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Jack Ma, the founder of Alibaba, recently came under fire for his comments praising the company’s “996” work culture. “To be able to work 996 is a huge bliss…If you want to join Alibaba, you need to be prepared to work 12 hours a day, otherwise why even bother joining,” he wrote in a Weibo post.
The comments came as a surprise in part because Ma is known as a humanist and frequently speaks out such issues.
“If you want to win in the 21st century, you have to empower others, making sure other people are better than you. Then you will be successful.”
“I’m coming to this world not to work. I want to come to this world to enjoy my life. I don’t want to die in my office. I want to die on the beaches.”
The employees at Alibaba certainly don’t appear to be on the beach.
The 996 model―which, frankly, I was surprised to learn had its own name―is one that requires employees to work from 9am to 9pm, 6 days a week. Comments in response to Ma’s post on Weibo endorsing the 996 culture seemed to indicate it wasn’t a particularly enjoyable 72 hours, with many anonymous commenters claiming they felt “exploited” and that the leadership should “stick more to the law.”
Ma didn’t back down, either, after the onslaught of criticism.
“As I expected, my comments internally a few days ago about the 996 schedule caused debate and non-stop criticism…I understand these people, and I could have said something that was ‘correct.’ But we don’t lack people saying ‘correct’ things in the world today, what we lack is truthful words that make people think,” he wrote, as reported in Fortune.
Underlying Ma’s comment, though, is the assumption that this type of intense work culture is, in fact, necessary for and the key driver of performance. And that Alibaba’s success somehow hinges on its employees committing to a 996 schedule.
Ma isn’t alone in thinking through this lens. The long hours and breakneck pace of work at similar companies, many believe, is a requirement for success. Last year, investor Michael Moritz wrote a controversial article for the Financial Times titled Silicon Valley Would Be Wise To Follow China’s Lead. While others, such as the founders of Basecamp, have vehemently argued against this type of culture.
The warring camps beg the question of which, in fact, is right. Is an intense work culture required for high performance?
Alibaba Financial Performance
From a business perspective, Alibaba is a one of the most successful cases of a platform company. It’s market cap is closing in on US $500 billion. It generated 250 billion yuan in revenue in 2018, its profit margin is a whopping 20%. And its China retail marketplaces reached 699 million mobile monthly active users in December 2018, and 636 million annual active users as of December 2018 — basically twice the size of the US population.
To understand just how successfully Alibaba runs its operations, it’s worth looking at its recent performance, comparing it to comparable companies, Amazon and eBay.
Size and Profitability
|Market Cap||~$475 Bn||~$907 Bn||~US $32 Bn|
|Revenue (ttm)||$40 Bn||$233 Bn||$11 Bn|
|Quarterly Revenue Growth (yoy)||41.30%||19.70%||10.10%|
|Gross Profit (ttm)||$25 Bn||$93.73 Bn||$8.36 Bn|
|Operating Margin (ttm)||~30%||~5%||~20%|
|Return on Assets (ttm)||8.65%||5.28%||5.91%|
|Return on Equity (ttm)||12.85%||28.27%||35.28%|
Source: Yahoo finance, company annual reports, Reuters
At first glance, it seems evident that Alibaba is running its operations very effectively. Not only are their financials sound but they are outperforming key competitors across several dimensions.
But for all its financial success, what I also see is Alibaba is in line on ROA and much lower on ROE. Despite its outsized financial performance, Alibaba isn’t outperforming on leveraging the assets it has to generate a net income. And this isn’t even accounting for people, arguably a firm’s most important asset. According to a Reuters estimate, revenue per employee runs at RMB 528 thousand for Alibaba compared to the industry standard of RMB 29 million. That’s close to 60x differential.
I’ll deliberately leave you with these data points to draw your own conclusion.
By many standards, Alibaba is indeed an incredibly successful organization. But organizations are too complex to accurately test whether Alibaba’s 996 culture is the primary driver of performance.
What we do know is that culture, like youth, appears resilient in its early years. But how you treat your culture today will eventually show signs of aging. The true test of ‘996’ will be to see how Alibaba ages with time.
Follow Stephanie Denning on Twitter: @stephdenning
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April 16, 2019 at 11:10PM
Forbes – Entrepreneurs