---
title: "A Practical, Down-to-Earth Daily Management Handbook for Small and Medium Distributors"
description: "This handbook offers practical advice for small and medium distributors on managing key employees, delegation, cost-cutting, diversification, recruitment, and other daily challenges. It emphasizes retaining core staff through shareholding, avoiding unnecessary expenses, and maintaining transparent and consistent policies."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-06-12"
language: "en"
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---

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

> This handbook offers practical advice for small and medium distributors on managing key employees, delegation, cost-cutting, diversification, recruitment, and other daily challenges. It emphasizes retaining core staff through shareholding, avoiding unnecessary expenses, and maintaining transparent and consistent policies.

**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 do this. Sometimes, as the boss, I wish I could just close the company and invest in stocks or real estate 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 satisfy the 20% of key employees.
First, I develop key employees to become shareholders: I sell company shares at half price with a buy-one-get-one-free deal. If they withdraw within five years, they only get back their principal; 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 against the company, they are doubly punished, deducted from their shares. This trick works 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; it's mainly that people don't cherish what's given for free, and the investment serves as a deposit to prevent shareholders from misbehaving. Moreover, employees can recover 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 at once, arranging deliveries, settling accounts, and purchasing. I arrived earliest and left latest. Once my brother came to the company, watched for a while, and said, "Brother, 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. Later, I realized I needed to delegate, even if employees could only do 70% of what I could. Sometimes I was anxious; salespeople just couldn't close deals I could, and I wanted to rush in, but I had to restrain myself, or how would my subordinates improve?
In a small company's development, 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 pass 15 people. A capable person can directly manage seven or eight people; an average one, only 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 the military, despite its size, 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, maintenance, and bank runs myself. I had no registered capital, so I borrowed a friend's business license. After a few months of self-studying accounting, I made random reports. At the end of the month, I went to the tax bureau to file. The inspector glanced at the report and started asking questions I didn't understand, let alone answer. He frowned 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 random report and went again. The inspector recognized me: "Why are you here again?" I made up an excuse: "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 a dozen people, I still used the accounting firm. The company had only 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, a boss can't oversee everything alone. The whole company is like a sieve, full of holes; it's a miracle if money remains. 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 loopholes. I'm grateful to my current accountant for her extreme responsibility. If I ever start another company, as long as there are four people, it will be a boss, an accountant, a cashier, and a warehouse keeper. I'd rather die than 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 try.
Generally, after a company survives three to five years and makes some money, the boss starts thinking about doing something else. Most people think their industry is less profitable than others. Unfortunately, I'm one of them (I think my experience could compile a book of 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 skills would make it a success. But a restaurant needs more than sales; if the food isn't good, customers won't return. I wasn't a foodie and lacked patience to develop new dishes with the chef. Also, running a restaurant involves purchasing, accounting, hygiene, and dealing with various authorities. It's exhausting and different from running a company. I lacked patience, so I put a department manager in charge, who made 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 these points: A: Can you endure the hard work? B: If 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 daily cost per table, including rent and labor. Determine the restaurant's positioning, target customers, table turnover rate, average spending per table, and gross margin. See if you can make a profit (calculate carefully, or you'll lose everything). D: Can you handle the local authorities and troublemakers? E: Parking issues. F: Find a chef and decide how to manage them—contract or commission? G: Is your wife willing to do purchasing, or can you find someone as loyal as her? H: Restaurant staff need room and board, and wages are rising fast, so budget accordingly. If you miscalculate, you'll end up exploiting yourself and your family.

**5. On Recruitment**
Over the years, I've done a lot of recruiting. At one point, I interviewed 50-60 people in an afternoon. Initially, I had no experience and always hired the best. For a customer service position paying over a thousand yuan, I often hired university graduates with CET-4. Later, I found they didn't stay. For simple jobs, a technical school graduate is sufficient. Hiring a university graduate is a mismatch 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 around 2,000 yuan. A girl applied with a bachelor's degree and three years of experience, earning 2,500 at her last job. I asked if she could accept a lower salary. She said yes without hesitation. Since she was suitable, I hired her. Two weeks later, after the previous person left, she quit the next day, citing the low salary, leaving us in a bind. Next time, I hired a girl who had earned 1,500 yuan. 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). In my experience, hiring one level lower and paying one level higher works well (i.e., hire third-rate talent, do second-rate work, pay first-rate wages. Of course, these are relative). During recruitment, take the time to verify candidates' identities. 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, we verify all local employees and require local guarantors for non-locals. Anyone caught falsifying is rejected. No such incidents since.
I have some bias against laid-off workers. Most, especially older ones from state-owned enterprises, are full of complaints, feeling society has wronged them. They bring their negativity and bad habits to the new company, expecting benefits as their due, thinking everyone owes them. They find it hard to integrate. Only a minority are hardworking. Perhaps private enterprises aren't suitable for them. Also, use relatives and friends sparingly; 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 started, I didn't feel like a boss and hated 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 this couldn't continue, so I started to be strict. But new problems arose: all conflicts centered between me and employees. Employees often argued with me face-to-face. Being the boss was depressing, and I didn't want to be a harsh manager. After interacting with Japanese companies, I discovered some secrets. Japanese general managers rarely scold ordinary employees; they're kind to them. 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 with 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 a few supervisors. I held a meeting to clarify responsibilities: whoever's subordinate has a problem, they handle it. Don't push everything to me. I usually only praise good deeds and encourage. When supervisors make mistakes, I rarely criticize publicly; I talk privately. Soon, management became smooth, my image improved, and employees respected me more.
Sometimes, the boss is like an emperor to the 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 revolting. As a boss, you can't let employees rebel or leave. Since supervisors and department managers enjoy position allowances, they should share the boss's burdens and play the bad cop when needed. The boss should remain detached and see things clearly. 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 works at a Fortune 500 company and has no interest in my small business. So when the company started, I decided to avoid using relatives and friends. Later, when the company reached a certain size, a relative 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, earning not much, and wanted to come to 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, he lived with my parents. Young and old have different habits, and my mother often complained. After a while, I moved him to the company dormitory, solving the problem. My cousin was clever 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 became very adept 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, so I 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 colluded to make illicit money. My cousin was very 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, dismissal. I talked to my cousin, and he swore not to repeat it. Within a month, another supervisor reported that my cousin's clique was doing shady work, not even hiding it, and even encouraging others. 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. I gritted my teeth and gradually let my cousin and his clique go. The 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'll lose them too.
I once heard a CEO talk about how he handled relatives after his company grew. His five or six relatives helped him selflessly during the startup. When the company grew, they couldn't keep up and occupied high positions, making management difficult. 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. Brilliant!

**8. Being a Boss and Driving**
Last year, I went back to my hometown and rode with a relative who had just gotten his license. The road was wide and straight, but his hands kept moving, left and right, and the car was swerving. I sat in the passenger seat, nervous, buckled up, and stopped talking, 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 when I drove. 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 at another company and adopt it on a whim, then find it ineffective and reverse it, leaving employees confused. Some existing commission and reward methods were already good, proven by practice and accepted by employees. But after listening to an expert lecture or reading a management book, I'd copy ideas without adapting them to our situation, immediately creating new policies. Then the accountant complains it's hard to implement, employees complain it's unreasonable, and after all that, 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 and passengers get tired, and the car swerves, risking accidents. Similarly, as long as the company operates within controllable bounds without major mistakes, 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. Probably every boss agrees (at least verbally), but in reality, many companies fail to do this.
During daily operations, companies often face cash flow issues, such as stocking up at month-end or year-end for discounts, project payments delayed by clients, or bank loans due. For a boss, these are all excuses for delaying wages. The boss thinks: It's not that we won't pay, just a few days late. The company is short on cash; employees should understand. The truth is: no matter the reason, employees cannot understand late or partial payment. Wages aren't a gift from the boss; they're hard-earned. Maybe an employee is waiting to pay rent, a mortgage, or school fees. Delayed wages can immediately threaten their livelihood. Normally, the boss has more financial flexibility than employees, 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 can't, borrow from the bank. If the bank won't lend, consider internal fundraising or borrowing from relatives and friends, explaining the purpose, term, and interest. Most employees are willing to invest in projects the company is confident about. If you truly can't pay wages at month-end and want to continue, the boss should first use personal savings, then mortgage the house or car, and redeem once cash flow recovers.
Delaying wages is like drug addiction: once you start, it's hard to stop. Whenever cash is tight, you'll delay wages, eroding employee trust. Surveys show that delayed wages are the most intolerable issue for employees and often the main reason for turnover.

**10. Learn to Say "No"**
Chinese people value face, so saying "no" is hard. But the boss is the last line of defense and sometimes must say "no."
Our company has a rule: company money is never lent to individuals. Of course, in special cases, employees can get advances on wages. Two years ago, a key employee chatted with me 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 money is 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 share purchase terms, 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 yuan. I was puzzled; why not get a bank loan? He said bank loans have 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 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 much money the company has, it can't replace the bank's function.
Sometimes, company rules have exceptions, but on matters of principle, the boss must stand firm. Equality before the rules is essential. As the saying goes, "It's not the scarcity but the unfairness that causes discontent." Walls have ears. Once you set a precedent, managing other employees becomes difficult. In recent years, the media has advocated rule of law over rule of man, and there's reason. When the boss needs to say "no," he should, to anyone. Although being cursed at temporarily is unpleasant, it's better than the company failing. Many companies have collapsed because bosses, unable to refuse, gave guarantees or loans to others. 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. 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. Everyone did as they pleased, and at month-end, wages couldn't be shorted.
One day, a friend from a big company visited and said, "You need to tighten management. I couldn't tell who the boss was all afternoon. Employees neither fear nor listen to you." I thought he was right but didn't know how to change. Eventually, problems erupted: serious embezzlement, low efficiency, and employees feeling hopeless. Several key employees decided to start their own business, and seven or eight out of a dozen left, taking half the clients.
Fortunately, I had another smaller branch and hired new salespeople. Since I started from scratch, I had strong resilience. I gritted my teeth and started over. This time, I learned from mistakes, established strict rules, and enforced them. Business quickly improved, and within a year, staff returned to a dozen, with profits exceeding before.
Looking back, my mindset was wrong. I thought the company should be like a state-owned enterprise, where everyone is a master and equal, and everyone works diligently. That's nonsense. In a company, interests and positions differ; absolute equality doesn't exist. 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 don't fit the market economy and social environment. I think the education we received fundamentally contradicts human nature. In the movie "Red Lantern," the villain Jiu Shan said, "If a man doesn't look out for himself, heaven and earth will destroy him," 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, ensure everyone gets good wages and bonuses, social insurance, and key employees share in the company's growth through shares, I've done my part. Being a boss is a lonely profession. Make friends outside the company.
Regarding rules and regulations, every moderately sized company has a thick book, but management levels vary greatly. The key is whether rules are seriously enforced and whether the boss supports and supervises them. If rules are enforced, personnel management follows naturally. Everything by the book, and the boss doesn't need to scold employees all day. In fact, from the start until now, I've never scolded any employee. A few times, 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 and news, there are scenes where leaders visit the grassroots, and people complain about long-standing issues. The leader waves his hand, scolds the corrupt officials, dismisses or prosecutes them, and solves problems in five minutes that took years. It's satisfying!
When I became a boss, as the company grew, my desire to lead expanded. I often made decisions impulsively. Once, salesperson A complained that salesperson B was poaching his client by undercutting prices, causing the client not to buy from A and reducing company profit. I was furious and posted a notice: B gets no commission, gets a public reprimand, and all commissions go to A. Later, B reacted strongly, saying he had been following that client for over six months, had basically agreed on price and model, and one day when he was out, the client called to finalize details, and A answered. A didn't relay the message but 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 mostly true. But the notice was already posted. What to do? I had to do damage control and set rules to prevent recurrence. Reflecting, why didn't I investigate before deciding? If B had been introverted, he might have just left, causing greater loss and affecting other employees' morale. I've made many rash decisions lately and regret them. It seems the bureaucratic phrase "Let's consider and study this" has merit. In the past, emperors' words were final; today's bosses can't make decisions without thought and investigation, or they'll lose credibility with constant changes.
Now when employees come to me with problems, I usually say, "Okay, I'll look into it and get back to you within a few days." This has reduced mistakes. It seems you can't just act for momentary satisfaction; you must consider all aspects. The higher the position, the more you should avoid on-the-spot decisions. That's why big companies seem slow to respond. If they responded as fast as individual businesses, they'd soon become one.

**13. Policy Formulation**
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, I held a sales meeting, assigned tasks to each salesperson, and set yearly 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 diverse. Was it that salespeople weren't good at selling the main product? Or was training lacking?
Overhearing a conversation between two salespeople solved the mystery.
After work, I was about to leave when I heard two salespeople chatting outside.
A: "You did well today—over 50,000 in one order. Why didn't you push our main product?"
B: "Customers are used to another brand. Besides, selling that brand gives 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, imagine the others.
I reflected and realized the fault was mine. Selling the main product might yield less immediate profit, but considering after-sales service costs and manufacturer promotional support after meeting targets, it's more beneficial. But employees don't care; they only care about their own gains. Human nature is selfish (ha, not in line with the mainstream). The sales policy was flawed.
The next day, I revised the sales incentive policy, favoring the main product. Sales of the main product earned both profit commission and turnover commission. Moreover, failing to meet the quarterly turnover target for the main product would affect the quarterly bonus. The policy change had immediate effect; the second quarter's main product sales were completed on time.
Generally, employees' interests differ from the boss's, often conflicting. Expecting employees to sacrifice personal interests for the company is unrealistic. 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 naturally work toward the boss's goals. Like Yu the Great controlling floods: mainly channeling, with blocking as a supplement. A wise policy must align with human nature; all empty talk should be discarded. Some leaders (including me, who often thought of reducing bonuses and giving life lectures) 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, and I managed 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 coordinating with other department managers, I had to manage a dozen salespeople in detail. It drove me crazy. When the sales department needed coordination with other departments, without a supervisor, other managers often didn't cooperate. Status mismatch, so they came to me. Ugh.
Unable to bear it, I decided to promote a sales supervisor from the available pool.
I set criteria based on performance, ability, and interpersonal skills, and finally selected a supervisor. Not ideal, but I'd train him on the job.
A year passed. The supervisor wasn't outstanding but managed daily affairs well. Previously, I had to personally assign tasks like unloading goods, cleaning common areas, and holiday duty. 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 supervisor to arrange things. I also delegated tasks like contacting manufacturers for training and coordinating with other departments. No major mistakes in a year. It seems an ordinary supervisor is better than none. People's abilities aren't innate. Like bees, they're all the same at birth. If you feed them royal jelly and raise them as queens, they become queens.

**15. Some Things Are Better Transparent**
Bosses usually hide the actual cost of goods when announcing sales policies, whether to employees, partners, or sub-dealers.
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. Since it was a profitable enterprise, we didn't worry about initial losses. At the start, we agreed: the branch would be the sole dealer for one of our agency products, enjoy the same base price and promotions as us, receive business guidance, and share year-end profits by share ratio.
After things stabilized, I handed over the branch's business to Vice GM Lao He, who managed channels. Until year-end, no issues.
The second year, conflicts arose. The branch needed VAT invoices for purchases, and we had to send trucks to pick up goods from the manufacturer's warehouse and ship them, incurring significant logistics and tax costs.
Lao He, unable to cover these costs, quietly added 2% to the product quotes and policies for the branch. Walls have ears. Ma, experienced in the industry with contacts 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 fell out.
Ma lost trust in Lao He and came 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: warehouse pickup, shipping, capital occupation, storage, and taxes, which totaled about 2% of turnover. Ma was satisfied and said he'd accept the 2% if we were transparent about the base price and policies. I then promised to leverage our combined volume to get more support from the manufacturer, ensuring the branch got better prices and policies than if it operated alone. Ma left satisfied, and the dispute dissolved. I thought: partners just want the right to know, to have equal access to the manufacturer's true policies.
In today's highly connected world, secrets are hard to keep. The days when one side of town didn't know about a price drop for half a month are gone. As long as it doesn't involve personal privacy or harm the company's core interests, our company's affairs are transparent. We disclose the base price of goods to all salespeople, explain how logistics, storage, and taxes are amortized, set a minimum price, and let salespeople handle the rest. This builds trust between employees and the company, simplifies processes, and speeds up response.

**16. Distributing Labor Protection Supplies**
When the company started, I was used to state-owned enterprise practices, so I'd distribute labor protection supplies like beverages and cooking oil during holidays. Each time, we'd send a truck to buy them, and there'd be a commotion as employees took them home by bike or taxi. Later, as the company grew and business got busy, we stopped.
Last year before Spring Festival, I visited a friend's company and saw them distributing holiday gifts: each employee got two bundles of toilet paper, a small bottle of oil, several large bottles of cola, and a box of oranges. A dozen employees each had a small pile, wondering how to carry it home—taxi wasn't worth it, and bus was impractical.
I went into my friend's office; he was calculating. He grinned and said, "See how lively it is? We're giving out holiday gifts."
I asked, "Why give those? 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 items 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 to pay that? It costs 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 holiday gifts."
He scoffed, "Those gifts total about 100 yuan. Who's fooled? No social insurance, year-end bonuses not paid. The boss is too calculating."
I felt ashamed. When I distributed labor protection supplies years ago, I also hoped to save on bonuses. Employees were probably complaining privately.
In this society, who's fooling whom? The boss knows toilet paper is cheap, and so do employees. Goods are abundant, and supermarkets have everything with clear prices. When making decisions, the boss should consider the employees' perspective to avoid low-level mistakes. Otherwise, thinking you're smarter than others 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, 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've searched all my folders and checked the bank statement. It's not there."
Xiao Ma said, "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 testify I never received Xiao Ma's check."
A confusing dispute, giving me a headache.
I said, "Search the finance office thoroughly, including corners, behind cabinets, and under desks."
Ten minutes later, cheers came from the finance office. The check was found in the gap between two desks.
This incident struck me. There were loopholes in the financial process. If the check hadn't been found, whose fault would it be? I couldn't decide. We had always been strict with cash: when salespeople returned cash, the cashier would verify and issue a receipt with the amount, payer, customer name, and date, signed by the payer. The salesperson gave a copy to the accountant for bookkeeping, and the accountant reconciled cash daily. Cash had never been an issue. 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, they must sign the salesperson's work order, and the salesperson must note the check number and amount beforehand. This creates a chain of responsibility, making disputes less likely.
From these lessons, I believe a company must have a sound financial system 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 system, leading to a deteriorating culture. A thousand-mile dike collapses from an ant hole; any small financial loophole must be plugged. Original vouchers are also crucial. A good memory beats a bad pen. No one can remember every expense detail from a year ago, but a proper voucher can. Financial systems and standards have their reasons, even if they seem to limit the boss's freedom. Having complete financial staff and systems is a key difference between running a business and being a self-employed individual. When you grow from a solo or family operation to three or five people, you can't bypass 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 likely consider fixed assets, working capital, profitability, intangible assets, P/E ratio, and debt ratio.
In our company, we don't calculate 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 and payables, amortization and depreciation, annual profit, expenses, and taxes. This is open to key employees interested in buying shares. Since employees trust me, most don't even look at the report; they're satisfied knowing the net asset value and the approximate dividend and appreciation ratio. 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 with the investment amount and sign a shareholding agreement detailing the amount, percentage, 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 original investment. The first batch of shareholders has long passed 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 for major decisions, I often consult both departments and balance their opinions.
Niu Gensheng of Mengniu said it well: "When wealth gathers, people scatter; when wealth scatters, people gather." Giving employees shares not only retains talent but also motivates them, because shares come with responsibility. When a boss gives away over 50% of shares, he feels the burden lighten by more than 50%, and he can relax on vacation with his family. Actually, a controlling shareholder doesn't need over 50%. If other shareholders each hold less than 5%, then 20-30% is enough to be the absolute largest shareholder. You wouldn't want all small shareholders to unite against you.
In earlier years, I distributed 30% of annual profits as dividends. Although the total was significant, for small shareholders, it was somewhat negligible. In the last two years, following advice, since our working capital is sufficient and inflation is high, I raised the dividend ratio to 60% of net profit. When announced, small shareholders were overjoyed, and hesitant employees inquired 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 details. So we set a total bonus based on annual performance, allocate it to departments by contribution and headcount, and let department managers and HR distribute to individuals based on assessment criteria. I only evaluate department managers' bonuses based on their department's performance.
Previously, dividends and bonuses were treated as expenses amortized monthly in the following year, which wasn't scientific. Now we accrue them monthly, setting aside the amount from profits, so 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. Prices have risen sharply, inflation is high, and monopoly industries and civil servants have received big raises. Employees often ask, "Boss, when will we get a raise?"
I'd like to raise wages, but our industry's products are constantly dropping in price, squeezing profit margins. Also, with 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 doesn't go to employees, 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 practice, I've found it hard to do all this perfectly. I'm not eloquent, and giving speeches isn't my strength. Moreover, spiritual motivation without material rewards works only 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 wages should still rise. If not satisfied, they'll vote with their feet and leave for a better-paying job.
Since this issue is unavoidable, I must solve it. According to the 80/20 rule, 80% of profits come from 20% of key employees. So the priority is to retain that 20%. Raising wages for 20% is affordable. For the other 80%, adjust wages modestly based on tenure, do more 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 were laid off from state-owned enterprises. Zhang has been with us for six or seven years and is diligent. Wang has been here four or five years and is steady. Li has been here two years and sometimes slacks off and complains. One day, Li came to me: "Manager, our department's wages haven't risen 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. This couldn't be allowed, or everyone would follow suit. Besides, the department's average wage was already above industry average. So I said, "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, chatted, praised his work, and told him that starting next month, he'd get an extra quarterly bonus, but it was only for him, and asked him to keep it confidential. Then I asked his opinion on the department's wages. He said, "Manager, I think the current wages are about right. For long-serving employees, it's a bit low, but with the quarterly bonus, I'm satisfied. I'll work hard!"
Late afternoon, I called Master Wang in. After small talk, I said, "This year, the company's profitability is tough, so raises may not be possible. Due to lower business volume, your department may need to reduce one person. The other two will be busier, and the company will consider increasing year-end bonuses for those who stay. What do you think?"
Wang thought and said, "Manager, I understand. I think the current wages are 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 wages are low. Could the company consider a raise? Otherwise, morale will suffer, which isn't good for the company."
I said, "Your department's wages are already above industry average. This year's market is tough, and the company is adjusting and launching new projects. Profits may be lower than last year. Please bear with it. When profits increase, everyone will get raises."
Li was unhappy: "Manager, profit is the manager's concern, not ours. If profits fall, it's the boss's incompetence. Employee wages shouldn't be affected. They should 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 task that must be done today. I need to leave now."
"Okay, thanks for your hard work. Go ahead," I said.
"Manager," Wang chimed in, "I have a stomachache. I need to use the restroom."
"Go, go. Of course, you can use the restroom," I said.
In an instant, only Li was left, stunned, at the meeting table.

**20. Fully Utilize Technology for Management**
Modern technology advances rapidly and solves many management problems.
When the company started, attendance was recorded by a timekeeper, but that had issues: the timekeeper might not be punctual, no backup when on leave, and personal relationships could affect fairness.
In the late 1990s, time clocks became popular. We bought one and placed it at the entrance. Employees punched in and out, and HR tallied at month-end. But soon, proxy punching appeared, where friends punched for each other. Despite heavy fines, 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 one has borrowed fingers to punch in.
As sales outlets increased and offices became more dispersed, management became harder. Sometimes, a product would sit in one store for months, while another store ordered more for a customer, due to poor communication.
Four or five years ago, we invested in a networked accounting software, enabling real-time communication between stores, the Beijing headquarters, and the branch. We can see all inventory, track each salesperson's transactions, and view receivables and payables. Reports are available on demand. I no longer have to ask the accountant: "What's the inventory? How much is in the account? What's so-and-so's sales this month?" With a computer and internet, I can access the data anytime, anywhere.
Recently, to improve after-sales service call quality and reduce disputes, we installed a recording card on the PBX. All incoming and outgoing calls are recorded. Customer service staff regularly listen to recordings, analyze strengths and weaknesses, and discuss improvements. After a while, not only did call quality improve, but phone bills also decreased. Probably because employees are embarrassed to make personal calls when recorded. Two birds with one stone.
Using technology for management not only improves efficiency but also minimizes human-induced deviations. As labor costs rise, investing in advanced equipment to replace manual work is a cost-saving method.

**21. From Results Management to Process Management**
Traditionally, our company used results management. At the start of each year, we set targets, allocate them to departments, then to individuals, who break them down monthly based on historical data. We assess performance monthly. At month-end, finance compiles results, and managers review and adjust policies or coach underperformers. This method is systematic but slow. With increasing competition and rapid market changes, it lags behind competitors. If a problem arises early in the month, it shows up on the report next month, and after policy changes and meetings, 40 days have passed. Sometimes, 40 days can 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. Each evening, sales supervisors collect and analyze the day's sales reports. Those who meet targets are fine; those who don't stay for individual coaching, analyze failures, and plan the next day. The next evening, they review and set new plans. This improved Dell's sales performance significantly, though salespeople were nearly driven crazy; few lasted more than three years.
"Stones from other hills can polish jade." Although daily assessment isn't realistic for us yet, weekly assessment is. So we changed business reports to weekly summaries. Every Monday, we review and verify each person's activities and task completion, take immediate action on anomalies, and talk individually with underperformers to solve problems. After a while, I felt the company's response to the market improved greatly, and managers at all levels had a clear picture. Problems in the month are addressed promptly, not delayed until next month.
I've been wondering if non-business departments could also adopt process management to speed up the whole company's response and execution. However, without hard numerical targets, it might be time-consuming and labor-intensive.

-END-
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