This article covers, but is not limited to: 1. How small companies retain key staff; 2. On delegation; 3. Some money cannot be saved; 4. On recruitment; 5. Bosses should play the good cop; 6. Relatives in the company; 7. Being a boss and driving; 8. Learning to say "no"; 9. Financial systems; 10. Policy formulation; 11. Dividends and year-end bonuses; 12. How to raise wages.
1 How Small Companies Retain Key Staff Over the years, prices have risen, costs have increased, but company profits haven't grown much. Every employee hopes for a significant salary increase, but it's estimated that over 90% of small companies cannot achieve this. Sometimes, as the boss, I wish I could just close the company and invest in stocks or real estate for some peace. Although in recent years, due to paying social insurance and housing fund for each employee, the per capita cost has increased by several 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 staff.
First, develop key employees to become shareholders: I sell company shares at half price, with a buy-one-get-one-free offer. If they withdraw within five years, they only get their principal back; after five years, I redeem at three times the amount. Each year, 60% of profits are distributed as dividends. After all, if there's money, everyone shares, but if a shareholder does something disloyal, they are doubly penalized, 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 staff for free? Actually, I don't care about the money, but people don't cherish what's given for free. Also, the investment serves as a deposit to prevent shareholders from doing outrageous things. 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. I often took two or three sales calls simultaneously, arranged deliveries, settled accounts, and purchased goods. I arrived earliest and left latest. Once my younger brother came to the company, looked around, 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 around a dozen people. Employees felt oppressed and had no room for growth. Later, I realized that I had to delegate, even if employees could only do 70% of what I could. Sometimes it's really frustrating; a salesperson just can't close a deal that I could easily close. I want to rush in, but I have to restrain myself, or how else will my subordinates improve?
In the development of a small company, 15 people is a hurdle, 50 is a hurdle, and 200 is another hurdle. Without improving management methods, further development is generally impossible. A company where the boss does everything personally will find it hard to pass 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 the military structure: a squad has 11-12 people, with a squad leader and an assistant. Three squads make a platoon, three platoons make a company, and so on. A regiment commander manages over a thousand people but may only know a hundred or so. If the commander 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 and prohibitions.
Now when customers ask me to buy something, I often say, "Oh, I'm sorry, I don't know the price. Let me introduce you to a salesperson who will contact you."
3 Some Money Cannot Be Saved When I first started, there were only one or two people. I did sales, purchasing, maintenance, and bank runs myself. At that time, I had no registered capital and borrowed a friend's business license. After studying 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 inspector glanced at it and started asking questions. I didn't understand the questions at all, let alone answer them. The inspector 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 report and went to the tax bureau. The inspector recognized me: "Why are you here again?" I had to make up a story: "The accountant is pregnant and can't come, so I came." "!" 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 had 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 account balance didn't increase much. Later, I realized that once the 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 a sound system, making it impossible for those with bad intentions to exploit, can you manage the company well. I thank 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'd rather die than save that money again.
4 Different Industries Don't Make Money This statement holds true for 90% of companies. Of course, if you think you're in the remaining 10%, you might as well try.
Generally, once a company survives three to five years and makes some money, the boss starts thinking about doing something else. Most people feel their industry is less profitable than others. Unfortunately, I'm one of them (I think my experience could compile a small encyclopedia 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 the restaurant successful. But a restaurant needs more than just sales; if the food isn't good, customers only come once. I'm not a foodie, and I didn't have the patience to develop new dishes with the chef. Running a restaurant involves not only purchasing and accounting but also health inspections, industry and commerce, and public security. It's exhausting, and it's a different game from running a company. I couldn't stand it, so I put a department manager in charge, who messed it up. Within six months, I lost several hundred thousand 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? B: If you're taking over a restaurant, find out why the previous owner is selling (don't just listen to one side; hang around the restaurant 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, gross margin, and whether you can 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 them—contract the kitchen or pay a percentage of revenue? G: Is your wife willing to do the 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 accordingly. 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. A few years ago, I interviewed 50-60 people in one afternoon. Initially, I had no experience and always hired the best. For a customer service position paying just 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 parties; 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 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. Half a month later, after the previous person left, she also quit, citing the low salary, leaving us in a bind. Next time, I hired a girl who had been earning 1,500. She's still in that position, doing well and satisfied with her salary. Most people can only go up, not down, in job position and salary. Those who can go both ways are rare; Deng Xiaoping might be one.
My recruitment experience: Better to miss a thousand than hire one wrong person (based on a famous historical figure's quote). In my experience, it's better 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 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, and the police won't bother with a few thousand yuan." Indeed, the police didn't. Now, for local hires, we verify everything; for non-locals, we require a local guarantor. Anyone falsifying information is rejected. Since then, no such incidents.
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 if owed, and find it hard to integrate. Only a minority 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 Bosses Should Play the Good Cop Every day, many things happen in the company—some deserve praise, some criticism. Who should deliver the criticism and praise?
When I first 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 then new problems arose: almost all conflicts were between me and the employees. Employees often argued with me face-to-face. It was depressing being a boss, 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 them. But they often reprimand middle managers in front of employees. Mistakes by ordinary employees are handled by their direct supervisors. Of course, at month-end, the general manager is strict about salaries. 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, 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. Before long, management became smooth, my image improved, and employees respected me more.
Sometimes, a boss is like an emperor to a country. If the emperor is wise but ministers are incompetent, people still have hope; at worst, they'll replace the ministers. If the emperor is incompetent, people lose hope 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 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's job has been good—she works at a Fortune 500 company and has no interest in my small business. So when the company was founded, I decided to avoid using relatives and friends as much as possible. Later, when the company reached a certain size, a distant elder called, saying her son (my cousin) had graduated a year ago and was working as a salesperson at a small company in our industry locally, with a modest income. She hoped he could come to Beijing for development. My relative's family is struggling; one child can'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 different lifestyles of young and old caused my mother to complain often. 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 became very adept in the industry. Then he approached me, saying he had several smart and reliable classmates back home who wanted to join the company. I thought it was a good thing, so I agreed. That's when the trouble began.
My cousin and his friends lived and ate together, speaking only their hometown dialect, which no one else in the company 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. Eventually, the issue reached me. The company's policy for such matters is: first offense, a warning and fine; 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 up to their old tricks, 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 in their old age. Short-term pain is better than long-term pain. I gritted my teeth and gradually let my cousin and his clique go. The business suffered 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 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 as 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 the younger ones he sent abroad for education, covering all expenses. After they got MBAs, he helped them find jobs, solving the problem neatly. Brilliant!
8 Being a Boss and Driving Last year, I went back to my hometown and rode in a car driven by a relative. He had just gotten his license and was a novice. 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. I pressed my feet as if braking. Cars in the next lane kept honking. Fortunately, we arrived safely. I recalled that ten years ago, when I first got my license, my younger 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 understand.
Running a company is similar. I often made similar mistakes. Policies changed frequently. If I saw another company's new policy, I'd adopt it on a whim, then abandon it when it didn't work, leaving employees confused. Some 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 thinking, creating new policies that caused complaints from both accountants and employees. After all the fuss, I'd revert to the original.
Now I often think that running a company is like driving. The boss is the driver. As long as the car stays within the two white lines of the lane, it's fine. You don't need to constantly adjust the steering wheel; otherwise, the driver gets tired, passengers get tired, and the car swerves, risking danger. Similarly, as long as the company operates within controllable bounds and doesn't make 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 policies should be made cautiously. Otherwise, the company is always adjusting, employees lack stability, 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. Every boss would agree (at least verbally), but in reality, many companies fail to do this.
During daily operations, companies often face cash flow shortages. For example, at month-end or year-end, you might stock up on goods to get a high discount from the manufacturer; or a project owner delays payment; or a bank loan is due. All these are excuses for not paying wages on time. Bosses 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 they're waiting to pay rent, a mortgage, or their children's tuition. Not getting paid on time can 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 can't, borrow from a bank. If the bank won't lend, consider internal fundraising or borrowing from relatives and friends, explaining the purpose, agreeing on the term and interest. Most employees are willing to participate in projects the company is confident about. If you really can't pay wages at month-end and want to continue, the boss should first dip into personal savings. If that's not enough, pawn the house or car, and redeem when 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 employees' trust in the company and the 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 saying "no" is hard. But the boss is the last line of defense and sometimes must say "no" despite the discomfort.
Our company has a rule: company money is never lent to individuals. Of course, in special cases, employees can get an advance on their salary. Two years ago, a key employee came to chat. He 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 terms for buying 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 surprised; he could get a bank loan. He said bank loans require interest and fees, so 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 get back. 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's function.
Sometimes, company rules have exceptions, but on matters of principle, the boss must stand firm. Equality before the rules. As the saying goes, "People don't fear scarcity but inequality." There's no wall without a crack. Once you set a precedent, it's hard to manage other employees. In recent years, the media has been advocating rule of law over rule of man; there must be a reason. When the boss should say "no," say it, no matter to whom. It's better to be cursed at for a moment than to suffer for a lifetime because the company collapses. Many companies have gone 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. Everyone 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, "You need to strengthen management. I couldn't tell who the boss was. Employees neither fear nor listen to you." I thought he was right, but I didn't know how to fix it. Eventually, problems erupted: serious embezzlement, low efficiency, and employees felt 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 with a few new salespeople. Since I started from scratch, I had strong psychological resilience. I gritted my teeth and started over. This time, I learned from the lesson: I established strict rules and enforced them. Business quickly improved, and within a year, the staff was back to over a dozen, with profits exceeding before.
Looking back, my initial mindset was wrong. I thought the company should be like a state-owned enterprise, where everyone is the master and equal, and everyone works hard voluntarily. That's nonsense. In a company, interests and positions differ; absolute equality doesn't exist. Although everyone is equal in dignity, how can positions, authority, wages, and bonuses be equal? Why did most state-owned enterprises fail, except for 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 past, the line "Everyone for himself and the devil take the hindmost" was criticized as a negative example. But now I think it reflects people's natural first reaction. The world is bustling 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 the company well, ensure everyone gets as much salary and bonus as possible, provide insurance, and let key employees share in the company's growth through shares, I've done my part. Being a boss is inherently lonely; make friends outside the company.
As for rules and regulations, every company of moderate size has a big book, but management levels vary greatly. The key is whether the rules are strictly enforced and whether the boss himself recognizes and supervises their implementation. Once rules are enforced, personnel management falls into place. The boss doesn't need to scold employees all day. In fact, from the start of the company to now, I've never scolded any employee. A few employees who left later returned, saying they couldn't stand their new bosses' tempers. 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 newspapers, there are often scenes where leaders solve problems on the spot. People cry and complain about long-standing issues, and the leader waves his hand, reprimands the corrupt officials, dismisses or prosecutes them, and solves in five minutes what couldn't be solved in years. It's satisfying!
Not long after I became a boss, as the company grew, my desire to lead expanded. 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 angry and couldn't tolerate such selfish behavior, so I posted a notice: B would get no commission, be criticized, and all commission and rewards would go to A. Later, B came to me, upset, and explained that he had been following that client for over six months, had basically agreed on price and model, and one day when he was out visiting another client, the client called to confirm 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 story was mostly true. But the notice was already posted. What to do? I had to do damage control and establish rules to prevent similar incidents. 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 regretted my hasty decisions. The bureaucratic 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 thinking and investigating, or he'll lose authority 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 in a few days." This has reduced such mistakes. So, don't act just for momentary satisfaction; consider everything. The higher the position, the more you should avoid on-the-spot decisions. That's why many people feel big companies are slow to respond. If big companies reacted as fast as individual businesses, they'd soon become individual businesses.
13 Policy Formulation After years of effort, our company finally obtained the agency rights for a famous brand in Beijing. I was thrilled. To meet the annual sales target for the brand in Beijing, we held a sales meeting where I assigned tasks to each salesperson and set the annual sales goals.
Three months later, the brand's sales fell short of the quarterly target. Why? Overall company sales were good, but the products sold were diverse. Was it that salespeople weren't good at selling the main product? Or was sales training lacking?
I overheard a conversation between two salespeople that solved the mystery.
After work, as I was about to leave, I heard two salespeople chatting outside the door.
Salesperson A: "You did well today—one order over 50,000. Why don't you push our main product?"
Salesperson B: "Customers are used to another brand. Besides, selling that brand gives me 500 more profit, so my commission is over 100 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 for a long time. The mistake was mine. Selling the main product might yield slightly less immediate profit, but considering after-sales service costs and the manufacturer's promotional support after meeting targets, it's more beneficial. The key is that employees don't care; they only care about their own gains. After all, human nature is selfish (not in line with the mainstream, but true). The sales policy wasn't well designed.
The next day, I revised the sales reward policy to favor the main product. Sales of the main product would earn 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 main product's sales target for the second quarter was met.
Generally, employees' interests and the boss's interests are not aligned and often conflict. 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 there's no need for ideological work; employees will naturally work toward the boss's goals. Like ancient Yu the Great controlling floods: mainly by channeling, not blocking. A wise policy must conform to human nature. All empty talk should be discarded. Some leaders (including me, who used to think about giving less bonus and more life lessons) give grand speeches that even they don't believe. 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 Among the Mediocre 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 I felt the key employees were of similar ability, none outstanding. Also, due to industry constraints and sales policies, each salesperson worked independently with little cooperation, making them selfish over time. Other employees were less capable and had high turnover, so the department had no head.
So every day, besides communicating with other department managers, I had to manage the sales team's minutiae. It was exhausting. 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.
Unable to bear it, I decided to promote a sales supervisor, even if it meant choosing the best among the mediocre.
I set promotion criteria based on performance, ability, and relationships with colleagues. Finally, I selected a supervisor. Though not ideal, I'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 rosters, often playing both good cop and bad cop. Now, with a supervisor, since he gets a few hundred yuan more in position allowance, he should take on more responsibility. "Eat the king's salary, share the king's worries." I just tell the supervisor to arrange things. I also delegated tasks like contacting manufacturers for new product training and coordinating with other departments. No major mistakes in a year. A mediocre 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 The More Transparent, the Better Bosses, when announcing sales policies, usually keep the actual cost of goods confidential, whether to employees, partners, or downstream distributors. They don't reveal the bottom line.
In 2006, due to business expansion, we set up a branch in a city near Beijing. We acquired part of a local partner's shares and sent key staff to manage it. The local partner, Mr. Ma, continued as general manager. Since it was a mature, profitable business, 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 area, enjoying the same base price and promotional policies as we got from the manufacturer, receiving business guidance from headquarters, and sharing year-end profits according to shareholding.
Once things were on track, I handed over the branch's business to Mr. He, the vice president in charge of channels. Until year-end, everything was fine.
The second year, problems arose. The branch needed VAT invoices for purchases from headquarters, and each time, headquarters had to send a truck to pick up goods from the manufacturer's warehouse and ship them to the branch city, incurring significant logistics and tax costs.
Mr. He, considering these costs, quietly added a 2% margin to the product prices and policies he sent to the branch. But news travels fast. Mr. Ma, with years in the industry and contacts with distributors nationwide, soon noticed the discrepancy. At a manufacturer's sales meeting, he confronted Mr. He, who tried to cover up, and they nearly came to blows.
Mr. Ma lost trust in Mr. He and came directly to me, saying if the issue wasn't resolved, cooperation couldn't continue.
I calmed him down, showed him the original agency agreement with the manufacturer, and itemized the costs: picking up goods, shipping, capital occupation, storage, and taxes, which totaled about 2% of turnover. Mr. Ma was satisfied and admitted that as long as I was transparent about the manufacturer's base price and policies, he could understand and accept the 2%. I then promised to leverage our combined sales volume to get more support from the manufacturer, ensuring the branch got better prices and policies than if they did it alone. Mr. Ma left satisfied, and the dispute dissolved. I thought: what partners want is the right to know, the right to understand the manufacturer's true sales policies.
In today's highly connected world, keeping secrets is nearly impossible. The days when one side of town didn't know about a price drop on the other side 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 transparent. We disclose the base price of goods to all salespeople, explaining how logistics, storage, and taxes are calculated and amortized, and set a minimum selling price. Everything else is up to the salesperson. This not only enhances mutual trust but also simplifies the sales process and speeds up response.
16 Distributing Labor Protection Supplies When the company was first established, I was used to the state-owned enterprise practices, so I occasionally distributed labor protection supplies during holidays, like beverages and cooking oil. Each time, the company sent a truck to buy them, and there was a hustle and bustle. Employees took them home by bike, taxi, or in bits and pieces. Later, as the company grew and business got busy, we stopped.
Last year, before the Spring Festival, I visited a friend's company. They were distributing holiday gifts: each employee got two large bundles of toilet paper, a small barrel 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 take them home. Taking a taxi wasn't worth it, and public transport couldn't carry them.
I went into my friend's office; he was doing calculations. Seeing me, he grinned and said, "See how lively our company is? We're distributing holiday gifts."
I asked, "Why give those things? They're hard to carry."
He said mysteriously, "You don't understand. When employees take these home, their families see that our company has good benefits. It gives employees face. It costs only about a hundred yuan per person, but it looks 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 several hundred more per employee 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 sneered, "Those things total about a hundred yuan. Who are they fooling? They don't pay social insurance, and year-end bonuses aren't paid. The boss is too calculating."
I felt ashamed. In the early years, when I distributed labor protection supplies, I also hoped to save on bonuses. Employees must have complained privately.
In today's 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 things from 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 at my desk 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. I said I gave it to Xiao Li, but she denies it."
Xiao Li, in tears, said, "I never received that check. I just 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 can it be missing?"
Xiao Li said, "Manager, you can ask the finance office staff. They can all testify that I never received Xiao Ma's check."
It was a messy dispute, and my head was spinning.
I said, "Go search the finance office thoroughly, including behind corners, 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 deeply affected me. There were loopholes in the financial process. If the check hadn't been found, whose fault would it be? I couldn't decide. The company had always been strict with cash: when salespeople returned cash, the cashier on duty would receive it, verify its authenticity, and issue a cash receipt with the amount, payer, customer name, and date, signed by the payer. The salesperson would give one copy to the accountant for bookkeeping, and the accountant would reconcile cash daily. Cash had never been an issue. But check management was lax; salespeople just handed checks to the cashier.
After this incident, we immediately revised the process: when the cashier on duty 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, responsibilities are clear, and disputes are less likely.
Reflecting on these lessons, I believe that 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 gains, harming the company and setting a bad example. Other employees will feel they're at a disadvantage if they don't exploit the loopholes, leading to a deteriorating culture. The boss will be crying too late. A thousand-mile dike collapses from an ant hole. Any small financial loophole should be plugged. Original vouchers are also crucial. A good memory is no match for a written record. No one can remember every expense detail from six months or a year ago, but a standardized voucher can. Financial systems and standards have their reasons, even if they seem to limit the boss's freedom. Whether financial staff are complete and systems are sound is a key difference between running a business and being a self-employed individual. When you grow from a solo or family business to three to five people, this is unavoidable. Unfortunately, I was ignorant of this and had no mentor, so I took many detours in the early days. Otherwise, I'd be rich by now.
18 On Shareholding, Dividends, and Year-End Bonuses Different companies implement shareholding differently. I don't fully understand how listed companies calculate and transfer share prices, but I guess they consider fixed assets, working capital, annual profitability, intangible assets, P/E ratio, debt ratio, etc.
In our company, when employees buy shares, 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, prepaid expenses and depreciation, annual profit, expenses and taxes, etc. It's all clear and open to key employees interested in buying shares. Since employees trust me, most don't even look at the report; they just want to know the net asset value and the approximate dividend and appreciation rate. Of course, the proper method would be 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 invested, and sign a shareholding agreement 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. As for exit after five years, we either redeem at the current net asset value per share or at three times the employee's actual 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 daily work 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 it well: "When wealth gathers, people scatter; when wealth scatters, people gather." Giving employees a share of the company 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 the company's shares, he'll feel the burden on his shoulders lighten by more than 50%. He can then take a peaceful vacation with his family. Actually, a boss doesn't need to hold more than 50% to control the company. If each small shareholder holds less than 5%, then 20-30% is enough to be the largest shareholder. You wouldn't want all small shareholders to unite against you.
In the early years, I distributed 30% of annual profits as dividends. Although the total was significant, for small shareholders, it was a bit underwhelming. In the last two years, following advice, and because the company has enough working capital and inflation is high, I raised the dividend ratio to 60% of net profit. When the news was announced, small shareholders were overjoyed, and some hesitant employees started asking about buying shares.
Year-end bonuses used to be distributed 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 their contributions and headcount. Department managers and the HR manager then distribute to individuals based on assessment criteria. Finally, I only need to assess department managers' bonuses based on their departments' 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, setting aside the amount from profits each month. This way, we know exactly how much we have at year-end, and departments have a basis for calculating bonuses.
19 On Raising Wages This issue gives me a headache. In recent years, prices have risen sharply, inflation is high, and monopoly industries and civil servants have been loudly raising wages. Employees often ask, "Boss, when will we get a raise?"
I'd like to raise wages, but the products we sell 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 into 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 current situation and long-term plans, inspire teamwork, and boost morale. Through practice, I've found it's really hard to do all that perfectly. I'm not good at speeches, and giving reports to employees isn't my strength. Besides, spiritual motivation without material rewards only works temporarily. The wage 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 fault. Their wages should still rise. If they don't get a satisfactory raise, they'll vote with their feet and leave for a better-paying job.
Since this issue can't be avoided, I need to solve it. According to the Pareto principle, 80% of profits come from 20% of key employees. So the primary task is to retain that 20%. The company can afford to raise wages for that 20%. For the other 80%, adjust wages 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 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 often complaining. One day, Li came to me and said, "Manager, our department's wages haven't been raised in a long time. The masters work hard. Could you consider a raise? Otherwise, morale might suffer. We've discussed it and would like to meet with you."
I understood immediately. Li had likely rallied the others to confront me. I couldn't let this become a trend, or everyone would do the same. Besides, the department's average wage was already above industry average. So I said, "I'm busy these two days. How about a meeting the day after tomorrow after work?"
"Great," Li smiled.
The next day, I called Zhang into my office. After some small talk, I praised his work and told him that starting next month, he'd get an additional quarterly bonus, but it was only for him, and I 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. Of course, for long-serving employees, it's a bit low. With the quarterly bonus, I'm satisfied. I'll work hard!"
Late in the afternoon, I called Wang in. After small talk, I said, "This year, the company's profitability is tough, so we may not be able to raise wages. Due to declining business, your department may need to reduce one person. The remaining two will be busier, and we'll consider increasing their year-end bonuses. What do you think?"
Wang thought for a moment and said, "Manager, I understand. I think the current wage 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 took place.
Li spoke first: "Manager, we three discussed and feel the current wages are low. Could the company consider a raise? Otherwise, it might affect morale, which isn't good for the company."
I said, "Your department's wages 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 wages 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 lacks ability. Employee wages 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 another twenty minutes, with me explaining and Li making impassioned speeches. Suddenly, Zhang said, "Manager, I just remembered I have a job that must be finished 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 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 for Management Modern technology advances rapidly and solves many management problems.
When the company was founded, attendance was recorded by a timekeeper, but that had issues: first, the timekeeper might not be punctual; second, when the timekeeper was on leave, 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 popular, so we bought one. Employees punched in and out, and HR could easily tally 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 spent a few hundred yuan on a fingerprint time clock, which completely solved the problem.
So far, no employees have borrowed fingers to clock in.
As sales outlets increased and offices became more dispersed, management became harder. Sometimes, a product would sit in one store for half a year, while another store would reorder it 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, headquarters, and branches. All inventory is visible, every transaction by every salesperson is 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's 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 the quality of after-sales service calls and reduce disputes, we installed a recording card on our phone system. All incoming and outgoing calls are recorded. Customer service staff regularly listen to the recordings, analyze each person's strengths and weaknesses, and discuss improvements. After a while, I noticed not only improved phone skills but also reduced phone bills. Probably because employees are embarrassed to make personal calls when they know they're recorded. Two birds with one stone.
Using technology for management not only improves efficiency but also minimizes human-induced deviations. As labor costs rise, buying advanced equipment to replace people is a cost-saving method.
21 From Result Management to Process Management For a long time, our company used result management. At the beginning of each year, we set annual targets, then allocated them to departments, then to individuals. Each person divided their annual task into monthly targets based on historical data. The company set assessment standards based on monthly tasks. At the start of each month, finance would calculate the previous month's completion, submit reports to department managers and the general manager, who would then adjust policies and coach underperformers. This traditional method is systematic and feasible, but with increasing competition and faster market changes, our management lagged behind competitors. If a problem occurred at the beginning of the month, it wouldn't show up in the report until the next month. After the manager adjusted policies and held meetings, 40 days might pass. 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 the day's sales reports, analyze them, and for those who didn't meet targets, they stay for individual coaching, analyze failures, develop new action plans, and plan 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. Of course, salespeople were nearly driven crazy; it's said few can endure more than three years in Dell's sales department.
"Stones from other hills can polish jade." Although daily assessment is still unrealistic for us, weekly assessment is possible. So we changed the business department's reports to weekly summaries. Every Monday, we summarize and verify the previous week's activities and task completion. We take immediate action on anomalies and talk to 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 better grasp of the actual situation. Problems in the current month no longer wait until the next month to be discovered and solved.
I've been pondering whether non-business departments can also adopt process management. This would greatly improve the company's overall response speed, allowing problems to be identified and solved promptly, and enhancing execution. However, since non-business departments lack hard numerical indicators, achieving process management might be time-consuming and labor-intensive.
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