Why is Pinduoduo’s execution so strong?

The following are excerpts from an article published in Chinese. The author, Dongqi Yu, is a renowned business commentator. The views and perspectives expressed in this article are NOT those of Momentum Works; nonetheless, we find them interesting and worth sharing.

You can refer to Momentum Works’ “Who is Temu” report for structured analysis and insights about Pinduoduo. You can also read our book “Seeing the Unseen: behind Chinese tech giants’ global venturing” for more case studies, analyses, and reflections. 

This is the 2nd of the three-part series, which includes the following: 

• How strong is Pinduoduo’s execution?

• Why is Pinduoduo’s execution so strong?

• Why is it hard for other companies to copy from Pinduoduo?

 

Read on! 

 

Out of curiosity, I had a serious discussion with a few friends from Pinduoduo about the logic behind this.

The first question is, to achieve Pinduoduo’s level of strong execution, employees must be suffering a lot. Why are there still so many employees willing to join Pinduoduo? 

My friend told me that the reason is simple: they are paid a lot.

How much exactly?

Starting salaries are high. For example, when Pinduoduo was preparing for its community group buy business, HR directly stood outside Xingsheng Youxuan 兴盛优选 (a major grocery community group-buy player with strong local footing in Hunan Capital Changsha & surrounding cities), offering to pay 2 to 3 times the salary to poach employees. (Note from MW: although we heard from reliable sources it was less than 2-3 times, but 30-40% higher than the industry average) 

This is just the starting salary.

What’s more exciting is the annual salary increase. Many companies offer around 7% to 10% at the end of the year, but at Pinduoduo, the increase is far beyond this norm.

Pinduoduo’s performance is scored on a 271 scale: 20% of the people are qualified as excellent, 70% qualified and 10% are unqualified. 

In the circle of my friend, a Pinduoduo employee who scores 70% gets at least an additional 10,000 RMB (US$ 1, 400) in their monthly salary. 

The top 20% receive even more. In one year, someone in the bottom 10% still got a 7,000 RMB (US$ 984) raise.

This means, if you work at Pinduoduo for five to six years and get a normal performance score, your annual salary will easily reach over a million. Therefore, leaving Pinduoduo for another company almost always means a pay cut.

On the salary issue, Pinduoduo follows a basic principle: Everyone works to earn money. 

To make employees comply and work hard, you have to talk with money.

Like the “provincial leaders” sent out for community group buy business, they could refuse or even resign if they really didn’t want to go. 

But why did most employees, originally based in Shanghai, willingly go to other provinces as governors? Because they were really paid well.

At Pinduoduo, if a new project succeeds, everyone involved gets a huge reward the following year. Not only does the salary increase max out, but there are also plenty of stock options and end-of-year bonuses.

Initially, when the company first announced this for a new project, many were skeptical. 

After all, few companies are willing to pay so much to reward a team. However, before community group buy, there was another group buy project, “Kuai Tuan Tuan” （快团团）. Pinduoduo fulfilled its promise of huge rewards for this project the following year.

Therefore, when the community group buy project was initiated, a large number of people eagerly signed up. Even HR and finance staff wanted to be “provincial leaders” and participate in the business. However, signing up was not useful. Most “provincial leaders” were directly appointed by the company.

For these appointed managers, the company offered: If you go to community group buy business, your bonus, stock options, and salary increase will max out. But what if you don’t go? The company is still authoritative; if you go against the company’s instructions and choose not to go, your salary increase will drop to zero.

Indeed, the root of Pinduoduo’s execution lies in being willing to pay. 

Money is the driving force behind obedience and hard work. 

But the issue is, money can’t sway everyone.

So, the second question is, why do Pinduoduo’s people buy into salary incentives so much? 

Why are they willing to accept hard work and absolute obedience for the sake of money?

My friend told me that Pinduoduo has always been filtering, only those who are after money and can accept high pressure and absolute obedience remain.

Before joining, he knew Pinduoduo paid well but also had high pressure, different from other companies. However, after joining, Pinduoduo still exceeded his expectations. Almost from the first day, Pinduoduo showed him how different it was. For example:

• On his first day, he saw everyone working until 11 pm, and he left work at the same time. He thought it was a special project launch day, but after asking around, he learned that it was just a normal workday, the working hour is the same every day.
• On the first day, there was no typical phase of getting familiar with the job. He immediately received a task to be completed the next day.
• After completing the plan and submitting it, if it was an important project and it got reviewed by the company’s management, it was likely to be drastically changed without explanation, and he had to implement the revised plan. He wanted to explain his original thinking and why the previous plan was better, but the management didn’t give him a chance to explain. The management making all decisions was basically Abu (now leading Temu).

Unlike most other companies, where new employees have a period of adaptation, Pinduoduo immediately shows you “what Pinduoduo is like” and “what Pinduoduo wants”.

As a result, in a very short time after joining, he quickly understood what the company wanted: 996 working hours, continuous hard work, and absolute obedience to the will of the managers.

The result was that those who wanted to earn money and could accept absolute obedience and high-pressure execution stayed. Those who didn’t accept it quickly left.

Thus, the team at Pinduoduo appears both unstable and stable to the outside world. Unstable because the turnover rate in the first month of joining is extremely high. But once an employee passes the first month, accepts and adapts to Pinduoduo’s demands, they often become very stable and stay for several years.

At the same time, tests of obedience to senior management’s will continue to occur in the work, reinforcing the idea that the will of senior management is absolutely non-negotiable. 

One incident left a deep impression on him:

Pinduoduo provides lunch. Normally, lunch starts at 12 pm. Everyone can enter the dining room and pick up their lunch with their name on it. However, the food is often delivered a bit earlier, like at 11:30 am. Some people would go in before 12 pm to find their lunch.

One day, Abu saw this and was furious: Before 12 pm is working time, how can you eat? 

The next day, HR put up a cordon at the dining room door, forbidding entry before 12 pm.

Another time, Abu received a complaint from an overseas user in the middle of the night. He immediately woke up all the relevant staff to solve the problem.

This process not only filters people but also repeatedly establishes the authority of senior management. Gradually, the team accepts the absolute authority established by senior management.

How strong is this authority? 

Once, during a dispute between product and development over a collaboration standard, someone brought up a principle saying it was “what Abu said”. Everyone immediately stopped talking and followed the instructions.

In the face of managers’ demands and will, obedience becomes the only choice.