Author: Xu Wei, Chairman of Heige Consulting Group and Heige Consulting (Beijing) Co., Ltd. Due to the nature of my work, I am often asked by distributor friends about how to develop markets, manage sales teams, and boost employee motivation. Such questions have led me to deeply reflect on the corporate operation of distributor enterprises. For baijiu companies, the quality of distributor resources often determines the success or failure of market operations. For distributor business owners themselves, in addition to partnering with manufacturers that have excellent brand assets and outstanding marketing management capabilities, the distributor's own efficient operational management capability is also a core condition for success. As China's marketing management continues to evolve, the baijiu industry must also undergo transformation. Distributor enterprises experience both pain and joy in the process of corporate operation and management upgrades. Case Study: The Pain of Management Upgrades for Distributor Enterprises Mr. Liu, a distributor for the BYB brand, is a veteran in the local sugar and wine trade. He started from a wholesale department and successfully operated the D brand through a strong distribution network and honest dealings. Now he is a well-known distributor in the local baijiu industry. His company has been operating corporately for two years, and despite significant resource investment, the BYB brand's performance has not improved. Upon investigation, it was learned that when Mr. Liu personally led his team of loyal followers in the traditional wholesale department, he managed to grow the obscure D brand to 50 million in the local market. Now, after two years of corporate operation and several changes of professional managers, the BYB brand's performance remains stagnant. What problems did Mr. Liu's company encounter when upgrading from a traditional wholesale model to corporate operation, and how should they be solved? With this common issue in mind, we conducted research and reflection! Where Do the Problems in Enterprise Management Upgrades Lie? The Boss's Mindset Issues Mr. Liu has always grown his business through keen business judgment and diligent work ethic. Although the business has upgraded from small-scale operations to corporate operation, only the hardware has been upgraded; his software (mindset) has not kept pace. Mr. Liu still handles everything personally and does not delegate authority. The reason is that his micromanagement leaves no room for the newly hired professional managers to exercise their skills, leading them to resign. Corporate operation is more about collective wisdom under the boss's correct strategic judgment, not individual heroism. Strategic Misjudgment Due to an Autocratic Personality In the rapidly evolving wine industry, where marketing and brand promotion models change quickly, business owners are required to have strong strategic judgment. When a business owner misjudges the future strategy of the company or industry, business tragedy follows. After years of success, Mr. Liu still uses the same large-distribution (circulation) model that worked for the D brand to operate the BYB brand. For the ever-changing market and consumers, this approach has minimal impact, so it's no surprise that market and brand promotion results are lackluster. Even after bringing in professional managers, he remains autocratic in major decisions and does not adopt their suggestions. For example, from a company development perspective, professional managers suggested adding agency brands, expanding business scope horizontally, and enlarging the company's operating platform, but Mr. Liu rejected all these ideas. He still insists on the concept of "if you do it, do it best," hoping to make his brand big overnight. While this idea is not necessarily wrong, given constraints on promotion resources, channel resources, human resources, and manufacturer-distributor cooperation models, it's no wonder the BYB brand's promotion is not improving. Confusion from the Manufacturer-Distributor Cooperation Model The cooperation model between Mr. Liu and the manufacturer for the BYB brand is a merchant-led product buyout model. The biggest advantage of this model is strong market operation autonomy, as the distributor is not overly controlled by the manufacturer; the disadvantage is that the distributor receives no support from the manufacturer in terms of market and brand. This cooperation model is also the core issue restricting Mr. Liu's investment in market resources. Aging Workforce and Difficulty Integrating New Talent Seventy percent of the sales team are former delivery workers from the wholesale department days. Their loyalty and work attitude are unquestionable, but as sales backbone, their sales skills and personal qualities are generally low. Sales personnel recruited through other channels often resign after a short period because they cannot integrate into Mr. Liu's loyal team. The reason is that the loyal team has formed a closed culture over years of working together, making it difficult for outsiders to fit in. Unreasonable Operational Control Systems While the hardware has achieved corporate operation, the software systems have not been upgraded. Employees still operate under the old fixed-wage system for delivery workers, with no rewards, no performance evaluation, and no goals. In daily operations, sales personnel have no commission incentives and no process management systems. In this era where terminals are king, sales personnel still rely on a few secondary wholesalers to make a living, making it impossible to implement terminal network construction and channel deepening as required by channel development. Distorted Corporate Culture and Misaligned Values Between Boss and Employees Through long-term research on wine distributors, it has been found that most distributor enterprises that developed in the early years have no corporate culture. If they do, it is a kinship culture that is very exclusive. Mr. Liu's company is no exception. Mr. Liu's values tend to favor those who work hard without complaint (mainly those who are active in loading and unloading goods but contribute nothing to the company's operation and development), while he does not highly recognize those who are active in offering suggestions for company development. Due to this value difference, people with strategic thinking find it hard to survive in the company because under the boss's values, they are often seen as talkers who do nothing, i.e., impractical talents. Several Ways for Distributors to Upgrade Management Systems Enterprise management upgrades are mainly achieved through core management tools. Summarizing the practical and effective management systems for distributor enterprises, they include talent development systems, compensation management systems, performance appraisal systems, reward mechanisms, and corporate culture (values) shaping systems. Through the effective implementation of these systems, the operational management capability of distributor companies can be improved. Promoting Management Upgrades by Establishing a Talent Development System First, clarify a viewpoint: there is no truly perfect person in this world; on the basis that no one is perfect, business owners must have a broad mind that embraces all. Often, people with obvious strengths also have obvious weaknesses. On one hand, allow subordinates to make mistakes; on the other hand, protect subordinates from malicious attacks by those with ulterior motives. The most terrible thing is when a business owner would rather believe a lie from others than trust a heartfelt word from a subordinate who has fought alongside him to expand the territory. The construction of a talent development system is still a new proposition for distributor enterprises. On one hand, due to company size, many distributors cannot establish such a system. On the other hand, because the operating platform of distributor enterprises is relatively small, it is difficult to attract high-quality talent. However, for distributor bosses who have developed or are about to rise, the construction of a talent development system must be elevated to a strategic height. For Mr. Liu's company, frequent turnover of sales personnel has directly led to customer dissatisfaction in the channel; many old customers have refused to cooperate due to unresolved issues caused by frequent personnel changes. From this perspective, the construction of a talent development system is imperative. The two pillars of a talent development system: 1. Internal Development Internal development is the fundamental human resource solution. Looking at large domestic and international companies, they all treat talent development as a strategic priority. Among the large wine companies I have contacted, the vast majority of senior managers come from the middle and lower levels, having served for over 10 years. For distributor companies, only by establishing an effective internal human resource development mechanism can they achieve fundamental management upgrades. The improvement of overall personnel quality will drive effective management upgrades. In the process of establishing an internal development mechanism, it is essential to design career advancement channels for employees. If career advancement channels are ignored, trained employees, due to increased capability and ambition, will seek other companies to satisfy their ambitions. This will result in training employees who end up working for competitors, which is not worth the loss. 2. External Recruitment External recruitment is generally used to address huge talent gaps caused by rapid development or to bring in high-end strategic talent. Because the cost is relatively high, it is not the first choice. 3. Establishment of Training Systems The establishment of a training system is a long-term development direction and an effective way to improve the combat effectiveness of existing personnel. However, it must be clearly recognized that training and development must be long-term behaviors, not actions that can quickly boost sales or management upgrades. Personnel development and training are behaviors that, through long-term cultivation and education, enhance employees' professional skills, thereby indirectly improving work efficiency and management upgrades. Promoting Management Upgrades Through Compensation System Construction In research on many distributor enterprises, an interesting phenomenon was found: when it comes to compensation system construction, bosses are very sensitive. What's more interesting is that many distributor companies change their compensation structures frequently—some change once a year or so, while others adjust every three months, leading to periodic fluctuations in the employee team. From my analysis of compensation systems in many distributor companies: large distributor companies have basically introduced compensation systems with performance appraisal; small and medium-sized distributor companies still follow the base salary plus commission system; and some distributor companies still use fixed salary systems. In fact, employees change jobs for two fundamental reasons: either their career advancement channels are blocked, and they feel they can take on more responsibility but don't get the opportunity; or in horizontal comparison, they feel their pay does not match their effort. For sales-oriented companies, only by giving employees absolute challenges can their work passion be aroused. Here is a recommended principle: as business operators, adjusting compensation once or twice a year based on actual business conditions is essentially correct. But adjusting every three months is too frequent and hasty. The Four Management Rules for Compensation System Design (common reference for salary system design): 1. Ensure Basic Needs—Position Salary

  • This is purely basic living security. As long as employees show up on time, do not touch this part of the salary.
  • In other words, basic salary is a basic recognition of the employee's value. If the company cannot even guarantee this, the boss cannot expect any loyalty or dedication from employees; they will leave at any time to have food on the table tomorrow. 2. Ensure Performance—Performance Appraisal Salary
  • Performance appraisal salary is a way to balance income among employees with different work inputs and performance contributions. It is an evaluation and supervision system for daily work completion, giving different value recognition to employees based on appraisal results from the same starting point (i.e., same position and same appraisal salary base).
  • Those who work hard and achieve good results get more; those who are less diligent and achieve poor results get less. 3. Ensure Better Life—Performance Commission
  • Every employee has a need to improve their quality of life. If position salary ensures basic living and performance salary ensures work enthusiasm, then commission ensures employee initiative.
  • Because to improve one's quality of life, one must increase income through work; performance commission precisely reflects the return from employees' initiative and more work for more reward.
  • Every employee has a positive gene deep inside. When the rewards for being proactive and not, positive and not, and good and bad performance are the same, the negative impact outweighs the positive, and everyone gives up proactive work. 4. Ensure Retention—Year-End Bonus
  • From analysis of actual operations of distributor companies, not many companies provide social insurance to employees. By conservative estimate, no more than 40% of companies provide social insurance to all employees. Even fewer companies give year-end bonuses to all employees as incentives; by conservative estimate, no more than 40% (excluding companies with poor performance).
  • Here is a suggestion for distributor bosses: don't think providing insurance to employees is a favor; it is merely fulfilling legal obligations. If for some operational reasons you do not provide insurance, you can instead give a year-end bonus to affirm and motivate employees who have worked hard all year. Although it is money you should spend anyway, when it appears in a different form, employees will still feel it as a blessing and remember it.
  • Routine is a culture: some distributor bosses have already started this practice, and each year's blessings are repaid with doubled employee loyalty, with excellent results.
  • Surprise is also a culture: if you haven't done this before, you can start now. For companies with unstable employees, unexpected generosity from the boss will enhance cohesion. As Niu Gensheng, former head of Mengniu Group, said: "When wealth is concentrated, people disperse; when wealth is dispersed, people gather." Promoting Management Upgrades by Recognizing and Building Shared Values: It is necessary to recognize both strategic talents who offer suggestions for the company and tactical talents who work hard for the company's construction. Because for a company to grow and develop, both types are indispensable. Strategic talents can assist the boss in strategic decisions; tactical talents are the actual executors of the boss's strategic decisions. In other words, a company needs both talkers and doers. It needs those responsible for results and those responsible for processes. Bosses must avoid only employing people with similar personalities and orientations, as this easily creates a corporate culture shaped by the boss's personality, blocking out truly suitable talents (detailed in "The Password for Longevity of Distributor Enterprises—Corporate Culture Chapter"). Use the perfect combination of "Liu, Guan, Zhang" from the Three Kingdoms to illustrate this point. Liu Bei, the boss of Liu's company, was not as wise as Zhuge Liang in strategy, nor as skilled in martial arts as Zhang Fei and Guan Yu. But he could recognize the value of both types. He recognized Zhuge Liang's strategic value and also Zhang Fei and Guan Yu's tactical and combat value. Liu Bei also had an extraordinary ability: he would go to any lengths to win over anyone he believed could help him build his empire. First, he valued the tactical and combat abilities of Guan Yu and Zhang Fei, and formed a brotherhood with them, creating a brotherhood culture that made them fight tirelessly for his empire. Then, in the operation of Liu's company, Liu Bei realized his own wisdom was limited and insufficient to carry the empire to the end. Later, through the recommendation of Mr. Shui Jing (Sima Hui), he learned that Zhuge Liang could help him achieve his cause, and he did not hesitate to visit the thatched cottage three times to bring Zhuge Liang under his command. Finally, with the joint assistance of Zhuge Liang, Zhang Fei, and Guan Yu, Liu's company began its management upgrade and achieved the tripartite division of the country. Promoting Management Upgrades by Finding a Suitable Manufacturer-Distributor Cooperation Model For distributor business owners, finding a suitable cooperation model with manufacturers is the fundamental solution to enterprise development. Different cooperation models determine the size of resources the company needs to invest. Choosing based on one's own enterprise resources and operational strengths and weaknesses can effectively avoid the pain of enterprise management upgrades caused by mismatched cooperation models. Promoting Management Upgrades by Establishing an Effective Organizational Structure In the past 30 years of reform and opening up, the management of wine distributors has evolved from small workshop-style rough management to today's corporate operation. After research and analysis of distributor enterprise management, we found a phenomenon: most distributor companies have incomplete organizational structures. In view of this, many manufacturers have taken the opportunity to cultivate distributors as professional companies for a specific channel. For example, some distributors are known for hotel channel operations, some for supermarket channel operations, and some for circulation distribution operations. But reviewing the 30-year development history of distributors, it is not difficult to find that every distributor company (or group) that excels in a single channel represents an era and cannot maintain longevity. For example: distributors known for circulation distribution channels rose rapidly in the era of deep distribution; those known for hotel channel operations dominated in the era of hotel plate-spinning; those known for supermarket channels, in the era of international retail chains surging, "held the emperor to command the princes." But these development models are not the king's way. In this era of rising major merchants, comprehensive capability and comprehensive strength are the king's way for distributor company development. In this context, adjusting and setting up the company's organizational structure reasonably is particularly important. Because for business owners, what you want to achieve determines your thinking pattern. The company's organizational pattern determines its future development. Below are two reference suggestions for organizational structure design: 1. Channel-Segmentation-Oriented Organizational Structure (Figure) 2. Brand-Segmentation-Oriented Organizational Structure (Figure)