AsianFin--Should a company give its employees the feeling of being like a "family"? That type of corporate culture is also known as a “clan culture.” Different generations of managers have different views on this issue. However, for a long time, with a high salary as the temptation, the corporate culture in leading Chinese internet companies has become increasingly harsh. That market culture, which emphasizes constant competition and results, is also known as the “wolf culture” in China.The wolf culture is evident from the recent controversy surrounding a former vice president of Baidu.

In a short video, Qu Jing, former Baidu Vice President of Public Relations, emphasized that if an employee resigns after arguing with her boyfriend, she would not bother to comfort her but approve it immediately because she is neither a "mother" nor a "mother-in-law." Many people working in large internet companies in China admitted that this is quite true, and most internet companies are even more stringent in practice. Her comments quickly backfired amid a public outcry against the apathetic corporate culture. She was virtually fired as the company moved to avoid further damage to its image.

Behind the controversy is the fact that major companies are hearing the voice of general public and are starting to abandon the attitude of "if you don't do the job, there are plenty of others who will."

In 2024, Fat Donglai, a Henan province-based company mainly engaged in the sales of pre-packaged food and bulk food, as well as special food products, is the talk of the nation. The company always emphasizes making frontline employees happy, even at the cost of shortening business hours and giving employees time off during the Chinese New Year.

Meanwhile, more cases emerged to indicate the shift. JD.com founder Richard Liu recently argued publicly, due to concerns about the company's performance, that "anyone who has long-term poor performance and does not strive is not my brother." This led to a series of half-serious, half-joking media interpretations about what "brother" means. The recently deceased founder of Wahaha, Zong Qinghou, received unprecedented posthumous praises on the internet for his parental-like care, such as refusing to lay off employees over 45 years old.

Objectively speaking, the management style or corporate culture of a company indeed varies by industry and company, but the trend is changing. The "clan culture," once thought to be somewhat in conflict with modern corporate management systems, is making a strong comeback.

Trusting People or Restricting People

The stringent requirements of major internet companies on employees are inseparable from the key performance indicators (KPIs), an imported management tool. The KPI constitutes a clear granular assessment scale for employees' behavior and performance.

But by 2016, the think-twice attitude towards KPIs appeared in China.  

In 2016, Xiaomi’s founder and CEO Lei Jun proposed the slogan "No KPIs, just be happy" at the company annual meeting. Since then, a trend of "de-KPIs" has swept through major internet companies.

The removing of KPIs gave OKRs a chance. Many companies later began to adopt the OKR (Objectives and Key Results) management model, which originated in Silicon Valley and was once highly praised by major internet companies like Tencent, Alibaba, Xiaomi, and Baidu.

However, OKRs also eventually faced resistance. Starting in 2021, ByteDance's internal research institute, the "OKR Improvement Department," which specialized in studying the company's use of OKRs, changed the relevant policies and no longer required employees to set OKRs. In February 2023, ByteDance issued a company-wide letter, changing the bi-monthly OKR to a quarterly OKR.

According to a report by U.S. tech media The Information, before Google's performance reform in 2022, nearly half (47%) of Google employees believed that the performance evaluation system was a waste of time. As a result, Google, which initially promoted OKRs, abandoned them and introduced the GRAD system (Google Reviews and Development), which focuses on employee impact assessments.

Apart from KPIs and OKRs, many other management tools used by major internet companies, including value assessments, nicknames in Alibaba, flexible working systems, and talent reviews, have lost their luster and have been widely criticized and ridiculed.

In retrospect, the complex management tools relied upon by internet companies can be said to be based on a psychological or sociological assumption, which is "human nature is inherently lazy." While it cannot be said that human nature is inherently evil, there is at least a skeptical attitude towards human self-discipline.

From a management perspective, there is actually an opposite approach, which is to believe in people's self-motivation and creativity. The role of corporate managers is more about providing support and space. This can be considered a broad "family culture."

At least from the feedback of netizens, ordinary workers seem to want the clan culture.

For example, netizens collectively remember Wahaha’s founder, who spared no effort to offer affordable homes to his employees by building dormitories in the central part of Hangzhou city. He never dismissed employees over 45 years old and welcomed former Wahaha employees to return to the company. Zong's passing has led to a nostalgic reflection on him and his era.

Boosted trending topics like "Employees’ leave requests are never denied," Fat Donglai has become a utopia in the minds of Chinese workers. During the four days of the Chinese New Year national holidays, the three malls under Fat Donglai received a total of over 1.4 million visitors, surpassing the top tourist destination in Henan province in terms of visitor numbers, and earning the nickname of a "6A-level scenic spot" with no off-season from netizens. The most popular tourist destinations are officially marked as “5A-level.”

There has always been discussion online that "the generation born after 2000 is starting to reform the workplace," and this is not just a joke. For these young people who grew up in an era of abundance, material things are no longer scarce, and they won't easily be "bought by money," let alone "work themselves to death for money." Instead, they have a great desire for autonomy and a sense of meaning, which are non-material benefits. For some post-2000s, working is like playing a game; they play a few rounds to earn some coins when they're happy, and they shut down and leave when they're not.

Secondly, in today's highly transparent internet era, the rise of consumer rights also greatly influences market trends. If a company or brand cannot build good values, it will be abandoned by consumers. This external pressure forces some companies to start adjusting their stance.

But is it just a change in ideas?

Commercial observer and business consultant Li Yanglin doesn't think so. In her view, under the past KPI model, the boss's authority came from their strong combat ability, where the first generation of entrepreneurs were impressive.

But now, as the market matures and people become more discerning, such myths have been shattered. Relying solely on individual strengths can no longer cope with the new challenges brought by the market.

The more a company tortures its employees with KPIs and OKRs, the more it indicates that the company's business has significant problems. People are not simply against KPIs and OKRs; they are against the wolf culture that fails to grasp the essence of "people and things," which not only fails to achieve personal ideals but also fails to meet the bosses' performance goals.

In Li's mind, well-run companies are essentially the same; they first find the core of their business and the key to winning. Based on business logic, they establish a set of corporate culture and then use KPI or OKR tools to drive business forward. This requires a lot of meticulous effort, not a simple and crude approach. It truly requires seeing, feeling, acting, and being spiritually present, and it must be sustained over time.

The Iteration of Organizational Forms: Which is the Optimal Solution?

In the book Reinventing Organizations by Frederic Laloux, there is a deep reflection on the way enterprises operate and a retrospective summary of the development process of organizational management models：

First, there is the Red Organization - the Impulsive Worldview. In this organizational worldview, "power" is the only perspective to examine everything. Either you strive to become stronger, making others submit to your strength and authority, or you accept your weakness and show submission and loyalty to your leader in exchange for protection.

Then, it evolved into the Amber Organization - the Conformist Worldview. In this worldview, as long people you follow the rules, they can "survive" and become a part of the organization; if people disdain the rules, they will be forever abandoned and expelled.

With the progress of time and technology, the third stage of organizational form was born, the Orange Organization - the Achievement Worldview.

This brings us to the era of the scientific and industrial revolution worldview. At this level, people began to explore and understand the internal workings of the world and natural laws. If a person is faster, smarter, and more innovative in understanding and manipulating the world than others, they will achieve more success, wealth, profit, market share, or anything they desire.

This worldview has profoundly changed human society over the past two centuries and dominates the thinking of today's business management community. It is the mainstream view that permeates business school curricula worldwide and deeply influences contemporary management practices.

The "Achievement-Orange" mindset views organizations as machines—"units and hierarchies, inputs and outputs, efficiency and effectiveness, pulling levers and moving needles, information flows and bottlenecks, restructuring and downsizing." Under this thinking, the advantages of the "mechanized" Orange Organization are extremely significant, filled with organizational innovation capabilities, clear goal management abilities, a reward and punishment management system, and a fair competition mechanism of survival of the fittest.

But with the development and changes in the market economy, the dark side of orange organizations has gradually begun to emerge.

The first negative impact is "obsessive innovation," where companies fall into a vicious cycle of pursuing growth for the sake of growth, unable to extricate themselves; The second negative impact is emptiness. In a system where success is measured solely by money and a sense of honor, all values are reduced to goals, numbers, and milestones. Only those who reach the peak are considered successful, leaving most people feeling empty. The desire for meaning and the pursuit of higher life aspirations become increasingly out of reach.

According to Zhu Xiaobin, Dean of the Xiangguang Sustainable Development Academy and co-founder of Lingjiao Workshop, orange organizations have been the mainstream form of most enterprises worldwide for nearly 100 years. Especially multinational companies, which place great emphasis on strategy, mechanisms, and performance, focusing on detailed goal management systems and matching this development strategy with various functional structures of business units.

In this process, Chinese internet companies, through learning and imitating world-class multinational companies, have formed their own unique management models, but most still fall within the category of orange organizations.

In contrast, in Zhu's view, the popularity of the Fat Donglai model fundamentally lies in its difference from the common orange or red organizations. It is a Teal organization with a well-established institutional management capability and vitality. As the highest stage of organizational evolution, a teal organization is an organic living entity that advocates self-management, flexible evolution, and drives the continuous growth of each person's true self. Every member of the organization is a complete organism in their respective roles. Compared to other types of organizations, teal organizations have three major advantages: wholeness, evolutionary purpose, and self-management.

From publicly available information, Fat Donglai already has some embryonic forms of a teal organization.

On one hand, Fat Donglai has a sound salary incentive system. In the book "The Road to Happiness" written by Yu Donglai, he reveals that the salary system for Fat Donglai employees is roughly as follows: store managers earn 50,000 yuan per month, assistant managers 40,000 yuan, department heads 25,000 yuan, assistant department heads 18,000 yuan, section chiefs 12,000-13,000 yuan, and frontline employees (cleaners, cashiers, etc.) have an average monthly salary of 5,500 yuan. Each employee works 40-42 hours per week and has one month of paid annual leave each year.

Additionally, according to a salary structure chart of Fat Donglai circulating online, besides basic salary and performance-based income, Fat Donglai also offers more than a dozen types of benefits, such as 40 days of paid leave annually, paid leave for marriage, paternity, and bereavement, and bonuses for long-term employees in the form of cash or cars.

Interestingly, in contrast, the internal management and punishment system of Pang Donglai is extremely detailed and strict. According to media reports, Pang Donglai adopts a militarized scoring system in management, with employees having a full score of 100 points. Every aspect of their work and service is standardized into forms, and points are deducted for any issues.

Yu Donglai once said that in his mind, Pang Donglai is not just a company but a platform for establishing a systematic, high-standard social spiritual culture. In other words, Pang Donglai has both the warmth of family culture and the meticulous management shadow of past KPIs.

"He has actually perfectly combined culture and system into the daily management of the company. This method has both emotion and system." In Zhu's view, the public's aversion to the KPI model now stems partly from a lack of emotional connection; on the other hand, it comes from the low quality of KPIs in many companies, or even a misunderstanding of the essence of KPIs, making people think it is not a truly healthy organization. Orange organizations, while improving efficiency, lose emotional warmth. Many corporate cultures often remain superficial, and in actual execution, they still give way to commercial purposes.

This is also the difficulty of why teal organizations are highly praised but hard to practice on a large scale. In Zhu's view, many public welfare organizations with flat and self-management characteristics can easily achieve the management form of teal organizations; however, while commercial organizations want to emulate this, the practice process is full of obstacles.

The Core and Opportunities of Paternalistic Management

So, compared to the difficult-to-implement teal organizations, will the traditional paternalistic management model, which focuses on emotion and authority, provide more solutions for modern enterprises?

"In the past, internet companies were thriving too well, with too many opportunities, so no one had time to think about these things. But now, the era where growth could be achieved simply by working harder and putting in more overtime is over." Wang Anzhi, Associate Professor of Management at China Europe International Business School, has observed that both internet companies and traditional enterprises that have been around for decades are facing significant anxiety. Among them, the companies that were constantly chasing trends are the most anxious. This is because, in today's market, it is very difficult to achieve growth simply by chasing external opportunities.

Why do companies need a horse race mechanism internally? Why must there be last-place elimination? Can internal competition alone maximize everyone's value? Can eliminating the bottom performers lead to sustained growth? Can hiring a consulting firm and spending a few months really come up with a better system? Can this system last for 10 years, or even 50 years?

When the market and environment are facing significant shocks and changes, when companies can no longer grow rapidly, and when survival becomes more important than becoming bigger and stronger, people start to turn inward and seek traditional approaches.

Behind the debate over management models is actually the manifestation and exploration of cultural genes.

In Wang Anzhi's view, extending care from the work aspect of employees to their life aspect has become the fundamental reason why Fat Donglai has continued to attract market attention in recent years. "Although some people may feel that they manage too much, mixing life and work together, this is actually the most typical approach in traditional Chinese management models."

In the Chinese context, when a boss takes care of an employee's life, it sends an important signal—you are no longer a stranger; we are now one of us. This is a language system that almost every Chinese person can understand intuitively, where individuals understand their roles within the interpersonal network and play their respective parts.

From a leadership perspective, effective management requires the establishment of a triad model of "kindness, authority, and virtue." Wang Anzhi believes that Chinese people always live in a highly efficient, tightly-knit social system. This system values optimal collective costs and efficient, rapid communication, "ideally requiring just a glance to understand, with everyone following the script, forming a cohesive and self-consistent interpersonal relationship model."

But the drawbacks of this model are also significant, namely that the leader's abilities determine the ceiling of the organization. When external circumstances face significant upheaval and change, if the leader's experience can no longer adapt to external trends, cannot make accurate judgments, and cannot lead the organization out of stagnation, the organization will face severe survival challenges. At this time, a transparent mechanism is needed to allow those with innovation and exploration abilities to stand out, gain more resources, and become the next hero to lead the organization forward.

However, there are too few heroes, and even fewer leaders willing to voluntarily step down. Because of this, the traditional paternalistic management model also has flaws and growth obstacles.

Although Zong's management style, full of human touch, is fondly remembered by many, it must be acknowledged that from the perspective of long-term corporate development, both Wahaha and Fat Donglai's management models have their own hidden concerns. The common issue is, what happens when the human-centric approach, full of Eastern wisdom, cannot be fully institutionalized?

Zong's human touch stems from the profound understanding of social relations by the first generation of entrepreneurs during China's reform and opening-up. But can the successors facing today's world find a suitable iterative version? Although Fat Donglai is highly praised, the first-generation founder is still active at the forefront, making succession a problem. Moreover, Fat Donglai's management is based on the premise of not pursuing large-scale expansion. Therefore, the applicability of this management style to large-scale chain enterprises is questionable.

From Founders to Institutionalization

Many great brands have had a strong or great founder. This in itself is not wrong; the key is that to achieve long-lasting success, effective institutionalized management needs to be established.

In this regard, Master Kong, a dominant player in China’s instant food industry, which successfully acquired PepsiCo China, can probably serve as a learning reference template for transforming traditional Chinese management into an institutionalized management model.

During the acquisition of PepsiCo China, Master Kong's management model faced a lot of opposition and even strike threats from employees. According to official data, PepsiCo China had approximately 15,000 employees, and about 6% of the original PepsiCo employees chose to leave after receiving compensation. However, according to some media reports, more than 10,000 out of these 15,000 employees eventually chose to leave.

But this did not stop Master Kong's progress.

Through capacity allocation, resource utilization can be maximized, reducing costs; lowering material procurement costs can also bring about efficiency improvements. Additionally, by unifying accounts, 80 factories use the same ERP system for unified accounting and information collection to reflect market demand. This not only changed the previously fragmented management model but also optimized the lengthy process where all management had to be reported back to the global PepsiCo headquarters.

A series of measures have brought a series of performance improvements to PepsiCo China. Although it experienced a talent gap and a decline in sales in the early stages of the alliance, in the second year of the Kang-Pepsi alliance, PepsiCo China turned from a loss of $176 million to break-even, and began to make a profit in the third year.

As of 2021, PepsiCo's share of the domestic carbonated beverage market reached 32.2%, second only to Coca-Cola's 53.4%. In 2010, PepsiCo's market share ranked fourth, at 5.5%.

"Master Kong's management logic is still very Chinese, but they have already exported this concept, forming a set of Chinese management systems. This has also become the foundation for its acquisition of PepsiCo and cooperation with global companies such as Starbucks and Disney." In Wang's view, when companies enter a relatively mature institutionalized management model, the so-called "benevolence, authority, and virtue" of the Eastern management model can also be simplified to a certain extent. Companies no longer need a wise leader, nor do they need the founder to frequently come out and inspire people. What people see is a set of Chinese management systems, truly realizing the management dream of "governing by doing nothing that goes against nature."

In the process of interacting with Master Kong, Wang found that they did not have the anxiety that most companies have. Although different from the theories in Western textbooks, the comprehensive institutional construction over the past few decades, and the clear understanding of every action the company is taking, have become their source of confidence.

But this is not a matter of which is better or worse, but rather a difference in development stages. The earlier the stage of the company, and the less it has experienced iterations or major setbacks, the more elements of "rule by man" it will have. The more it enters the stage of large-scale replication and expansion, the more institutional construction it needs. "Many companies are anxious because they have been focusing on external opportunities in the past and have no time to reflect on themselves."

Take Starbucks as an example. During the process of founder Schultz exiting the management system, Starbucks once slid into the form of an orange organization under the management of professional managers, until Schultz resumed the role of CEO, and it returned to the appearance of a teal organization.

Even internet companies with strong potential for teal organizations have not been immune. From Google and Amazon to Microsoft, many internet companies highly valued a free and equal work atmosphere in their early days, but as their size grew and performance indicators became increasingly demanding, their organizational forms gradually emphasized input-output ratios and efficiency, gradually turning into orange organizations.

"The requirements for leaders in teal organizations are too high, and founders play a very critical role in them." According to Zhu, professional managers often need to be responsible for their own KPIs. Under this standard, it is difficult to maintain the state of a teal organization, and they will unconsciously move towards the orange organization model.

In this era full of turbulence and change, every enterprise has to face the impact and pull of multiple internal and external forces. With the changes in the times and concepts, corporate management systems have also been pushed to the crossroads of change and reform.

In Zhu's view, in addition to the internal iterative drivers, the rise of new generation employees and value-driven consumers will also become a huge social force, impacting traditional red and orange organizations. When they realize that continuing this way will lead to abandonment by employees and consumers, they will inevitably make changes. Fat Donglai is not an unrepeatable exception. There are also many companies in China that are transitioning towards teal organizations. These companies will rely on their distinctly different competitiveness to become a key link in driving the iterative transformation of future management models.

From the perspective of management science, Wang believes that management science is a discipline that originated in the West. Only when a management model suitable for the Chinese market and local culture is sorted out will the inheritance of management systems and successors no longer be confusing. "So, will a truly local Chinese management model emerge in another 10 or even 15 years? Let’s wait and see."