Image source@Visual China
Text: Mu Sheng
Recently, Jingdong Group announced that from January 1, 2024, the annual fixed salary of front-line business personnel such as JD procurement and sales will increase by nearly 100%, and the average salary increase of all employees of JD Retail will not be less than 20%.
As soon as the news was issued, it quickly sparked heated discussions on the whole network, in this "cold winter" full of layoffs and salary cuts, Jingdong's salary increase was undoubtedly a "torch".
So, what is the reason why JD.com has the confidence to raise salaries, and what will their move bring to them?
01 Jingdong does not lie flat
JD.com announced a more detailed salary adjustment plan: front-line employees such as procurement and sales, the original monthly performance salary, floating year-end bonus have been increased to the fixed salary, and enjoy a fixed year-end bonus of 4 times the monthly salary, and the adjusted annual fixed salary has increased by nearly 100%, improving the basic treatment of business personnel. In addition, for business incentives, JD.com has adopted the principle of no cap, that is, it has raised floating salaries in an uncapped way to encourage employees to make greater contributions.
At the same time, JD.com issued a "procurement and marketing convening order", calling out the resigned procurement and marketing employees to say that "when they go home, they will raise their salaries".
In 2023, the reshuffle of the pattern of Internet head e-commerce and the rise of Pinduoduo have really brought a lot of challenges to Alibaba and JD.com. The competitors are so strong, and JD.com, which does not lie flat, is not idle, and frequently makes moves and actively seeks changes, including Dongge's internal "never lie flat" speech, and learn from Pinduoduo Xi "refund only" service. Of course, among the many measures, the most striking is the salary increase.
02 Internal factors - organizational change of procurement and marketing system
JD.com's actions are not accidental.
We have written in the article "Hot Reviews | Ma Yun played the card, Liu Qiangdong followed up, and the organizational reform of the e-commerce duo walked together?", we predicted that the adjustment of the organizational structure of Jingdong is only the first step, and the next step is to solve the incentive problem of the combat unit. If JD.com wants employees to treat the company's affairs as their own and increase the engagement of employees, it must improve their earnings.
JD.com's logic is different from the logic of other platform-based e-commerce, Ali and other e-commerce are platform-based logic, mainly matchmaking transactions, and the platform does not need to bear the risks of purchase, sales, storage, and logistics; Therefore, procurement and sales have become the key to JD e-commerce, procurement controls the upstream of the goods, determines the purchase, and sales controls the downstream of the goods, determines the shipment. For JD.com, controlling these two ends largely controls the chain of transactions, so strong incentives at these two ends is undoubtedly a correct choice.
As expected, JD.com's next step is to do incentives, which is in line with our previous predictions. But the question is, is it really reasonable to simply increase the incentive method of employee fixed compensation?
Simply increasing the fixed salary is undoubtedly the easiest operation and the most popular among employees, but the risk is that it is a bit of an "amnesty to the world", which may not be able to reward attendance and punish laziness, and may reduce the human efficiency of the enterprise because of the need to pay a large number of fixed labor costs.
Let's put it simply, if there is a budget for a salary increase, it seems that a more reasonable option is to carry out a "differentiated salary increase" through a more refined performance appraisal system, and reward talented people according to their value contribution. In this way, the company can not only improve employee morale through salary increases, but also convey the value orientation of the enterprise and upgrade the corporate culture.
Of course, it is not impossible to achieve the above effect by increasing the fixed salary as an incentive. But there is a premise here - the company's rank system and qualification system must have a strong ability to screen. In other words, the focus of the company's value contribution is on the qualifications, rather than on the performance appraisal. Once the qualifications for a certain level are met, the enterprise assumes that he has the corresponding performance output.
Logically speculated, JD should have chosen this path.
03 External factors - competitors are menacing
On November 28, Pinduoduo continued to soar with the strong performance of its third quarter results. As of December 31, 2023, Pinduoduo has a market capitalization of $194.39 billion, Alibaba has a market capitalization of $197.40 billion, and JD.com has a market capitalization of only $45.47 billion, which is much lower than its competitors.
In terms of profitability, although Alibaba's profits have declined in the past two years, it still has the highest profit due to the resources accumulated in the early stage, the largest market share, and the highest profit. On the other hand, on the way to catch up with Ali, JD.com made a "roadblock" Pinduoduo, which quickly seized the Internet e-commerce market with its low price and convenient service of "refund only", which gave JD.com, which seemed to be in a good situation in 2020, a blow to the head. Pinduoduo has not only achieved a turnaround in the three years of the epidemic, but also achieved a net profit growth of more than 3 times in 2022.
Figure 1: 2018-2022 Pinduoduo, Alibaba & JD.com Net Profit Comparison Chart Source: Musheng Consulting, Pinduoduo, Alibaba & JD.com financial reports
In the past, Ali was the leader of e-commerce, with the highest market share and the highest per capita net profit, and the market was gradually divided by competitors in the past five years. On the whole, Ali's human efficiency is on a downward trend, but human efficiency still suppresses JD.com;Pinduoduo's per capita net profit is growing rapidly, which also shows that Pinduoduo's profit growth is significantly faster than the growth of the number of enterprises,Its human efficiency (per capita net profit caliber) has increased significantly,After 2020,It has surpassed Ali and JD.com,And the gap is still widening,2022year,Pinduoduo's per capita net profit is about 10 times that of Alibaba,And Alibaba's per capita net profit is about 10 times that of JD.com。 On the other hand, JD.com, limited by a huge team of employees, has changed little in the past 5 years, whether it is profitability or human efficiency trends, JD has lagged behind its competitors.
Figure 2: 2018-2022 Pinduoduo, Alibaba & JD.com per capita net profit comparison chart Source: Musheng Consulting, Pinduoduo, Alibaba & JD.com financial reports
The business models of the three companies are different, but everyone is competing in the track of e-commerce, and to win, they can only magnify their own advantages. In 2023, Alibaba is shrinking its business and refocusing on e-commerce, Pinduoduo is almost all in e-commerce and logistics business, where should JD.com go? Therefore, it seems reasonable to use salary increases to retain employees, improve morale, and avoid the loss of talent. If even this group of "brothers" is gone, then Brother Qiang Dong's country will not be able to hold on to the country that he has built over the years.
But the question is,Can the money spent on people,Can it upgrade JD.com's "self-management ability"? Can it be transformed into the "user experience"?Here,It may not have completely formed a logical closed loop,Of course,We also look forward to JD.com's follow-up actions。
04 The right path to motivation
JD.com's decision to raise salaries at such a time is not only JD.com's determination to focus on retail business, but also the ambition of JD.com to become bigger and stronger after Brother Qiangdong's return. This is commendable in the current environment where Internet companies are generally cautious and not high-spirited.
However, we still have to emphasize that the most important point of incentive is to do differentiated incentives, so as to truly play the role of rewarding attendance and punishing laziness. Therefore, JD.com's incentive object is correct, but the incentive method is debatable. Even if they choose to rely on the rank system and qualifications to identify employees' value contributions, this approach is difficult to fine-grain. Therefore, we do not recommend that the boss directly increase the fixed salary of the employee, most of this kind of money throwing is useless.
The evolution direction of incentives we see is "market-based incentives", that is, employees who can make food can form business units in the form of projects to create value, share risks and share benefits with the company. On the one hand, it allows employees to invest in the form of VAM, which produces the effect of "where the money is, where the heart is", and on the other hand, it improves the authority of excess profit sharing, so as to generate similar benefits for employees as partners.
The correct incentive should be to reduce the fixed salary of employees, greatly increase the space for floating salary, and give high incentives as long as they can "fight food" in the face of users. Only by rationally designing the "market-oriented incentive mechanism" can employees have "self-motivation", realize the effect of "everyone is their own CEO", and let the capable people "work more" and "get more", so as to improve the efficiency of the enterprise and contribute to the long-term development of the enterprise.
Obviously, although this kind of change will make employees uneasy, if they are given a greater career and benefit temptation, the "capable people" in the employees will naturally take over, which is also a simple organizational model should be oriented. In a platform organization, the ultimate role of the employee should be that of a partner, and the main part of the employee's final income should be super profitable.
In the process of contact with relevant reliable sources, we learned that Liu Qiangdong personally has a strong control over JD.com's organization and human resources work, and he will even personally get into the design details of such policies, so whether there can be a breakthrough in this area, the "remote control" is actually in his hands. Whether to act, and when to act, depends on how he feels about the timing as an entrepreneur.