR tallied at month-end. But soon, proxy punching appeared; friends punched for each other. Although we punished severely, it continued.
In the new century, fingerprint technology matured. We bought a fingerprint time clock for a few hundred yuan, solving the problem completely.
So far, no employee has borrowed another's finger to clock in.
As sales outlets increased and offices became more dispersed, management became harder. Sometimes a product sat in one store for half a year, while another store ordered more for a customer, due to poor communication.
Four or five years ago, we invested in a networked financial software, enabling real-time communication between stores, headquarters, and branches. All inventory is visible, each salesperson's transactions are traceable, receivables and payables are clear, and reports are available on demand. I no longer have to ask the accountant: "What's the inventory? How much is in the account? What are so-and-so's sales this month?" With a computer connected to the internet, I can get the data I need anytime, anywhere, with a click.
Recently, to improve after-sales service call quality and reduce disputes, we installed a recording card on the phone system. All incoming and outgoing calls are recorded. Customer service staff regularly listen to recordings, analyze strengths and weaknesses, and discuss improvements. After a while, I noticed not only better phone skills but also lower phone bills. Probably employees are embarrassed to make personal calls when they know they're recorded. Two birds with one stone.
Using technology to manage not only improves efficiency but also avoids human-induced deviations. As labor costs rise, buying advanced equipment to replace people is a cost-saving method.
**21. From Results Management to Process Management:**
For a long time, our company used results management: at the start of each year, we set annual targets, allocated them to departments, then to individuals, who broke them down into monthly targets based on history. We set assessment standards based on monthly tasks. At the beginning of each month, finance summarized the previous month's completion, sent reports to department managers and the GM, who studied them and made new policies or coached underperformers. This traditional method is systematic and feasible, but with increasing competition and faster market changes, our management lagged behind competitors. If a problem arises early in the month, it only shows up in the report next month, and after the manager adjusts policies and communicates, 40 days have passed. Sometimes 40 days is enough to turn a small problem into a big one.
Recently, I learned about Dell's sales management. Dell initially assessed salespeople monthly, then weekly, and finally daily. Every evening, sales supervisors collect daily reports, analyze and summarize. Those who met targets are fine; those who didn't stay for individual coaching, analyzing failures, making new action plans, and planning the next day's tasks. The next evening, they review the previous day's plan and set a new one. After this change, Dell's sales performance improved significantly, but salespeople were nearly driven crazy; few lasted more than three years in Dell's sales department.
"Stones from other hills can polish jade." Although daily assessment isn't realistic for us yet, weekly assessment is. So we changed business department reports to weekly summaries. Every Monday, we summarize and verify each person's business activities and task completion for the previous week. We take immediate action on anomalies and talk individually with underperformers to understand and solve problems. After a while, I felt the company's response to the market greatly improved, and managers at all levels had a clear picture of business conditions. Problems in the current month no longer wait until next month to be discovered and solved.
I've been wondering if non-business departments can also adopt process management. That would greatly improve the company's overall response speed, allowing problems to be surfaced and solved promptly, and strengthening execution. However, since non-business departments lack hard numerical targets, achieving process management might be time-consuming and labor-intensive.
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