23 Jul, 2018TECHINASIA.COM
The following is an edited excerpt from Alibaba: The House That Jack Ma Built by Duncan Clark. The excerpt was provided by publishing house Ecco. You can buy a copy of the book here.
[During] the dot-com boom, skilled employees in China constantly jumped ship to rival ventures or, tapping the growing pool of venture funding, tried their luck at their own start-ups. The cost of talent started to spiral upward, including for the software developers, web designers, and project managers that Alibaba would need to build out its offerings.
Here Alibaba had two important things going for it: Hangzhou and Jack Ma. Unlike Beijing and Shanghai, where turnover of qualified employees was a major headache for entrepreneurs, Hangzhou had a deep pool of fresh graduates and very few local employers.
In addition, Alibaba benefited from Hangzhou’s relative isolation. There weren’t really any rivals to poach his employees. A few other technology firms were located in the town, such as UTStarcom or Eastcom, but in the dot-com craze these were fast becoming “old economy” ventures.
Alibaba also benefited from Hangzhou’s distance from Shanghai—then some two hours away. For young talented engineers in Hangzhou who wanted to work for a fast-growing Internet venture, Alibaba was it. This helped keep costs low, too.
For the price of one engineer in Beijing or Shanghai, Alibaba could hire two. The comparison with Silicon Valley was even more dramatic, as Jack pointed out: “[To] keep one programmer happy [in Silicon Valley] takes $50,000 to $100,000. For that much money in China, I can keep ten very smart people happy all the time.”
As a second-tier city, real estate was cheaper in Hangzhou, too. Even after Alibaba moved into a 200,000-square-foot office in early 2000, its total rental bill was just $80,000 a year, a fraction of what it would have been in Beijing or Shanghai. Jack liked the distance from Beijing: “Even though the infrastructure is not as good as in Shanghai, it’s better to be as far away from the central government as possible.”
When building up his team, Jack preferred hiring people a notch or two below the top performers in their schools. The college elite, Jack explained, would easily get frustrated when they encountered the difficulties of the real world. For those who came aboard, working for Alibaba would be no picnic.
The pay was low: The earliest hires earned barely $50 per month. They worked seven days a week, often sixteen hours a day. Jack even required them to find a place to live no more than ten minutes from the office so they wouldn’t waste precious time commuting.
From the outset, Alibaba has been driven by a Silicon Valley–style work ethic, with every employee issued share options in the company, vesting over a four-year period. This is still a rarity in China, where the traditional setup in private companies was an emperor-like boss who treated employees as disposable and salaries as discretionary.
As the Alibaba.com website grew in popularity – aided by offering its services for free – the team in Hangzhou struggled to keep up with the volume of incoming emails. Alibaba’s customer service team found themselves at times acting as free tech support to clients, responding to questions about how to reboot a computer. But wedded to its customer-first tenet, Alibaba resolved to respond to every email within two hours.
Keeping the team focused, co-founder Simon Xie recalled, Jack was “a culture, a nucleus.” Jack greeted new recruits with a sobering message, and a promise. Then trotting out one of his favorite sayings: “Today is brutal, tomorrow is more brutal, but the day after tomorrow is beautiful. However, the majority of people will die tomorrow night. They won’t be able to see the sunshine the day after tomorrow. Aliren must see the sunshine the day after tomorrow.”
Co-founder Lucy Peng, Alibaba’s first human resources director and later its “chief people officer,” also played an important role in the hiring process and in shaping the company’s culture. In a 2000 Harvard Business School case study on the company, she commented that “Alibaba employees don’t need experience. They need good health, a good heart, and a good head.”
Jack has always been dismissive of business schools: “It is not necessary to study an MBA. Most MBA graduates are not useful… Unless they come back from their MBA studies and forget what they’ve learned at school, then they will be useful. Because schools teach knowledge, while starting businesses requires wisdom. Wisdom is acquired through experience. Knowledge can be acquired through hard work.”
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