This week, Sea Group’s CEO Forrest Li sent an internal note saying that the management will NOT take cash compensation until “the company reaches self sufficiency”. 

On LinkedIn, we came across this comment: “Not many top management are doing this in many similar cases.”

I thought an additional point to this is “Not many top management built the company they now run.”

Leadership not taking salary itself does not save the company a great deal of cash, in Sea’s and other cases. It is, however, an important gesture to get others in all levels of the organisation to understand the priorities of conserving cash in a crisis.

Some senior people at Sea might choose to leave, as benefits (or team sizes) are cut – but the remaining management will be even more battle hardened.

Crisis is something that is well known (and I would say well experienced) by founders of large tech companies in China, as we have covered in the “leadership” section of Seeing the unseen: behind Chinese tech giants’ global venturing.

Wang Xing of Meituan, Zhang Yiming of ByteDance, and Colin Huang of Pinduoduo – the trio of new generation consumer tech giants in China – all endured a lot during their companies’ ascent. All three of them also spent 7 years toiling with different startups before even founding their current company. And at least for the case of Wang Xing, it is not over yet.

Such experiences shape the leaders, and in turn leaves an imprint on the organisation. This is often quite positive for the company to endure endless competition in China; however, as these companies step into the global area, such resilience can become a liability, as a different set of paranoia is required.

The storm is not over 

As we explained last week, the storm that is surrounding the global economy is expected to persist. While capital is sitting on the sidelines waiting for more certainty, tech companies that had been in the growth phase (and had expected the pandemic-accelerated growth to persist) suffer.

Sea Group, and its main money burner Shopee, are not in immediate cash crisis – but they face critical uncertainties over growth (hence difficult to raise more money), and the potential that this crisis will last longer or get much worse than anticipated.

It is prudent to conserve cash – and we believe there is even more room for cost cutting at the company. We are approaching the end of Q3 – these measures will probably only start to show significant positive effects on the bottom line in the final quarter of the year.

Do not be surprised if more news on layoffs, cost cuttings and general pain emerge in the coming weeks, from Sea Group or other tech companies still in the growth phase. A bit more of mutual understanding between staff and management will probably build goodwill that will last beyond this crisis.

The book

Leadership is one of the four key aspects (alongside people, organisation and product) covered in our book – “Seeing the unseen: Behind Chinese Tech Giants’ Global Venturing” which is now already available in bookstores and online.

You can get the book from major bookstores in the US, Singapore, Malaysia and Thailand. Wiley is working to make the book physically available in other countries – and you can also order online from Amazon or Wiley – we will update you when the Kindle version becomes available.

Have a great weekend!

Guoli Chen & Jianggan Li

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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Jianggan Li is the Founder & CEO of Momentum Works. Prior to founding Momentum Works, he co-founded Easy Taxi in Asia, and served as Managing Director of Foodpanda. The two years running Rocket Internet companies has given him a lifetime experience on supersonic implementation, and good camaraderie with entrepreneurs across the developing world. He holds a MBA from INSEAD (GMAT 770) and a degree in Computer Engineering from Nanyang Technological University. Unfortunately he never wrote a single line of code professionally - but in his first job he was in media, travelling extensively across Asia & Europe, speaking with Ministers & (occasionally) Prime Ministers. Apart from English and his native Mandarin, he is also fluent in French and conversational in Cantonese & Spanish. He tried to learn Latin (for three years) and Sanskrit (for six months) as well. In his (scarce) free time, he reads, travels, hikes and dives. Pyongyang, Tehran & Chisinau are among the interesting cities he has been to.

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