Things not being said about Chinese tech management

Disfunction with Chinese characteristics

I got out of Shanghai last week, just before the city lockdown was finalised. In the move, the edition got pushed back a bit. But we’re back!

After hours of chatting with tech founders and employees, my conclusion - Chinese tech management is strange yet familiar. I say this because these issues are also prevalent in Western tech companies, but as with most things Chinese, they happen on another scale here.

What I’m about to say is based on anecdotal evidence¹, but I’ve heard the same behavioural patterns repeated enough. We see this management approach at a point in time, in the context of Chinese tech gaining swift prominence against the backdrop of a developing country finding its feet. The result is Silicon Valley's startup sloganism colliding with Jianghu culture (China’s version of the code of chivalry). As the talent coming into the industry got better, and the pace of execution got faster over time, the tension between different factions became more prominent. Chinese tech management tends to be more hierarchical and execution-driven relative to the West. There’s been a lack of focus on efficiency; given growth could easily be obtained by hiring more. We’ll be seeing Chinese tech companies accounting for their organisational debt after many decades of easy growth. Like 1980s corporate America, shakeups in management are coming at the end of a decade of crazy growth. The organisations that emerge will be leaner and perhaps more ready and mature.

Key takeaway: I don’t think the current headcount cuts are negative events for the tech giants (especially when the cut is some mid-level folks). There was unnecessary bloat from years of easy growth and chasing fengkou.

"SPIRO 1," by Francisco Vila Guillén

The insecure mid-level management team of tech companies

When Alibaba, Tencent and Baidu started in the 2000s, there was no concept of tech entrepreneurs. People have always started small businesses, but no one in living memory ever built a private business empire in China. VCs were mistaken for fraudsters — in fact anyone starting a business was mistaken for fraudsters. For a country undergoing the initial tremblings of liberalisation and digitalisation, two groups went to work for fledgling domestic startups— the crazy innovative self-starters and the people who couldn’t get a better job in either SOEs or MNCs. That’s a big gap in competence between the two.

This meant while the tech founders were impressive people, some of the early employees of these corporations were decidedly not. Talking to an early Tencent VP, he mentioned his co-workers did not have prestigious university degrees if they had university degrees. Before listing, the average coder in Tencent graduated from the Chinese equivalent of community colleges and was very average. This was not a localised phenomenon by any means. Some people get lucky by being at the right place at the right time. Their positions are more luck than merit. While this is also the unspoken rule in Silicon Valley much of the time, the difference is stark in China, given the heterogeneous distribution of education and the assumed inherent worth that accompanies education.

The early employees also tend to be missionaries relative to the mercenaries of the later cohort.² Someone who joined Alibaba in 2012 joined an upstart on the cusp of changing the Chinese retail landscape. Someone who joins Alibaba in 2022 is entering an establishment potentially on the decline. The graduates who join tech firms are the best talent of their generation, but they join for the money and prestige more than the love of the mission. The intergenerational gap is stark.

Implications from these factors are numerous. First, there is a generational disconnect where older employees believe in the notion that tireless hard work yields rewards. After all, they experienced this with vested stock growth. The younger generation is there for a job, not a purpose. They want to know when they can afford a house. Second, early mediocre employees who made it to middle management oversee more qualified and talented underlings. People do not scale with organisations, but growth hides many ills. Insecurity abounds when managers, alongside their employees, realise that they aren’t as qualified to be holding the positions they do.

“You may wonder, what the difference is? From your perspective, you’re deceiving me in order to exploit me, and I’m exploiting you. Aren't we all exploiting each other? There is still a big difference. Maybe most of the senior management is post-70s or post-80s and they don’t understand the post-90s and the coming 00s. These younger people grew up under the wind of free culture. We don't like this kind of official and polite manner. 

You assume I am a donkey pulling the grinding mill. You whip me to keep me going. I think it is normal. No one thinks it is abnormal. I am a donkey. You are the master. I want to be lazy, that’s normal for a donkey. You don't want me to be lazy, that’s normal for a human. You keep me fed, so you are allowed to whip me to force me to work harder. That’s understandable. But the question is, you can’t whip me while asking me to love you at the same time right?” - Passage from an ex-Alibaba employee's parting letter to the firm

What is abundant is not valued

China has historically been known for one thing - an abundant and cheap labour pool. The skill pool of a billion-plus people was also generally unskilled or semi-skilled. While the past decades have seen China upskilling its population, the default attitude towards the labour force is one where people are fungible and, therefore replaceable.

People's attitudes towards being somewhat fungible worked for a long time, as it was a growth mindset exemplified. The country and its sectors were developing, no one had too much industrial expertise since it was all new to most. It was expected that hiring someone who seemed bright (via their university degrees), or had the right government relationships was the best way forward. People moved jobs to where there was growth, which made many CVs look like a hopscotch meander through what's hot. 

There was much to build for tech companies, and everyone was welcome, but what happens when the building is done? Chinese internet companies are typically operationally heavier than their Western counterparts. They hired large swaths of folks to run on-the-ground operations, build-out logistics capabilities, or be the sales fleet to small merchants or consumers. In a developing country, much of the background infrastructure was also incomplete, and there was a prize for the builders. But as the tech ecosystem became more mature and work went from building to maintenance, what was the expectation towards workers? The answer was that maybe too many people were kept on and the full-speed work pattern never changed even as the content lessened.  

996 existed long before there was a term for it, but youthful spirits, blue ocean spaces and the promise of future rewards sustained the workforce back then. Those that couldn’t hack it left, and most tech firms gained a reputation for hard work, high rewards and a high churn culture. In the late-stage consumer internet age, endless work culture became a liability rather than an asset. When the size of the pie became fixed, additional work didn’t get you ahead — it just made the race more tiring. The vicious circle of work, burnout and churn looms over every tech worker. The quandary they face is that once they leave big corps, the smaller tech firms work just as hard since they are under-resourced. There seems to be no escape from the involuted work culture. From the company’s perspective, what does it matter if people leave? There’s plenty outside the door waiting to get in. And if the workers were going to leave anyway, better get your money’s worth while they are here.

Management prioritises short-term speed 

Management and organisation excellence was a luxury for companies with stable growth and a longitudinal timeline. It was possible to brute force solve a problem with additional bodies in the early days. Hiring more people is still the default modus operandi of many firms when they encounter operational bottlenecks on tight deadlines (and deadlines are always tight, there are no prizes for being slow to a market). It also stroked the leader's ego to be overseeing many people. After all, being in charge of such resources was a direct approximation of power.³

The very distinct problem of organisational bloat and diseconomy of scale with hiring people is apparent here. Instead of having 1:1s with their direct report, management tells employees to write daily, weekly, monthly, and quarterly reports listing what they’ve been doing. Not to mention the inefficiencies caused by hiring - it takes time to get new employees up and running, often dragging down the productivity of others during the ramp-up. Communication and coordination get harder as group size increases. The inability to attribute direct outcomes to individuals creates visible principal and agent problems. Entire work culture arises where employees slack off (touching fish culture) and management makes countermoves without addressing the real issues — firms overhired during product sprints then have to deal with excessive headcounts. 

The focus is for firms to get things done quickly, and the attitude is whatever that takes. Refinement of process and improving efficiency generally took a back seat. This approach afforded fluidity and agility. Work calls happen all day, every day. Project directions can change on a dime, and the teams will reorient. Less time is spent on strategy and more on execution and reiteration. Communication takes place over the fragmented synchronous WeChat more than email or work messaging platforms like DingTalk or Feishu. Calendar invites are getting wider adoption, meeting agenda-less so.

There seems to be a cultural background to the lack of optimisation. While Western firms credit their success to distilling and adopting industry best practices, Chinese firms credit their success to being one of a kind. Chinese management exceptionalism takes Western startup slogans like ‘move fast and break things’ and mixes them with the local customs of patronage linked to Jianghu culture. The assumption is that every firm’s process should be unique, and there is some resistance to change. This has been stalling the adoption of successful organisational processes like sales funnel across China, yet another reason why Chinese SaaS finds it hard to take off. 

Conclusion

Recently a founder mentioned to me that rather than adding headcount this year, they are planning to do more with their existing headcount. Just adding more people was causing more hassle than output, he said. That was refreshing to hear. I don’t think his thinking is unique amongst tech players large and small. In fact, the firing now might be long overdue from years of accumulated operational debt. A crisis is a terrible thing to waste⁴. 

While it seems like I spend a few pages complaining about Chinese tech management⁵, there are other points worth making. Chinese tech is what it is today often in spite of its management. There’s still scope for change that could utilise its human capital to its fullest potential and not just fire coders when they’ve reached 35 years old⁶. 

The other point is that enough attention has been drawn to the issue of 996 work culture that I expect more company policies to come out against this. When it does, I will not be mourning the loss of productivity of tech workers. Instead, I will be glad that society finally stepped in to stop the wasting of hours and people can finally get on with their lives.⁷

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1. For better or worse, I chose to avoid going into specifics in this piece

2. In many ways, they are similar to the Gervais management principle.

3. Another interesting explanation I’ve heard for this practice of hoarding resources from other firms. If labour was an essential input into growth, then having a cornered resource of hiring all the experienced Android developers at the beginning of the shift to mobile was strategically important.

4. I speak from the heartless position as an ex-VC

5. And subtly Western tech management

6. I realise I might seem contradictory here saying that firms fire coders but also retain too many people. The truth is they can both be true because reality is not coherent

7. One of of these things will hopefully be having kids from the government’s perspective