In an enterprise, when it comes to strategy and any business decision, it is necessary to assume the existence of people and the ability of people. In true management, people are everything. "People-oriented", "people first" and "humanism", we must think about people when we see things, which is actually the basic requirement for management.
Text / Ning Gaoning Former Chairman of Sinochem Group
The relationship between corporate strategy and people
Strategy is not isolated, but a systemic issue. The establishment of strategic goals is the first achievement of an organization's mature development. Take two companies as examples: Alibaba and Tencent . The market value of each of these two companies is almost equal to Sinopec + China Mobile, more than 400 billion US dollars, almost 3 trillion yuan, while both Sinopec and China Mobile have a market value of less than 2 trillion yuan.
The major shareholders of Alibaba and Tencent, the people who actually own both companies, are not Chinese. Naspers, the largest shareholder of Tencent, is from South Africa, accounting for about 40% of the shares, and Ma Huateng accounts for about 10%; 7% to 8% equity. I joked that this is a typical Chinese working to become the richest man. Why is
like this? When they were most difficult and most in need of money, no Chinese investors invested. From a strategic point of view, no one realized the company's growth and future potential. This is not a question of making money, but a question of strategy. In terms of strategic thinking, have you really considered growth, how to cultivate business and development potential, instead of selling it quickly if you don’t make money? This is the driving force for the formation of the strategy.
I went to Jinggangshan to study, and I remember an example: Chairman Mao asked the soldiers in Huangyangjie , "Where is the place to look ahead?" The soldiers said it was Ciping . "Look further?" "It's Ji'an ." "Look further?" We are not surprised by Chairman Mao's words, but at that time Chairman Mao probably had no food at night and only had an army with dozens of guns in his hands, but his strategic and forward-looking nature laid the foundation for the success of the Chinese revolution. This is the driving force behind strategy formation. What exactly is the
strategy? In my opinion, strategy is fundamentally about growth and the way of growth, and the starting point of strategy is the market. Drucker pointed out that strategy is the process of achieving maximum return with minimum resources through the most effective management. The root of strategy is a growth method, what method and path we use to achieve the growth of the enterprise. For a diversified group, the group headquarters guides each business unit, and can use the ten-step method of strategic thinking to form a business unit's competitive strategy. Every year Sinochem Group uses the ten-step method to go through the strategy. Before making the budget every year, it needs to review the strategy to see if the strategy is right, how to do it, and whether it should not be done.
The same strategic choice, industry choice and positioning, resource input, and market environment, but the results are different, because the team members, organizational methods, and system efficiency are different. In other words, the strategy is the same, but the execution is different, and the results are different.
In an enterprise, strategy and execution are the most difficult relationships to deal with. There is often a difference of 60% to 70% between what is based on discussing strategies, macro environment, and industrial policies and what is actually achieved. Because of organizational connections, human connections, and resource connections, there will be deviations in strategy implementation. Conversely, some middle-level people are very capable and grass-roots people are very dynamic, and they may eventually promote, supplement and rescue strategies. It depends entirely on how this matter is managed in an organizational system.
People are the biggest link between strategy and execution. The word "enterprise" of an enterprise means "people first", and people are the core element in an enterprise. The Chinese call it an enterprise, and foreigners call it COMPANY, which also means a partner, from which we can see the relationship between people in an enterprise. In enterprise management, there is a power system and a bearing system. Whether you want to do it depends on whether you have a power system; whether you can do it well depends on whether you have a bearing system.
High-level management has different responsibilities from middle- and lower-level management. The more strategic and macro-level things are, the more high-level things are. This is also a system that is constantly circulating and self-renewing.
from the adjustment of strategic direction, the acquisition of resourcesAnd configuration, to team formation and structure, target budget and assessment, and then to product, technology, cost, marketing channel , customers, consumers and market share, strategy is gradually linked to execution. The logic is very clear. If an enterprise chooses the wrong industry, it will be difficult to solve it through operation. Because there is a problem with the strategic choice, a new strategy must be created. The market determines the strategy, and the strategy determines the marketing. As a strategy execution, this is almost the key point that distinguishes good companies from bad companies.
When I was in Hong Kong, there were two companies in Hong Kong, Hutchison Whampoa and New World. At that time, many businesses of these two companies were the same, such as real estate, telecommunications, ports, and retail. Twenty years later, New World's stock is still 10 yuan, and Li Ka-shing's Hutchison Whampoa has risen a lot. The business is the same, the market environment is the same, and there is no big difference in the system. Why is there such a big difference in the results? The key lies in employing people.
I asked Mr. Li Ka-shing before, why you can do well in oil and telephone, while Henderson and New World can do well in real estate, but not in other businesses? He joked that mostly he speaks English. He works in a factory during the day and studies English at night. Because he can speak English, he is not afraid of foreigners. He hired a lot of foreigners to work for him.
So the most important thing is to employ people. Li Ka-shing has a human eye, a global strategic vision, and a judgment eye for the industry. Looking at other Hong Kong companies, they are basically family-run, friend-run, and old courtier-run companies. The development of these companies has great limitations.
The role of people in an enterprise
In an enterprise, when it comes to strategy or any business decision, it is necessary to assume the existence of people and the ability of people. In true management, people are everything. Why? Because people are the premise of all other management behaviors. You have the best team, the best system, the best management method, the best corporate culture, and let’s talk about other ways of doing things.
But our problem is that often this assumption does not exist. We have already decided what to do, but when we come back, we realize that there is not enough ability, motivation, and professionalism. This is a problem. Therefore, people are the starting point and the end point of management. "People-oriented", "people first" and "humanism", we must think about people when we see things, which is actually the basic requirement for management.
● 6S management system
I am promoting the decomposition of 6S management system in China Resources , COFCO , Sinochem and other enterprises. How to manage the enterprise during the operation of the enterprise can see the relationship between people and things.
First, strategic unit management system (BU, business unit). What is a "strategic unit"? First of all, the strategic nature of its own industry, and secondly, it has the understanding and drive of strategy.
Second, comprehensive budget system (analysis of business and market). In the past, the budget was compiled by the finance department, but not now. Some companies even only make work plans without making budgets. What they will do next year, what products they will sell, and how much market they will occupy will no longer be calculated, because these numbers are basically fabricated. The comprehensive budget system is to really clarify the business.
Third, the management reporting system (current period, main business, authenticity). In the past, there were financial statements, but they could not be managed with financial statements, because financial statements combined historical non-cash and accounting treatment, making it difficult to evaluate. The management reporting system excludes history, accounting principles, , etc., and is exclusively in charge of the current competitive evaluation of the main business. This way the team's responsibilities are clear and easy to evaluate.
Fourth, the audit system (compliance construction of internal operations). The audit system is internal audit, which mainly focuses on compliance audit. For example, if I lend money or loan to others, I sell the goods and don’t get the money back. This cannot be verified by the accountant, but from the perspective of the enterprise, it is necessary to consider how the business should lend money and the debt ratio should not be too high.
Fifth, business evaluation system (benchmarking, market, history). In the past, the evaluation of the business was based on the budget. You say you want to earn 100 million this year, and you will earn 120 million by the end of the year. If you praise you, if you earn 80 million, you will criticize it. In this way, the budget becomes a bargaining system. As for the so-called evaluation based on benchmarks, competitors, market, and history, budget evaluation only accounts for 10% to 15%, and the remaining 85% is evaluated based on market, history, and benchmarks.
Sixth, management team and manager commentsValuation system (team, innovation, potential). Strategic investment needs to go through a long period of cultivation and go through difficult stages. This is the most important thing, and it is also the hardest thing. things to do. Otherwise, the company will make a profit this year, and the people will leave, and nothing will happen; if the company changes its team, the company will fail; Cannot be pulled into a growth trajectory.
So, how would you rate a team manager? Make money must be a good manager? Not necessarily, is it a bad manager who doesn't make money? Not necessarily. This includes the evaluation of the development stage, innovation and potential of the enterprise. When these six points are connected together, the operation begins, and it will be broken down into investment, evaluation, and business operation process for evaluation every year. Now the system of Sinochem is in automatic turnover operation, self-improvement, self-renewal and self-improvement every year.
Types of Managers There are five types of managers in
enterprises.
first, entrepreneurial type. Entrepreneurial managers like to manage large companies, as if he was born to be an official. After coming, it can basically be maintained. He has responsibilities, works from nine to five, treats people well, is not corrupt or corrupt, holds all kinds of meetings, reads speeches according to the script, everything is good, no problem, and the scale is maintained. But to hold on is to fall behind, because others have made progress and the market has made progress.
Second, the efficiency-enhancing type. Internally carry out management reform and improvement, improve efficiency, such as cost reduction, production increase, sales expenses, etc. He takes care of it. This is an efficiency type, and this is not a bad manager.
Third, business expansion. Managers must have the desire to develop, must have market share, and must compete. He will build new factories. He said, "Look at the competitors who have increased production, invested, and built new factories. We have to build them. If we don't build them, we will fall behind." Is that right? That's right. This is the extended manager. While not really revolutionizing the industry, it is evolving. If he is lucky, the industry he is in is a very fast-growing industry, and he can achieve some success, but this is not always the case, and he does not know when the industry will change.
Fourth, strategic transformation and development. This kind of manager will study strategic transformation, especially innovative technology and industry transformation, and constantly come up with new ideas. This kind of manager will not do repetitive construction, will not fight price wars, and will definitely come out with new and innovative things. This is a very rare manager and rare.
Fifth, sustainable developmentorganization remodeling. This kind of manager will turn the organization into a learning, innovative and sustainable organization, whether he is present or not. The development of the organization itself from the development of spiritual concepts to business expertise is very complete, which is even rarer for managers. These are the five levels of managers. The higher the level of managers, the more they will bring great impetus to the progress of the enterprise.
five-step combination theory
five-step combination theory I have used for many years, it is the path and logic of company management. The enterprise is integrated, but in the MBA course, it becomes different courses such as strategy, finance, human resources, marketing, cost accounting, etc. It does not clearly explain the logical relationship in enterprise management. That is: what is the relationship between cost and strategy? What is the relationship between people and strategy? What is the relationship between the team and the cost? What is the relationship between technology and team? Through the five-step combination theory, you will find that the original enterprise is such a cycle, with logical relationships and forward and backward paths. Of course, this kind of cycle is dynamic, and there are many small cycles in the big cycle.
The first step is to choose a manager. The ultimate decision-maker for all activities in an enterprise is the person in charge of the enterprise. The biggest decision of the person in charge of the company is to select managers through the board of directors based on the value orientation and preferences of shareholders. The selection of managers basically determines 80% of the fate of the company, and all subsequent things start from here.
The second step is to form a team. The selected manager must have a relatively strong ability to form a team, and he must also be given certain rights, otherwise there will be no room for development, there will be excuses for doing things, and the motivation will be weakened. The third step of
is to develop strategies. Why is the strategy not there from the beginning? Because the team is the beginning, only a good team can have a good strategy. The strategy does not fall from the sky or be determined by someone. It must be developed by an organic, coordinated and dynamic team.
The fourth step is market competitiveness. MBA class90% of the process is about this, including product, technology, cost, price, market, brand, talent, capital, operation, risk and so on. The fifth step of
is value creation. Enterprises are multi-objective, including the goals brought about by the enterprise itself, the society and the attributes of state-owned enterprises. In addition, shareholders, employees, customers, partners, the public, capital market ... these goals must be balanced. The evaluation of an enterprise is not a single one, but must be evaluated from various aspects such as politics, economy, society, customers, humanities, etc., from which we can see whether the enterprise is a good enterprise or a bad enterprise as a whole. So it goes back to the first step, the evaluation of the manager or the team-is it doing a good job? Should we continue to do so? Once a substitution is made, the cycle begins again. Every step in the
cycle must be done well, because it is the multiplier effect . The manager gets 1 point if he does it right, and 0.5 points if he doesn't do it right, and everything behind is half wrong. If you make a mistake of 0.5 points when it comes to the team, it will become a few tenths of a point when it comes to the development strategy. Therefore, in the process of enterprise cycle, only by achieving good balance can the strategy and organization be coordinated.
Note: The author resigned on August 26, 2022. He has been at the helm of four Fortune Global 500 companies, China Resources, COFCO, Sinochem, ChemChina, and realized the merger of ChemChina and Sinochem. (Sinochem Group)
