Click the image for details. In the past two years, the difficult situation for distributors has become a common consensus in the industry. Last year, New Distribution conducted a survey on the survival status of distributors, finding that over 90% of distributors have net profits below 3% and ROI (Return on Investment) below 20%, meaning that distributors are generally in a state of not making money or making slight losses. Against this backdrop, there is a distributor who achieved a transaction scale of over 300 million yuan in 2018, with a compound annual growth rate exceeding 40%. The boss is a hands-off manager, employees work hard on their own, and the company's major and minor matters are not a concern. How did he do it? Last week, at the "2019 New Year Marketing Course" jointly organized by New Distribution and Teacher Liu's Forum, Mr. Nie Biquan, General Manager of Shaanxi Baihui Trading, shared how he used the "big platform + small organization" model to activate employees and achieve growth against the extremely unfavorable external environment. 01 The Organizational Transformation of Baihui Trading Shaanxi Baihui Trading is a comprehensive trading enterprise, with core business categories including paper and hygiene products, oral care, and daily necessities, with nearly 3,000 SKUs. Currently, it has 6 branch companies, located in Ankang and Xi'an. Before elaborating on the "platform + small organization" model, let's review the organizational management reform process of Baihui Trading.
2008: To motivate core backbone personnel, Baihui Trading launched a "partnership plan": invest 20,000 yuan and enjoy a corresponding proportion of company dividends. This was the prototype of the "platform + small organization."
2010: Comprehensively sorted out the expense usage of various departments, sectors, and organizations within the company, achieving transparent and clear financial data management.
2012: Based on clear operational data, implemented independent accounting by brand, department, and channel for the business side.
2015: Piloted the establishment of small business organizations in the form of branch companies, first spinning off the non-core food department as an independent pilot. Baihui Trading, as the investor and platform supporter, provided partial start-up funds and basic services to the food company.
2016: In the first year of organizational reform implementation, the food company's revenue did not grow, but it cleared up past accumulated damaged goods, near-expiry items, etc., and the efficiency of capital use doubled.
2017: The organizational reform "bore fruit," with the food company's revenue growing by 30-40%. Baihui began promoting organizational reform in the oral care business.
2018: Established the "platform + small organization" empowerment system, clarified the division of labor between the platform and small organizations, and set up an institutionalized, standardized, and normalized new partnership organization system. Survival depends on the boss, but long-term existence depends on the team. However, the key is how to ensure that team employees continuously focus on business development. Nie Biquan told New Distribution that the only person who doesn't need management is the boss. Based on this consideration, Nie Biquan firmly promoted the company's partnership system to ensure that both the enterprise owner and employees focus wholeheartedly on business growth. Nie Biquan emphasized that the biggest challenge for distributors in 2019 is uncertainty. Advanced productive forces represented by the internet are accelerating their entry into offline channels, driving the upgrade and reconstruction of traditional industries. At the same time, against the backdrop of consumption upgrading, the diversification and personalization of consumption will further affect traditional distribution businesses. The strong getting stronger has become the current main theme. When facing complex and changing environmental tests, distributors need new organizations to maintain professionalism and focus. Only in this way can they cross the finish line in a sprint-style marathon. Traditional organizations, compared to new ones, cannot efficiently respond to external changes. Distributors must fully unleash employee creativity and shift from command-control management to authorization-empowerment management. 02 Baihui's Platform + Small Organization Empowerment System Characteristics of the Platform + Small Organization Model: Platform: The trading company, as a platform-based organization, undertakes functions such as capital, finance, logistics, warehousing, and internal affairs, providing resources, processes, information, and management support to "small organizations," fully delegating authority and empowering them. The platform only controls the flow of funds. Nie Biquan told New Distribution that when the organization changes, the company's revenue also changes. The platform's main revenue sources include: first, income from renting out infrastructure (warehouses and offices); second, logistics income, delivery commissions; third, as the output side of capital flow, earning interest income; fourth, dividend income from shareholding in branch companies; fifth, related platform service fees (system, finance, internal affairs support, etc.); sixth, other income from distribution of own brands. Small Organization: Business departments set up multiple entrepreneurial groups or independent branch companies based on different distribution categories or brands, with independent accounting, independent operation, and assuming sole responsibility for profits and losses. The basis of "assuming sole responsibility for profits and losses" is not starting from zero with new business, but rather, after the platform company has incubated and operated maturely and profitably, it is allocated to the small organization for operation, ensuring that the business is "brought to adulthood." Institutional Aspects of the Platform + Small Organization Model: First, Model: 1+N (N cannot be less than 3 people), where "1" refers to the core backbone and leader within the past trading platform, who becomes the boss of the small organization. "N" refers to the frontline business personnel, who are also the founding team. Second, Values: "Small organizations" must consist of members who identify with the values; if values differ, opportunities are resolutely not given. To cultivate and find members of the new era, Nie Biquan told New Distribution that Baihui has set standards: people born before 1985 cannot be introduced into new management positions. He emphasized, "Old people can do work, but young people have veto power." In Nie Biquan's view, the post-90s and post-00s are the future; only by using people of the new era can new problems be solved. Third, Capital: Suppose the start-up capital for distributing a certain category is 10 million yuan. Two-thirds of the funds are provided by the company as loan capital. At year-end settlement, regardless of profit or loss, loan interest is repaid first. The remaining one-third is jointly funded by the platform and the small organization's boss in proportion. Fourth, Risk: The "boss" of the small organization shares risks with the company. In addition, fully considering that "N" as founding employees face the operational risks of the new company, they are promised guaranteed minimum returns for 2 years, fully unleashing the combat effectiveness and creativity of frontline employees. Nie Biquan once told New Distribution, "The most intense competition is war, and the key to victory is speed. From the earliest wooden sticks, swords, and bows and arrows, to modern guns and missiles, speed is reflected everywhere. The purpose of organizational restructuring is to improve flexibility and enhance rapid response capability to the frontline market." In the past, traditional organizational structures were mainly based on "bureaucracy." However, New Distribution believes that to cope with the uncertainty of future distribution, the future organizational model for distributors must be small organizations. Frankly speaking, in the traditional pyramid-shaped functional management, only the person at the top of the pyramid is happiest, with everyone revolving around the boss, but its efficiency is low. When transformed into small organizations, frontline employees revolve around customers. Only when employees are fully authorized and trusted can business efficiency truly improve and self-driving be achieved. 03 Bosses Change Circles, Enterprises Change Organizations, Heavily Invest in Young People At the scene, Nie Biquan said, "Look at ten years, where is the trend? Do one year, where is the point?" Whether distributors or practitioners, they must see trend changes in real time and continuously break through and reform themselves. As the saying goes, heroes are made by the times. No matter how capable an individual hero is, they must respect business laws and grasp the general trend. Three to five years determine the fate of an enterprise. How to seize the trend? The boss is key. Whether it's distributor transformation or enterprise transformation, the "top leader's" judgment of the trend determines how far the enterprise can go, and the circle the boss is in determines the boss's ability to judge the trend. Nie Biquan said that backwardness is often not the backwardness of one person, but the backwardness of a group, the backwardness of a circle. If the boss does not change circles or change thinking, then all transformation is meaningless. Because the boss cannot accurately judge where the "trend" is, failure in transformation is ultimately a high-probability event. Regarding enterprises changing organizations, in the face of a changing environment, distributors should not pin hopes on an old organization and let a bunch of "old people" transform. Breaking off a branch to "plant a new willow" is more reliable than "an old tree sprouting new branches." Nie Biquan suggests first dismantling the organization, cutting traditional processes, then cultivating small organizations with full authorization. "People born before 1985 cannot enter new management positions" is the organizational system Nie Biquan established for Baihui Trading. In his view, heavily investing in young people is far more promising than "old people" who have accumulated experience but are unwilling to change. Problems of the new era must be solved by "new people." Young people have no baggage of the past and have their own understanding and ideas about new things. Only they can become "incremental organizations," opening up new battlefields for the enterprise and achieving incremental growth!