The short notes: the mechanism of the Five-Year Plan

Aka China's OKR system

The Short Notes series was inspired by a reader who said they just wanted something short to sound smart at parties (if they happen again).

This month sees the unveiling of the 14th Five-Year Plan in China. Technology progress has been a prominent feature. But we’re not talking about what they are right now.

Instead, let me tell you how the Five-Year Plan (FYP) is created and implemented with tech speak. It will become clear why once you finish the piece.

TLDR: The FYP is the Chinese government's OKR (Objectives and Key Results). It is used to create alignment and engagement around measurable goals but is not prescriptive in specific policies.

Let's talk about China Limited; it’s pretty big now. The admin staff alone pushing is 50 million. So China Limited has long stopped trying to be prescriptive on the actions of each department. Instead, it lets incentives aka performance bonuses, do its invisible hand thing.

Every five years, the company has a massive all-hands meeting. It's an intense 2 days affair, and they announce the “Big Hairy Audacious Goals” of China Limited for the next five years.

Prep for the OKRs begins at least two years before the all-hands. The senior management will have task-groups spend their weeks gathering 360-degree feedback from each department. Every department also has its mini-task groups to collate info on their prior OKR progress and document their key asks to the senior management. Collaboration and bargaining for the OKR priorities happen behind closed doors. The senior management also will bring in external consultants and specialist advisors for inputs as well.

The objectives are memorable descriptions of the things China Limited wants to achieve. They are meant to be inspirational and challenging. The Key Results are a set of metrics that measure the firm's progress towards the objective, some are binding, and others are indicative. The entire exercise’s purpose is to enable strategic inter-departmental coordination and mobilise resources towards a set of common goals which fosters stable growth. Once you're as big as China Limited, every department is a fiefdom and pulling in a single direction is herculean labour.

Once the Objectives and Key Results get announced, the work truly begins. Each department (and their sub-departments and the teams in the sub-departments) then create their OKRs and granular implementation plans that feed into their direct leadership's OKRs. There are significant variances in OKRs between teams; the marketing function doesn't need to care about the finance team’s targets and vice versa. There are also different approaches for departments with the same OKRs; the OKR structure encourages experimentation and localisation.

The process is agile; there are many team sprints that last for quarters or years, with target revisions and real-time course adjustments planned into the cycle.

What makes this whole thing run? Performance reviews, of course. Every department head is assessed on their goal attainment during regular intervals. Good performance can fast-track promotions, and poor performance may entail swift demotions. The targets have become a matter of personal responsibility and everyone is incentivised to achieve the targets they set for themselves (with guidance from the company topline OKR).

Then the cycle starts all over again in a few years.

Substitute senior management for CCP leadership, department heads for regional governments and performance reviews for Cadre Responsibility System, and you've got the process essence of the FYP.

So, what does this mean? 

The key policy points in the FYP's technology are general outlines and sometimes wishful thinking. The policy direction will be determined by the myriad sets of local government and national department policies that interpret the FYP through local capabilities. The devil will be in the interpretation and implementation.

Further reading: The Reinvention of Development Planning in China, 1993–2012, Sebastian Heilmann and Oliver Melton

Premium members have received a salacious piece of Alibaba intranet that’s been blowing up in Chinese tech circles and the Youzan deep-dive in the last week. They can look forward to an update on Bilibili next.