“For all of us Alibaba is a dream. Everyone here has worked so hard and really believes in this dream. We want to make this a company that lasts 80 years. But if we want to make this dream happen, we have to be realistic. Right now it doesn’t make sense for us to have a big center in Silicon Valley. If we want to make the company grow again someday, we are going to have to cut back today.
“I feel really bad and sorry, for you and your families. At the end of the day the mistakes we made are my responsibility. So I’m very sorry for this. I hope that someday, when the company is healthy, we can grow again and give you another chance to join Alibaba.”
It was an emotional speech and, as was usual for Jack, straight from his heart. I looked around the room, and the hostility I feared had not materialized. People seemed to respect Jack’s candor and were resigned to the decision he had made. The only remaining question was who would be cut, and my job was to tell them.
We were laying off about half the staff, and that sent a chill through the office. Although I didn’t know the staff personally, my stomach churned each time I sat down with one of the unlucky. The company offered laid-off staff members three months of salary and allowed them to keep some of their stock options. To my surprise many were not as concerned about losing their jobs as they were sad to be leaving Alibaba. Even some of the Western staff in the office, many of whom had no personal connection to China, seemed attached to the company and its mission.
Back at the Alibaba House, I collapsed on the couch, glad to have a difficult day behind me. The company’s future was still uncertain, but at least we were taking the painful steps necessary to survive. It was also clear that if any company could subsist on a tiny budget, we could do it. After all, Alibaba’s founders had paid themselves a salary of only RMB 500 ($60) per month in the company’s early days. Compared to the employees of our global competitors, we could more easily go back to living on a shoestring budget. Our “Back to China” strategy had begun, and if we had to, the team could contract all the way back to the Alibaba apartment, cutting costs along the way. Now, if only we had a revenue model, I thought to myself, we just might have a chance.
A few days later, after Jack and I returned to China, he called me. I was surprised to hear a shaky voice on the other end of the line.
“Porter, can I ask you a question?” His voice was breaking; it sounded like he might even be crying.
“Sure, Jack. What’s wrong?”
“Am I a bad person?”
In the eight months I’d known him, I’d never seen his optimism or confidence waver.
“What do you mean?”
“I’m getting a lot of calls from staff, and they are angry with me about the layoffs. I know it was my fault that I made those decisions. And now everyone is mad at me. But do you think I’m a bad person for what I did?”
In the background I could hear Jack sniffling. I felt sad for him. Given all of the chaos and disorganization in the company, I had seen this day coming. But rather than being angry at our CEO for letting the company fall into such disarray, I was sympathetic. In my mind Jack was still just an English teacher who had reached for the stars. It was hard to blame him for overreaching.
“Jack, you did what you had to do. The company wouldn’t survive if you didn’t make those decisions.”
“Yeah, I guess you’re right. But I just feel like I let everyone down.”
We spoke for a few more minutes and then hung up. I felt even more unsettled than I had on the morning of the layoffs. If Jack lost his confidence, who would be left to encourage us?
Last Man Standing
Not long after Jack and I returned from the United States, Joe pulled me into his office. “Porter, I need you to prepare an Alibaba organizational chart,” he explained. “We’re bringing in another candidate for chief operating officer, Savio Kwan, and I’d like you to bring the org chart along when you interview him so that he can have a better understanding of Alibaba’s company structure.”
In any other company this would have been a simple and straightforward task, but in the case of Alibaba it was daunting. Alibaba was almost two years old and had never had an organizational chart. I didn’t particularly relish the task of trying to make sense out of the amorphous blob that was our structure.
Internal chaos was the price we were paying even as Jack boasted publicly, “Alibaba doesn’t plan.” New departments formed and disbanded so quickly that nobody had a good sense of who was doing what and who was in charge. Day-to-day decisions were difficult to make without having Jack weigh in. Important personnel decisions, such as the hiring and firing of new staff, were made without any clear procedures, resulting in anger and resentment among staff members who felt they were being treated unfairly. The organizational chart would be a pain in the ass to put together, but the prospect of having an adult in the room, in the form of a COO, was enough to motivate me.
As I set out to draft the organizational chart, I contacted the managers I thought were in charge of the various departments that had popped up in the previous six months, as the company swelled from 40 to several hundred employees. Not surprisingly my guesses were not always correct. Like a pinball I was bounced around to various colleagues who clearly didn’t know what departments existed or who, in fact, was in charge. After hammering out the best chart I could, I realized that not everyone in the company had been accounted for. Partly to cover my bases, and partly as an ironic joke to myself, I placed an asterisk next to the chart and, at the bottom of the page, wrote:
*If you do not see yourself on this organizational chart, it does not mean that you are not employed by Alibaba.
By the time I sat down with Savio, he seemed just as confused as I was—in fact, he was frazzled by the whole Alibaba interview process. “So who have you met so far?” I asked.
“I’ve had about eight meetings so far with the company founders, and it really seems like there’s a lot of confusion.”
A 25-year management veteran, with 15 of those years spent at General Electric, he was no doubt used to a more structured organization. While interviewing at Alibaba, he’d been tossed from manager to manager with no proper introductions.
“I can’t understand why all these people are interviewing me. It’s pretty unorthodox for a COO to be interviewed by his potential subordinates. And no one seems to have clear agreement on what the company’s strategy or priorities are.”
I was afraid that we’d already scared Savio away. Seeking to bring some calm to the situation, I pulled out a folder with the Alibaba organizational chart I’d created, along with a few articles and background material about Alibaba that gave as close to a comprehensive introduction to the company as was possible at the time. He took a deep breath and seemed to feel a bit more at ease.
“Eight meetings in, this is the first time anyone has given me any kind of overview of Alibaba,” he said. I could only imagine what had been discussed in his earlier meetings.
Savio settled in and told me a little bit about himself. He had been born and raised in Hong Kong, then had studied in London, and ultimately found his way back to China, helping lead GE’s medical equipment business there in the 1980s and ’90s. He had been working in China at a time when few people from Hong Kong were willing to do so, and that had given him a front-row seat for China’s transition from a planned economy to a market economy. It gave me some comfort to know that he had worked in China before doing so became a trend and would probably be accustomed to a rough-and-tumble environment.
Savio was not the first person whom I’d interviewed for the position, and my first impression of him was that he wasn’t the best candidate. He had a warm and jovial spirit that told me he might fit in, and the graying hair that signaled experience, but I worried that he lacked the industry expertise and decisiveness necessary to bring order to Alibaba’s chaos. I preferred the first can
didate I’d met, a strong, bold—even brash—China country manager from a large multinational tech company who seemed like he’d bring real backbone to the company. Savio seemed almost too nice. I shared my thoughts with Joe Tsai.
“So you liked the other guy?” Joe responded. “Well, I don’t think we’re going to be able to get him. He’s in a pretty high-level position at his current company, and in this market it would be hard to convince him to join a little start-up like Alibaba.”
In January 2001 we announced that Savio was our new COO. And a few weeks after that Savio surprised me with his decisiveness by cutting the majority of the remaining international staff at the company. First he cut Hong Kong, keeping only a few financial and administrative staffers. And then he cut what was left of the US office, save for a couple technical experts. The suddenness was a shock, which left me with a strange loneliness that even the staff members with whom I’d had disagreements were now gone. With the exception of Abir Oreibi in Europe and a few other international staffers, I now found myself the lone survivor in the group hired about the same time I was.
As painful as it was, the layoffs were crucial to stop Alibaba’s financial bleeding. Jack should have recognized this earlier, but doing it took an outsider who did not have personal relationships with the staff. In the wake of the layoffs I arrived at work to see rows upon rows of empty desks where my colleagues used to sit.
In severing the international staff, the company had made an attempt to be fair. Employees were offered a choice of three months’ salary or one month of salary plus two years’ worth of their unearned stock options. Disgruntled and with little faith in the company’s prospects, many of the laid-off managers chose the full three-month salary offer, not wanting to be left holding worthless stock certificates for a company that appeared to be headed toward bankruptcy.
Savio’s next step was a more symbolic one—clearing out the bunk beds from Alibaba’s main Hangzhou office. “This is unsustainable,” he contended. “If people are working around the clock like this, they will burn out. We have to allow people to spend time with their families and have a life outside of Alibaba, or they won’t last long in the company.” On the one hand I got his point. But on the other hand, I worried that not only was he cutting staff, he was cutting back the hours that existing staff were working. Might he be bringing a big-company working culture to Alibaba without any of the actual business to justify it?
With his quick, bold cuts in staff, Savio had defied my initial impression of him as lacking conviction. But cutting costs was one thing. Building a business was another. And Savio’s next moves failed to impress me. Rather than taking the company by the reins, defining its strategy, and moving forward with a bold execution plan, Savio decided to focus senior management on a lengthy process of defining the company’s mission, vision, and values.
Hadn’t we been talking about these things for more than a year already? I thought to myself. If there was one thing that Alibaba had been big on, it was talking about dreams and values. Our problem, it seemed to me, was that we had a lot of lofty talk and not enough tangible results. With Alibaba’s money running out, shouldn’t we be doing more than writing down typical corporate-speak on PowerPoint presentations?
After a couple months on the job, Savio made a trip to the Shanghai office, where I’d been working, to present what Jack and the Alibaba cofounders had been working on. Savio led us through the slide presentation:
We’ve made a lot of organizational changes lately as we’ve cut back staff and moved our operations to China, as you know, but we have to make clear to everyone that we have only two options from here: grow or die. We all believe in this business for the long term, and we have one great advantage over all of our foreign competitors, which is that we can keep our costs much lower in China. So as our competitors fall each day, we just have to achieve one thing—to be the last man standing.
In the last few months I’ve been meeting with Jack and the company founders, and we’ve hammered out the company’s mission, vision, and values. I’m here to present them to you today:
First, Alibaba’s mission: To make doing business easy.
Next, Alibaba’s vision: To be a partner to all business people.
Finally, Alibaba’s nine values: Passion, innovation, teach and learn, openness, simplicity, teamwork, focus, quality, customer first.
Savio stood back from the projection screen with a dramatic pause to give us all a chance to soak it in. As I sat in the silence, I couldn’t help but be disappointed.
That’s it? I thought. Three months in and this is all we’ve come up with? A few touchy-feely PowerPoint slides about mission, vision, and values?
Savio went on:
These are the core values that everyone will be evaluated on. From now on, everyone will have a quarterly review and scorecard. 50 percent of your points will be based on your performance in reaching goals. The other 50 percent of your points will be based on how well you adhered to Alibaba’s core values.
I was starting to catch on. This was actually going to be a part of a process.
Savio continued:
And with these values, we will have a new system for hiring, evaluating, promoting, and firing staff. From now on each personnel decision will be made according to “one over one plus HR.” So for each employee’s review, four people will be present. The employee. The employee’s manager. The employee’s manager’s manager. And a representative from HR. This is going to ensure that our personnel decisions are clear and consistent across the company.
This type of review system was new to me but it seemed to make sense. As Savio introduced these systems he’d brought with him from GE, I could see that Alibaba’s organization and procedures were beginning to take shape.
“We’re also initiating something new—we’ll have two tracks for people to advance within the company,” Savio said. “There will be a management track for people who would like to move up in the organization as managers. And a ‘specialist track’ for specialists, so that they can also advance in the company.”
This was an idea that had never occurred to me, but once Savio explained it, it made perfect sense. The natural tendency for a company is to promote a high-performing specialist, such as an engineer or graphic designer, to the position of manager. Most employees would accept this because they want to see their salary and recognition increase. But not every skilled specialist makes a great manager. Alibaba had made this mistake several times and in the process lost a great specialist while gaining a terrible manager. It usually didn’t take long for the role mismatch to become so uncomfortable that the manager left the company or was forced out.
Savio’s next step was to announce training tracks for the team. Entry-level employees, such a sales staff, would be put through a training program tailored to their specific functional skill in the company. Managers would participate in separate training tracks focused on developing their management skills. In addition each new employee would receive at least a week of orientation to the company. At the core of these training tracks were Alibaba’s mission, vision, and values.
As Savio wrapped up, I was still slightly skeptical but I decided to keep an open mind and give Savio and his plan a chance. He did have 25 years of business experience, after all. Maybe there was more to Savio’s approach than met the eye. Plus, Savio seemed to appreciate the urgency of rescuing Alibaba’s deteriorating balance sheet and was beginning to focus management’s attention on coming up with a strategy to actually make money.
In the next few months we batted around ideas about how the company could generate revenue. Unable to make money on our own website, we discussed the idea of selling e-commerce solutions to local governments in China, with the idea that they might build “Alibabies” that local businesses could use as platforms for posting their products online. After knocking on a few government doors with this
idea, and quickly realizing that local government officials would demand bribes and kickbacks from us in exchange for purchasing an Alibaby, we dropped it. Following the Alibaby strategy might keep us out of bankruptcy, but it might also put us in jail.
As we struggled to find a way to make money, we noticed an interesting trend. At just about the time that sellers on Alibaba.com were beginning to make deals with overseas buyers they’d met on the website, their product listings on Alibaba.com were being crowded out by the increasing number of competitors who were signing up for Alibaba. So, for example, the first electric scooter manufacturer on Alibaba received all the inquiries from interested buyers around the world and, with no competition, had little incentive to pay Alibaba for the free service he was receiving. But over time he was increasingly crowded out by a growing number of scooter sellers who were joining the site and posting their products online. Sellers began to ask us for the opportunity to pay us for a sponsored listing of their products so that they could appear above Alibaba’s organic search results. It appeared that, after giving Alibaba’s services away for free for two years, we had finally reached the critical point at which customers were willing to pay.
In spring of 2001 our budding sales team decided to focus its efforts on a product we’d test-launched called China Supplier. For roughly $2,000 an exporter in China got a nicer-looking company profile, could post more product listings than a standard member, and received priority listing for the exporter’s products in Alibaba’s search results. For a typical manufacturer $2,000 was a bargain compared to the costs of advertising in an expensive trade publication or traveling to the United States or Europe to attend an industry trade show to display products. While a magazine advertisement might be obsolete after one month, and a trade show would last only a week, the Internet offered these sellers an opportunity to run their online trade show on Alibaba 24 hours a day, seven days a week.
Alibaba's World Page 5
